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The Climate Change International Investment and Trade Disputes: Legal and...
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The Climate Change International Investment and Trade Disputes: Legal and Political Implications

A special issue of Laws (ISSN 2075-471X).

Deadline for manuscript submissions: closed (1 May 2024) | Viewed by 10467

Special Issue Editors

Dr. Yulia Levashova

E-Mail Website1 Website2
Guest Editor
Center for Entrepreneurship, Governance & Stewardship, Nyenrode Business University, 3621 BG Breukelen, The Netherlands
Interests: international investment law; economic law; foreign direct investment (FDI) policy; corporate social responsibility
Dr. Sara Pugliese

E-Mail Website
Guest Editor
Department of Law, Parthenope University of Naples, 80133 Naples, Italy
Interests: European Union law; international investment and trade law

Special Issue Information

Dear Colleagues,

Climate change is predicted to significantly impact investment, commercial, and trade disputes. There is a rise in international, European, and national regulatory rules mandating companies, foreign investors, and States to reduce greenhouse gas emissions and mitigate the effects of climate change. The EU and individual States are rapidly introducing rules for companies requiring them to comply with human rights by conducting due diligence and preparing reports on social and environmental risks. The lack of compliance with the environmental, social and governance (ESG) rules warrants legal action from regulators and stakeholders that may cause severe financial damage to a company. Furthermore, companies will be prone to suffer from reputational damage and a competitive disadvantage with other companies that already focus on sustainable business models and working on their environmental and human rights policies.

The COVID-19 pandemic intensified scrutiny of corporate conduct and investment behaviors, as well as accelerated the debate about ESG norm compliance. These developments will inevitably increase the number of commercial, investment and trade disputes. The critical issues related to climate change mitigation measures, e.g., supply chain disruption, transport costs and sustainable extraction of raw materials, are already and will be even more so in the future the subject of investment and trade disputes.

Furthermore, transitioning to a low-carbon economy will involve significant investments in new technologies and infrastructure. Companies that do not react to this transformation may face financial risks such as stranded assets or market value loss. According to this viewpoint, ESG-related criteria are becoming more widespread in long-term investment and commercial contracts, particularly in the energy, food, mining, and infrastructure industries. The new generation of IIAs, such as the 2019 Dutch Model Investment Agreement and the Australia-United Kingdom Free Trade Agreement of 2021, have also begun to include provisions relating to climate change action or sustainable investor’s conduct.

The examples such as Rockhopper Italia v. the Italian Republic and RWE v. the Netherlands show a growing trend for new sorts of lawsuits based on states’ climate change policies. Disputes over the state’s regulatory action to achieve climate change goals will only intensify in the future. Civil society placing pressure on their governments to minimise CO2 reductions eventually affects the economic interests of companies, generating disputes. As a result, the issue of balance between the ability of the state to regulate in the interest of the public and investors’ economic interests will continue to dominate the ISDS agenda in the future.

Finally, climate change concerns should be examined in the context of national and European foreign investment screening mechanisms.

The current Special Issue’s goal is to address climate change in the context of investment and trade law. The Special Issue discusses the most urgent concerns related to ESG risks and their role in contracts and treaties; climate mitigation measures and trade and investment disputes; mandatory HRDD and its impact on investment arbitration; the role of national governments and other stakeholders in the proliferation of climate change disputes; and the screening mechanisms.

Possible (but not exclusive) topics for articles could be:

  • Climate change investment law disputes;
  • Renewable energy disputes;
  • Climate change domestic law cases;
  • ESG issues in the context of commercial arbitration;
  • Strategic (national and international) litigation against States concerning the environmental and climate change commitments;
  • Third party funders for environmental-related disputes
  • HRDD - prevention of environmental and climate change disputes;
  • Institutional investors and environmental responsibility in relation to FDI;
  • Trade disputes and climate change;
  • FTAs and trade agreements: climate change provisions;
  • Foreign investment screening mechanisms and climate change risks.

Dr. Yulia Levashova
Dr. Sara Pugliese
Guest Editors

Manuscript Submission Information

Manuscripts should be submitted online at www.mdpi.com by registering and logging in to this website. Once you are registered, click here to go to the submission form. Manuscripts can be submitted until the deadline. All submissions that pass pre-check are peer-reviewed. Accepted papers will be published continuously in the journal (as soon as accepted) and will be listed together on the special issue website. Research articles, review articles as well as short communications are invited. For planned papers, a title and short abstract (about 100 words) can be sent to the Editorial Office for announcement on this website.

Submitted manuscripts should not have been published previously, nor be under consideration for publication elsewhere (except conference proceedings papers). All manuscripts are thoroughly refereed through a double-blind peer-review process. A guide for authors and other relevant information for submission of manuscripts is available on the Instructions for Authors page. Laws is an international peer-reviewed open access semimonthly journal published by MDPI.

Please visit the Instructions for Authors page before submitting a manuscript. The Article Processing Charge (APC) for publication in this open access journal is 1400 CHF (Swiss Francs). Submitted papers should be well formatted and use good English. Authors may use MDPI's English editing service prior to publication or during author revisions.

