Investor rights and environmental obligations: Reconciling the irreconcilable?

Journal of Environmental Law

Volumn 13, Issue 2, 2001, Pages 199-220

  Baughen, Simon ^a  

^a UNIVERSITY OF BRISTOL   (United Kingdom)

Author keywords

[No Author keywords available]

Indexed keywords

FREE TRADE; INTERNATIONAL AGREEMENT; INVESTMENT; TRADE-ENVIRONMENT RELATIONS;

EID: 0034850501     PISSN: 09528873     EISSN: None     Source Type: Journal    
DOI: 10.1093/jel/13.2.199     Document Type: Article

References (44)

1. Unlike the position under NAFTA, there is no provision in the DSU for suit by persons within member states who are adversely affected by measures of other member states.
2. Under Article 22.
3. On the general issue of the conflict between trade and the environment see: S. Charnovitz, 'Exploring the Environmental Exceptions in GATT Article XX' (1991) 25(5) JWT 37; J. Cameron, P. Demaret and D. Geradin (eds), 'Trade and the Environment: The Search for Balance' (Cameron and May, 1994); H. Ward, 'Common but Differentiated Debates: Environment, Labour and the World Trade Organisation' (1996) ICLQ 592, esp pp 601-7; J. Cameron and K. Campbell, 'Challenging the Boundaries of the DSU Through Trade and Environment Disputes' in J. Cameron and K Campbell (eds), Dispute Resolution in the WTO (Cameron and May, 1998) Ch 10.
4. On the general issue of the conflict between trade and the environment see: S. Charnovitz, 'Exploring the Environmental Exceptions in GATT Article XX' (1991) 25(5) JWT 37; J. Cameron, P. Demaret and D. Geradin (eds), 'Trade and the Environment: The Search for Balance' (Cameron and May, 1994); H. Ward, "Common but Differentiated Debates: Environment, Labour and the World Trade Organisation' (1996) ICLQ 592, esp pp 601-7; J. Cameron and K. Campbell, 'Challenging the Boundaries of the DSU Through Trade and Environment Disputes' in J. Cameron and K Campbell (eds), Dispute Resolution in the WTO (Cameron and May, 1998) Ch 10.
5. On the general issue of the conflict between trade and the environment see: S. Charnovitz, 'Exploring the Environmental Exceptions in GATT Article XX' (1991) 25(5) JWT 37; J. Cameron, P. Demaret and D. Geradin (eds), 'Trade and the Environment: The Search for Balance' (Cameron and May, 1994); H. Ward, "Common but Differentiated Debates: Environment, Labour and the World Trade Organisation' (1996) ICLQ 592, esp pp 601-7; J. Cameron and K. Campbell, 'Challenging the Boundaries of the DSU Through Trade and Environment Disputes' in J. Cameron and K Campbell (eds), Dispute Resolution in the WTO (Cameron and May, 1998) Ch 10.
6. On the general issue of the conflict between trade and the environment see: S. Charnovitz, 'Exploring the Environmental Exceptions in GATT Article XX' (1991) 25(5) JWT 37; J. Cameron, P. Demaret and D. Geradin (eds), 'Trade and the Environment: The Search for Balance' (Cameron and May, 1994); H. Ward, "Common but Differentiated Debates: Environment, Labour and the World Trade Organisation' (1996) ICLQ 592, esp pp 601-7; J. Cameron and K. Campbell, 'Challenging the Boundaries of the DSU Through Trade and Environment Disputes' in J. Cameron and K Campbell (eds), Dispute Resolution in the WTO (Cameron and May, 1998) Ch 10.
7. 4 'United States: Standards for Reformulated and Conventional Gasoline' WT/DS2/R (1996) 35 ILM 274 (for the panel report); WT/DS2/9 (1996) 35 ILM 603 (for the appellate body report).
8. Following the same reasoning used in 'Thailand: Restrictions on Importation of and Internal Taxes on Cigarettes' (1991) 30 ILM 1122.
9. (1991) 30 ILM 1594 and (1994) 33 ILM 839.
10. 'US: Import Prohibition of Certain Shrimp and Shrimp Products' WT/DS 58 R.71 (1998) 37 ILM 832.
11. In practice, compliance would generally be secured by conformity with the most demanding requirements enforced by importing states.
12. WT/DS58/AB/R (1999) 38 ILM 118. See also, P. Mavroidis, 'Trade and the Environment after the Shrimps-Turtles Litigation' (2000) 34(1) JWT 73.
13. WT/DS58/AB/R (1999) 38 ILM 118. See also, P. Mavroidis, 'Trade and the Environment after the Shrimps-Turtles Litigation' (2000) 34(1) JWT 73.
14. Article 5(2) requires 'available scientific evidence' to be taken into account by members when assessing risk.
15. Similar provisions are to be found in Article 2(3).
16. The presumption would be rebuttable where, for example, a member enforced codex standards against imports but not against domestic products.
17. 'EC: Measures Concerning Meat and Meat Products (Hormones)' WT/DS 26 AB.R and WT/DS 48/AB.R. See also, G. Goh and A.R. Ziegler, 'A Real World Where People Live and Work and Die: Australian SPS Measures after the WTO Appellate Body's Decision in the Hormones Case' (1998) 32(5) JWT 271.
18. 'EC: Measures Concerning Meat and Meat Products (Hormones)' WT/DS 26 AB.R and WT/DS 48/AB.R. See also, G. Goh and A.R. Ziegler, 'A Real World Where People Live and Work and Die: Australian SPS Measures after the WTO Appellate Body's Decision in the Hormones Case' (1998) 32(5) JWT 271.
19. This body is the international commission set up by the FAO Conference and the World Health Assembly in 1961-62 to make recommendations on food safety standards.
20. AB-1997-4.
21. The appeal panel stressed that the burden of proof falls on the complainant to show a prima facie breach of the SPS agreement.
