A Study Of Legal Issues On Environment Protection In International Investment Rules

With the relationship between international investment and environmental protection recently paid more and more attention to, the international investment rules begins to include the factors of environment protection in different degree, and some certain cases in practice of international investment arbitratiion have come in, which makes it very neccssary to study legal issues of environmental protection involved in international investment rules. The study thereof have been becoming hot abroad, while just at the beginning at home. However, all the researches not only have their respective limitaion: some of which forcus only on one legal issue caused by one case, some others only on a general conclusion drawn from some cases, but also are lack of attentions to the following aspects: different treaty groups, pattens of clauses and wording problems of international investment rules regarding environment protection; restrictions on domestic environmental measures and sovereignties imposed by substantial investment rules and the dispute settlement procedures privileging investors; and causes of the conflicts between investment protection and environmental objectives. So, in this dissertation, the author tries to give a full and clear picture of the relationship between international investment and environmental protection, the confliction between international investment rules and environmental protection objectives, and suggests not only sytems approaches to the contradiction between investment protection and environment objectives but also China's countermearsures accordingly, based on full study of legal issues of environmental protection in international investment rules and deep analysis on their causes. The dissertation consists of eight chapters as follows: Chapter I: With liberalization of international investment and globalization of environmental protection awareness as a background, the author analyses the interaction effect between international investment and environmental protection and raises the necessity and legal significance of environmental issues brought into international investment rules. The interaction effect includes positive and negative: it is the positive when international investnment, in line with the principle of sustainable development and in favor of environment, can promote envirnment protection, and when the awareness of environmental protection makes investments of more humanity; on the other hand, it become negative when international investment plays a role in pollution haven or regulatory chill, which does damage to the parties'environment as well as to the overall environmental benefits of mankind, and when different environmental standards lead to imbalances of investment flows so that improper environmental measures may bring investments man-made risks and constraints. Whether or not the negative can be overcome or avoided depends on what is the investors'duties imposed by investment rules and how to carry out "the principle of common but differentiated environmental responsibilities" and how to prohibit improper environmental measures, which make it have legal significance to incorporate environmental issues in international investment rules.Charpter II: With reviewing the current state of the incorporating environment protection into international investment, this chapter mainly describes and summarizes various treaty models and clause patterns in investment rules, and introduces the pulse of European Union thereon.The international investment treaties in this dissertation refer to special Investment Agreements and Free Trade Agreements containing investment rules.Because of their different attitudes towards environmental protection, different countries have different standpoints on putting environmental issues into investment treaties.Some environmental issues was brought into international investment treaties in recent years, but the involvement is much different: some treaties just mention it very simply, some treaties show environmental rights and obligations for contracting parties, some others deal with relationship between investment and environment more roundly.Environmental rules in these treaties are prescribed in different patterns: based on clause type, there are preamble clauses, special clauses, exception clauses, and other environment-related matters clauses; based on treaty structure, there are preamble clauses, text clauses, annexe clauses and other documents concerned; based on content of environmental rules, there are clauses generally mentioning environment, clauses preserving national regulatory space for environmental protection, clauses not lowering standard level, clauses coping with the relationship between investment treaties and environment treaties and clauses on environmental protection procedures and methods. The existing investment treaties containing environment issues, however, had seldom mentioned environmental obligations of investments and investors. In the investment agreenment (draft) between EU and ACP countries, environmental obligations are stipulated the first time, the minimum environmental standards are set and the higher environmental standard in contracting countries shall be adopted by investors.Chapter III: The chapter analyzes the conflicts between investment protection and environmental objectives. Generally speaking, attention paid to environmental protection is no enough in international investment treaties: some don't mention at all; some mention a little but far to entirety; some seem to mention entirely but with apparent defects, which result in poor effectiveness of environmental rules, weakness of wording in environmental provisions, default or unworth of environmental exceptions. From the existing investment agreements, it sees a full range of protection for the investors'private interest by adopting a broad definition of investment, strict substantial rules and procedural mechanisms, but sees much less for common environment interest, which