Mandatory Arbitration of International Environmental Claims
In his International Environmental Law column, Stephen L. Kass writes that the the Chevron saga, a 25-year battle over the environmental, legal and political issues arising over oil exploration in Ecuador, has now resurfaced in a way that sheds important light on the mandatory arbitration provisions of both existing bilateral investment treaties and, more importantly, the proposed Trans-Pacific Partnership.
September 17, 2015 at 02:22 PM
11 minute read
In my May 2015 column on “Regulation and Investor Protection under the Trans-Pacific Partnership” (May 1, 2015), I suggested that the Obama administration should drop the controversial requirement for Trans-Pacific Partnership (TPP) parties to agree to mandatory arbitration of U.S. investors' claims against host governments. The TPP, a proposed 12-nation trade and investment convention, seeks to facilitate U.S. investments abroad. Its arbitration requirement, currently included in the latest draft of the TPP, would enable U.S. investors in TPP countries to commence private arbitration proceedings against host governments under either the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States (ICSID) or the U.N. Commission on International Trade Law (UNCITRAL).
Under the TPP as currently drafted, U.S. investors could demand such arbitration against a host country's national government by alleging “regulatory takings” and other TPP violations growing out of efforts by those governments to protect their nations' environment or address global issues such as climate change or pollution of the world's oceans, whether that action was taken by the country's executive, legislative, judicial branch or a municipality.
A recent decision by the U.S. Court of Appeals for the D.C. Circuit reveals how complex that arbitration can become even under a U.S. “bilateral investment treaty” (BIT) with a single nation. It also illustrates why developing countries included in the 12-nation TPP, where the U.S. has far less bargaining leverage, may object to such a treaty requirement as a condition to TPP membership.
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