22. See S.W. Chang, 'GATTING a Green Trade Barrier: Eco-Labelling and the WTO Agreement on Technical Barriers to Trade' (1997) 31(1) JWT 137. In Tuna Dolphin I at para 5.42 the panel found that the 'Dolphin Safe' labelling scheme in the US did not violate Article 1(1) of GATT as it involved no government-conferred advantages.
23. However, it would not be too difficult for a domestic investor to manufacture a foreign component to its corporate structure to enable it to take advantage of the rights of foreign investors under Chapter 11.
24. In addition Chapter 20 provides for State-to-State arbitration.
25. 'Investment' is widely defined in Article 1138 to cover not only an 'enterprise' (as defined in Article 201) but also an interest in an enterprise that entitles the owner either to share in its income or profits or to share in its assets on dissolution. This definition is sufficiently wide as to give rights of suit under Chapter 11 to minority shareholders in foreign corporations. However, claims to money arising solely from 'commercial contracts for the sale of goods or services by a national or enterprise in the territory of one Party to an enterprise in the territory of another Party' do not constitute 'investment' under Article 1138.
26. For a more detailed analysis of NAFTA's environmental provisions see, A.M. Rugman, J. Kirton and J. Soloway, 'NAFTA: Environmental Regulations and Canadian Competitiveness' (1997) 31(4) JWT 129.
27. Indeed, Article 2101 specifically applies Article XX of GATT 94 to the TBT provisions in Chapter 9 with the clarification that subheading (b) includes environmental measures and subheading (g) extends to the conservation of living and non-living exhaustible natural resources.
28. For a detailed analysis of this suit see J.A. Soloway, 'Environmental Trade Barriers under NAFTA: The MMT Fuel Additives Controversy' (1999) 4 Minnesota Journal of Global Trade 55.
29. It also tried, but failed, to persuade the US government to initiate state to state arbitration under Chapter 20.
30. A preliminary hearing on jurisdiction decided that where a dispute could be the subject of either Chapter 11 or Chapter 20, the foreign investor could proceed under Chapter 11 notwithstanding a decision by its home state, the US, not to proceed under Chapter 20.
31. NAFTA's arbitration provisions, being based on the private commercial law model, contain minimal provision for mandatory public access to arbitral documents. Details on other Chapter 11 cases can be found in annex 1 of Mann and Von Moltke, 'NAFTA's Chapter 11 and the Environment', published on the internet by the International Institute for Sustainable Development at iisd1.iisd.ca/trade/chapter11.htm.
32. Details taken from Public Citizen Global Trade Watch briefing papers on the internet at http://www.citizen.org.pctrade/nafta/Ethylbri.htm and http://www.citizen.org.pctrade/nafta/canada.htm.
33. Details taken from Public Citizen Global Trade Watch briefing papers on the internet at http://www.citizen.org.pctrade/nafta/metalcla.htm.
34. Above, n 25.
35. See, for example, Japan: Taxes on Alcoholic Beverages AB-1996-2.
36. See Brownlie, 'Principles of Public International Law' 5th edn (Oxford: Clarendon Press, 1998) at p 535 where he writes: 'State measures, prima facie a lawful exercise of powers of government, may affect foreign interests considerably without amounting to expropriation.'
37. ' . . . to achieve a given level or percentage of domestic content'.
38. ' . . . to purchase, use or accord a preference to goods produced or services provided in its territory, or to purchase goods or services from persons in its territory'.
39. But cf the following draft in the Annex: 'Affirmation of Right to Regulate: A Contracting Party may adopt, maintain or enforce any measure that it considers appropriate to ensure that investment activity is undertaken in a manner sensitive to health, safety or environmental concerns, provided such measures are consistent with this agreement.' Much of the force of the affirmation is removed by the highlighted text in the proviso.
40. Available on the internet at http://www.oecd.org//daf/cmis/mai/meaenv.htm.
41. Five years notice of withdrawal together with an duty to continue to apply MAI to existing foreign investments for a further fifteen years after withdrawal.
42. Professor Sol Picciotto argues for 'positive integration' along these lines in 'Lessons of the MAI: Towards Regulatory Framework for International Investment' published on the internet at http://elj.warwick.ac.uk/global/issue/1999-1/lessonsmai/article.h.
43. 'Environmental Protection and International Competitiveness: A Conceptual Framework' (1998) 32(3) JWT 5.
44. Above n 25, op cit at 49 and 72. These factors include inter alia: the specific location of the investment; the capacity of the receiving environment to absorb effluents, emissions, and other environmental impacts from the operation or maintenance of the investment, including the environment outside the jurisdiction of the host state, and changes in this capacity; impacts generated by both later and earlier uses of the environment or environmental resources; other assets of the investor in the jurisdiction (in the event of liability arising); changing environmental standards over the life of an investment.