Investor-State Dispute Settlement and Environmental Justice

Growing cries for action to effectively address the climate and other environmental crises hold important implications for the governance of cross-border investments. Policymakers and environmental advocates have often overlooked how provisions granted by states in international investment agreements (IIAs) have been used by investors to challenge government measures taken in the public interest to protect the environment and advance environmental justice.

This paper, published in the Sciences Po Legal Review issue devoted to the climate crisis, explains how the investor-state dispute settlement (ISDS) mechanism, made available to investors in thousands of bilateral and multilateral trade and investment agreements, may influence the future of environmental justice. It revisits and builds upon discussions of how ISDS may chill legitimate and necessary regulation (or shift the costs thereof), elaborating upon theories of chill and providing examples of how ISDS has been used to challenge actions taken to address the climate crisis and protect threatened water resources. The paper also then explores implications for the environmental justice dimensions of environmental regulation, describing how ISDS can undermine democratic processes and stakeholders’ abilities to meaningfully participate in environmental decisionmaking and protect their rights. The paper concludes with recommendations on how states can address the systemic impact of ISDS on regulatory space over environmental and other matters of public interest.

A shorter version of this piece was published on the Kluwer Arbitration Blog.