Buggenhoudt, Claire --- "The public interest in international investment arbitration on natural resources" [2017] ELECD 1053; in Tan, Celine; Faundez, Julio (eds), "Natural Resources and Sustainable Development" (Edward Elgar Publishing, 2017) 298

Book Title: Natural Resources and Sustainable Development

Editor(s): Tan, Celine; Faundez, Julio

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781783478378

Section: Chapter 15

Section Title: The public interest in international investment arbitration on natural resources

Author(s): Buggenhoudt, Claire

Number of pages: 19

Abstract/Description:

During the last few decades, trans-border investment has steadily grown. The increase in foreign investment has led to a significant rise in disputes between foreign private investors and host states, especially in the area of natural resource exploitation. Furthermore, foreign investors increasingly bring these disputes to international arbitration mechanisms. By opting for international arbitration between states and private parties, rather than domestic judicial mechanisms, investment treaties aim to counterbalance the legislative power that the host state has over foreign investors. Despite its promises of impartiality and independence, this type of arbitration is often criticized because it seems to constrain the state’s power to protect public interest values such as environmental protection. The reasoning underlying this critique is the arbitrators’ strong reliance on legal principles developed in the context of commercial dispute settlement. The use of commercial dispute settlement techniques allegedly keeps the arbitrators from considering the wider interests of society in their decisions. To examine how investment tribunals deal with conflicts between the protection of foreign investors and the state’s power to pursue sustainable development goals, this Chapter highlights the role of one public interest, namely environmental sustainability, in (mainly) ICSID arbitrations that are relevant for disputes on natural resources. The interpretation of two types of international investment provisions is studied. The first section studies the influence of public interest policy objectives on the interpretation of provisions that include specific protection standards such as non-discrimination. The second section examines the interpretation of exception clauses in international investment agreements, which allow inconsistent measures if they are necessary to protect important public interest concerns. The study shows that investment tribunals are willing to take account of public interests through a broad interpretation of protection standards and the use of a proportionality test to review the suitability of public interest measures. The use of proportionality balancing is, however, controversial in this context because it is hard to distil which standard of review is used by investment tribunals; this leads to considerable uncertainty regarding the right of states to regulate public interest matters. Keywords: exception cluases; investment agreements; investment protection standards ; investor-state arbitration; proportionality; public interest policy