Keywords

  • climate change investment law
  • renewable energy law
  • climate change domestic law
  • commercial arbitration related to environment
  • national and international litigation related to environmental and climate change commitments
  • trade agreements and disputes related to climate change

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Published Papers (5 papers)

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Research

21 pages, 315 KiB  
Article
Energy Security, Energy Transition, and Foreign Investments: An Evolving Complex Relationship
by Maria Rosaria Mauro
Laws 2024, 13(4), 48; https://doi.org/10.3390/laws13040048 - 19 Jul 2024
Viewed by 2312
Abstract
Energy has historically enticed significant interest from foreign investors. Simultaneously, it has perpetually held a pivotal position in any nation’s framework. Consequently, governments have long regarded energy security as a paramount concern, crucial for ensuring national stability. Energy security, simply put, is defined [...] Read more.
Energy has historically enticed significant interest from foreign investors. Simultaneously, it has perpetually held a pivotal position in any nation’s framework. Consequently, governments have long regarded energy security as a paramount concern, crucial for ensuring national stability. Energy security, simply put, is defined as “the availability of sufficient supplies at affordable prices.” However, a more contemporary perspective also emphasizes the necessity for long-term sustainability in the supply. This perspective adds a new foundational element—sustainability—to the concept of energy security. Stemming from this premise, two phenomena in the energy sector emerge that could impact international foreign direct investment (FDI) flows. Firstly, the transition from hydrocarbons to renewable sources necessitates substantial investment, wherein foreign investments could play a pivotal role. Secondly, there is an increasing trend of States utilizing FDI for strategic objectives. The acquisition of strategic energy infrastructure by foreign entities is now perceived as a risk to the energy supply security of nations. Consequently, several States have bolstered their FDI screening mechanisms to assess potential impacts on supply security, infrastructure operation, and national security in general. These two aforementioned phenomena may sometimes conflict. This article aims to analyze the intricate relationship between energy security, energy transition, and foreign investments. The author posits that an overly broad interpretation of national security and the misuse of screening mechanisms could serve as instruments for shielding the domestic economy, potentially undermining the foreign investment legal framework. Such an approach in the energy sector could have a “chilling effect,” leading to a reduction in FDI and impeding the energy transition or the attainment of other energy-related objectives. At the same time, a deep reform of the international investment regime is required, which should go through a modification of International Investment Agreements (IIAs) clauses but also through a more environmentally friendly approach by investment arbitral tribunals. It appears extremely difficult to find a balance between international investment law and environmental/climate change law. In this context, the Energy Charter Treaty (ECT), which has recently undergone a “modernization process,” is assumed to be a test bench. Full article
(This article belongs to the Special Issue The Climate Change International Investment and Trade Disputes: Legal and Political Implications)
21 pages, 309 KiB  
Article
Rethinking Just Transition in Investment Law Perspective: Incentives against Climate Crisis between Sustainability, Economic Security, and Strategic Industrial Planning
by Sara Pugliese
Laws 2024, 13(3), 37; https://doi.org/10.3390/laws13030037 - 18 Jun 2024
Viewed by 1261
Abstract
With the expression “Just transition”, the European Commission refers to a new development model to bring in the environmental and digital transition “leaving no one behind”. From an investment law perspective, it implies the adoption of several incentives to support new green economy [...] Read more.
With the expression “Just transition”, the European Commission refers to a new development model to bring in the environmental and digital transition “leaving no one behind”. From an investment law perspective, it implies the adoption of several incentives to support new green economy activities or the reconversion of old ones into green and energy-neutral production models. Starting from an analysis of the EU just transition strategy, the paper focuses on the Italian case, investigating the interconnection between just transition funds and other measures (the Single Special Economic Zone and National Recovery and Resilience Program) to verify their effectiveness in terms of investment retention and attraction and their effects in terms of strategic industrial planning. Concerning retention, the Sider Alloys and Acciaierie d’Italia case studies are analyzed. Concerning attraction, as the incentives may appeal to aggressive activities dangerous to the EU and Member States’ strategic autonomy, the paper offers an overview of the instruments available for screening and preventing creeping economic operations, especially the proposed reform of the investment screening mechanism and the anti-coercion instrument. In conclusion, the paper proposes the adoption of an ex ante impact assessment, including citizen consultation, aimed at verifying investment concrete capacity to contribute to the just transition process. Full article
(This article belongs to the Special Issue The Climate Change International Investment and Trade Disputes: Legal and Political Implications)
16 pages, 305 KiB  
Article
The Danger of the Interpretation of Facts: Legal Uncertainty in the Spanish Saga Cases
by Nataša Rajković
Laws 2024, 13(3), 27; https://doi.org/10.3390/laws13030027 - 28 Apr 2024
Cited by 1 | Viewed by 1400
Abstract
Enhancing legal certainty is one of the main values that are sought in the investor–state dispute settlement system. The importance of legal certainty is strengthened in the case of renewable energy investments, which are in the global public interest, long-term and capital-intensive up-front. [...] Read more.