results from the asymmetry of right and obligation.Foreign investors enjoy too many rights under international investment rules, but undertake few enviroment obligation only as per requirement domestic environmental law. Investor's right is in fact the obligation of host states, the host states can possibly give more advantages to foreign investment than to their natives but can never make any reqirement beyond domestic laws—even if the reqirement is for the sake of environment protection, which means the host states undertak more obligation while enjoy less right under internatioal law. Chapter IV and V: The two chapters discuss restrictions by substantialinternational investment rules on domestic environmental measures, investment definition clauses and environmental law definition clause have some impacts on domestic environmental measures, but from agreement clauses or arbitral cases, national treatment, most favoured nation treatment, fair and equity treatment have much more impact thereon. Among the constrained environmental mearsures, the most important are environmentally sound technology (EST) transfer and environmental expropriation. EST transfer is restricted by many factors, such as a narrowed scope, vague definitions, no obligations for actural parties, little assurance and mechanism for implementing obligations, and much emphasis on intellectual property protection in international environmental agreements, but international investment rule itself is where the restriction mainly comes from. International investment rules emphasize protecting intellectual property, prohibit performance requirements of technology transfer and specific investment forms, but not prohibit restrictive business practices defiitely, moreover, they require transfer of EST mainly through commercial channel, all of which can bring direct restriction on EST transfer.Based on the polluter-pays principle, the risk of the precautionary principle, police power and principle of international environmental obligation priority, the author argues that environmental expropriation should not be compensatory. Because there are loopholes in investment rules (environmental expropriation exception) and arbitrators (also economists or jurists in practice ) have a natural tendency to support compensation, there was no case in practice that was overruled or failed due to environmental causation. Investors lost in some cases mainly because of causation defects or lacking causation rather than environmental protection.Chapter VI: Investor-state dispute settlement mechanism challenges environmental sovereignty, but the mechanism itself has systemetic defects, such as regarding disputes as commercial ones, nontransparency of the procidure, no application of the host state's laws and the arbitral tribunals'tendency to private interest, which result in the austere challenges to environmental sovereignty. The challenges are represented as priority of foreign investors'privileges over national sovereignty, limited jurisdiction of the host state on administrative environment cases, and derogation of host state's legislative right on environment. Therefor, the international investment agreements in recent years have been made some amendment as per the arbitration practice and the procedure clauses therein have been reformed, such as adding preliminary procedure and appraisal period, increasing transparency and public participation etc. But we can not say that the negative effects of the investment dispute settlement mechanism on environmental protection have been completely eliminated, because the reform on procedue is far to its end, and the special inherent nature of the dispute settlement mechanism itself still plays a decisive role.Chapter VII: The fundamental causes of conflicts between investment protection and environmental object are grubbed up as follows: the first is the differences between the characteristics of investment rules and environmental rules, which are derived from their different historical backgrounds, different targets, different beneficiaries and different effectiveness; the second is the conflicts among multiple benefits in investment rules, including those between economic interest and environmental benefit, between the overall benefit and individule interest, and between the North countries and the South countries; the third is defects of international system, e.g. lack of absolute authority core, and the fact that coordination mechanism among nations cannot work effectively against indivadule nation's interest; the forth is deeper sources ethically, including the international investment rules disregarding modern ethics of international politics, lack of ultimate values international law should owns, lagging behind international ecominic ethics, and ignoring environmental ethics that should have been symbolized.Chapter VIII: In terms of rule's balance, policy's orientability and domestic measures, the author presents strategies to harmonize investment protection and environmental objectives: integrate all ethical values with common interests of human being at the core; adjust the approaches at decision-making level with measures'variety at the core; counterpoise investor's private interest and common environmental interest by rules at operation level, and reinforce investment organizations'function on policy's orientability, with special measures of both host states and home states as supplement. Finally, based on analysis of China's current rules concerned, the author brings forward recommendations and countermeasures for China: due to obvious weakness of theory and practice in this field, China should, adhering to national interest, human benefit and the principle of common but differentiated environmental responsibilities, actively participate integrating environment with international investment rules, in which one point to be paid attention to is the technical issues in formulation of investment rules, China should strengthen the research of international rules and human resources for greater contribution in future.