Study On Environment Exceptional Rules In International Indirect Expropriation

Since 1980s, the international community has endeavored to promote the unified legislation in international investment. In 1995, Organization for Economic Co-operation and Development (OECD) set up the Board of Investment, try to reach a multilateral agreement on investment (MAI) through consultation, and establish universal investment rules. However, the result shows that one of the obstacles of reaching the agreement is the difficulty to strike a balance between the indirect expropriation and the situations, aims and measures of the host country. Although the international community has come to realize that it is undesirable to encourage foreign investment through lower standard in domestic health, safety and environment, the MAI also agrees that the measures in environment protection should not cause inappropriate influence in free investment. However, common understanding has not been reached yet, therefore, it is of significant meaning to do the research in the meaning of international laws and regulations about indirect expropriation and exceptional rules and regulations in environment protection.There is by far no unified standard in deciding whether the aims and measures of the host country in protecting environment have led to indirect expropriation. Generally speaking, the uncertainty of rules in public and private legal relationship would make the interest of the private sector prone to harm. However, the prevailing understanding on the purpose of investment agreement in the international investment is that the conclusion of investment agreement is to attract and protect foreign investment. The uncertainty in the concept and the standard, by the contrary, make the right of the host country in implementing the environment protection measures been restrained. In practice, we can adopt the standard of giving priority to aims and taking efficiency into consideration. And it is necessary to make further investigation on whether the measures taken by the host country is in conformity with the four factors, which are not making the investment unprofitable and having no returns, aiming at protecting environment, doing no harm to the reasonable expectations of the investor and giving reimbursement to loss caused by inappropriate measures. Conforming to the four factors constitutes no indirect expropriation. Many multilateral environment agreements have been reached in international community. And indirect expropriation regulations have been added in the investment agreement. However, in lack of coordinating mechanism in indirect expropriation regulations and multilateral environment agreements, it is of great difficulty to predict how, in practice, the multilateral environment agreements get applied in indirect expropriation cases. Facing the existing environment laws and regulations and multilateral environment agreement, Item 3 Article 31 of the Convention of the Law of Treaties, Vienna in 1969, provisions of the explanation of treaties should be observed, unless being explicitly excluded in the investment agreement. Indirect expropriation regulations can guarantee not to restrict the development on multilateral environment agreements through many ways, like case investigation, direct stipulation on investment agreement, and environment evaluation in formulating indirect expropriation regulations. And binding law mechanism should be established to provide appeal channel for the treaty countries and to guarantee that the indirect expropriation regulations would not encourage the host country to slacken environment protection for attracting investment.The international community needs to strike a balance between countries and regions, the developing countries and the developed countries, the lawful interests of the foreign investors and the environment interests, when formulating the rules of exceptional measures of environment protection in indirect expropriation regulations. It should be in the attitude of integrity that the international community considers the stipulations on the aims and measures of environment protection, and coordinates the demands of the developing countries and the developed countries to establish a sound mechanism resolving international disputes, to form a steady precedent-based practice, and to set up mechanisms for evaluating investment environment and for public participation. In some specified situation, host countries should be allowed to create unilateral rules for protecting environment. In legislation, exceptional rules for environment protection in indirect expropriation should be specified; in practice, laws and regulations which could be easily listed should published, and equal partnership should be established to promote the international community in reaching a common understanding in environment and indirect expropriation. The relevant stipulations about indirect expropriation and environment protection regulations are mixed in trade treaty, and trade measures in form may hinder free investment; therefore, this article gives a summary of the legal rules and regulations about the environment protection aims and measures in indirect expropriation through quotation of some cases of international trade, referring to the attitude of the WTO Arbitral Tribunal in trade liberalization and environment protection. Suggestions also have been made in the last part of the article.