Enhancing legal certainty is one of the main values that are sought in the investor–state dispute settlement system. The importance of legal certainty is strengthened in the case of renewable energy investments, which are in the global public interest, long-term and capital-intensive up-front. The first part of the paper presents the importance of legal certainty in investment arbitration in general, its limits and its importance in the context of the green energy transition. In addition, it addresses the special features of renewable energy investments. The second part of the paper analyses from the perspective of legal certainty the Spanish renewable energy cases initiated under the Energy Charter Treaty (ECT), which deal with similar factual and legal issues. In this respect, the paper presents the varying weight tribunals gave to the important facts that led them further to conclude whether Spain breached the fair and equitable treatment standard, and if so, whether the investor was entitled to full compensation or a reasonable rate of return. In addition, it presents different approaches to perceiving the stability provision of Article 10 (1) of the ECT. The paper concludes that it remains uncertain to what extent RE investors will be protected under the ECT’s stability condition in the case of fundamental or small-scale changes. Although one group of arbitrators may argue that the fundamental change triggers per se a breach of a stability condition, others may argue that for the breach to be established, the host state’s measures must be arbitrary, unreasonable or discriminatory. Moreover, the threat to legal certainty might not only be the vague provisions of the ECT but also the significant discretion tribunals have towards the interpretation of facts, leading to different outcomes. Indeed, it is at the discretion of arbitrators to consider whether the timing of investment, presence of evidence indicating possible regulatory changes, and the reasonable rate of return prescribed in Spain’s domestic law will be relevant or irrelevant. Full article
(This article belongs to the Special Issue The Climate Change International Investment and Trade Disputes: Legal and Political Implications)
19 pages, 288 KiB  
Article
Reconciling International Climate Law and the Energy Charter Treaty through the Use of Integrative Interpretation in Arbitration
by Eike Hinrichsen
Laws 2024, 13(2), 24; https://doi.org/10.3390/laws13020024 - 22 Apr 2024
Cited by 1 | Viewed by 1796
Abstract
The conflicting objectives of the Energy Charter Treaty’s (ECT) protection of fossil fuel investments and climate change mitigation can reveal themselves in investor state dispute settlement (ISDS). As neither the modernization nor the termination of the ECT is likely, ECT arbitration will continue [...] Read more.
The conflicting objectives of the Energy Charter Treaty’s (ECT) protection of fossil fuel investments and climate change mitigation can reveal themselves in investor state dispute settlement (ISDS). As neither the modernization nor the termination of the ECT is likely, ECT arbitration will continue to exist. This article, therefore, examines the reconciling potential of integrative interpretation in climate relevant ECT arbitrations. An integrative interpretation is not only prescribed by the international rules of treaty interpretation, but can also be found in the practice of international dispute settlement. However, international climate law has not yet been taken into account by a single ECT tribunal. Although some hurdles and uncertainties remain in practice, examples of extraneous treaty use, as well as the reasoning of the judgments of recent climate litigation, show that ECT ISDS has the potential to reconcile climate change and energy investment interests in the future. Full article
(This article belongs to the Special Issue The Climate Change International Investment and Trade Disputes: Legal and Political Implications)
19 pages, 1158 KiB  
Article
The Invocation of the Precautionary Principle within the Investor–State Dispute Settlement Mechanism: Not Seizing the Occasion
by Naimeh Masumy and Sara Hourani
Laws 2024, 13(2), 22; https://doi.org/10.3390/laws13020022 - 28 Mar 2024
Viewed by 2093
Abstract
The principal purpose of this article is to demonstrate how the precautionary principle can be included in the investor–state dispute settlement (ISDS) deliberative process by providing a legal solution that would permit the invocation and implementation of this concept within the ISDS operational [...] Read more.
The principal purpose of this article is to demonstrate how the precautionary principle can be included in the investor–state dispute settlement (ISDS) deliberative process by providing a legal solution that would permit the invocation and implementation of this concept within the ISDS operational framework. The precautionary principle has been widely applied in the environmental management field, yet its role within the ISDS framework has remained relatively underutilised. To analyse this issue, this paper first explores the operational justification of the precautionary principle and how decision-makers should endorse it in order to fully recognise and address environmental concerns on a legal level. Next, the article proceeds to examine recent ISDS cases in which the precautionary principle was invoked and compares various risk assessment techniques to illustrate how it may be incorporated into the deliberative process and harmonised with other standards. The paper suggests that the forward-looking nature of the precautionary principle has paramount importance in disputes involving oil and gas, particularly in cases where oil and gas activities are believed to contribute to greenhouse gas emissions that could worsen global warming. This paper advances the argument that a wider application of the principle could better equip ISDS tribunals to address the limitations of scientific knowledge, especially under circumstances where significant or irreversible environmental damage may occur. Full article
(This article belongs to the Special Issue The Climate Change International Investment and Trade Disputes: Legal and Political Implications)
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