ISDS and Climate Change Policies: A barrier, facilitator, or neither

The Society's 114th Annual Meeting—and first Virtual Annual Meeting—took place June 25–26, 2020. The 2020 Annual Meeting theme, "The Promise of International Law," was an opportunity to reflect on the successes and failures of international law, while reaffirming our commitment to achieving its promise of a more just and peaceful world.

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As countries grapple with how best to regulate conduct within their borders to attempt to mitigate climate change and to meet the objectives of international commitments, including the Paris Agreement, policies have taken various forms – from offering “carrots” in the form green energy subsidies, to “sticks” aimed at sanctioning disfavored energy uses or sources. Such regulatory decisions have impacted a broad spectrum of investors, resulting in a spate of recent investment claims. Dozens of investment claims have been brought by renewable energy investors under the Energy Charter Treaty, asserting that states have reneged on favorable terms offered to incentivize the massive private investment in green energy during the global financial crises and in the face of budget shortfalls. Nuclear power has been steadily in decline in Europe for at least the last decade, with Germany expediting its exit from nuclear power following the Fukushima disaster, which prompted an investment claim from Vattenfall asserting the value of its nuclear assets has been stranded. And fossil fuel investors have threatened investment claims, asserting that policies impairing conventional energy production denies them their legitimate expectations of returns on their investments. This panel will address, in the context of policies enacted by states to mitigate the effects of climate change, where the line is between compensable investment claims where investors’ legitimate expectations have been frustrated by climate polices, on the one hand, and non-compensable claims resulting from states’ climate policies? Is the threat of ISDS a barrier to government policies encouraging the shift to green energy? Or do investment treaties and free trade agreements encourage foreign investment into local green economies? And, if there is uncertainty as to where the “right to regulate” in the climate space without triggering compensable investment claims, how does that uncertainty affect new investments in green or conventional energy projects? Italy has withdrawn from the ECT in an apparent response to the number of claims it was defending following its retroactive measures relating to renewable investments, and there are threats of additional withdrawals or modifications to the ECT and other ISDS mechanisms. If states withdraw from, or agree to modify the terms of, investment treaty protections, will that discourage private investment required for renewable energy sources? Alternatively, should modifications to international agreements be embraced and what should they look like to meet states’ challenges in regulating to mitigate climate change? This panel will explore the impact ISDS has on achieving internationally agreed-upon goals and individual states’ policy objectives on climate change.

Gabriela Alvarez Avila, Curtis, Mallet-Prevost, Colt & Mosle, S.C.
Kasturi Das, Institute of Management Technology, Ghaziabad, Delhi-NCR, India
Kevin D Mohr, King & Spalding
Danielle Morris, Wilmer Cutler Pickering Hale and Dorr LLP (Moderator)
Carlos Sole, Socio KPMG

(Speaker organizations are shown as of June 2020)