Skip to main content
Menu

Main navigation

  • About
    • Annual Reports
    • Leadership
    • Jobs
    • Student Programs
    • Media Information
    • Store
    • Contact
    LOADING...
  • Experts
    • Policy Scholars
    • Adjunct Scholars
    • Fellows
  • Events
    • Upcoming
    • Past
    • Event FAQs
    • Sphere Summit
    LOADING...
  • Publications
    • Studies
    • Commentary
    • Books
    • Reviews and Journals
    • Public Filings
    LOADING...
  • Blog
  • Donate
    • Sponsorship Benefits
    • Ways to Give
    • Planned Giving

Issues

  • Constitution and Law
    • Constitutional Law
    • Criminal Justice
    • Free Speech and Civil Liberties
  • Economics
    • Banking and Finance
    • Monetary Policy
    • Regulation
    • Tax and Budget Policy
  • Politics and Society
    • Education
    • Government and Politics
    • Health Care
    • Poverty and Social Welfare
    • Technology and Privacy
  • International
    • Defense and Foreign Policy
    • Global Freedom
    • Immigration
    • Trade Policy
Live Now

Blog


  • Blog Home
  • RSS

Email Signup

Sign up to have blog posts delivered straight to your inbox!

Topics
  • Banking and Finance
  • Constitutional Law
  • Criminal Justice
  • Defense and Foreign Policy
  • Education
  • Free Speech and Civil Liberties
  • Global Freedom
  • Government and Politics
  • Health Care
  • Immigration
  • Monetary Policy
  • Poverty and Social Welfare
  • Regulation
  • Tax and Budget Policy
  • Technology and Privacy
  • Trade Policy
Archives
  • February 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018
  • July 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
  • February 2018
  • January 2018
  • December 2017
  • November 2017
  • October 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • August 2016
  • July 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • September 2015
  • August 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • March 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • June 2014
  • May 2014
  • April 2014
  • March 2014
  • February 2014
  • January 2014
  • December 2013
  • November 2013
  • October 2013
  • September 2013
  • August 2013
  • July 2013
  • June 2013
  • May 2013
  • April 2013
  • March 2013
  • February 2013
  • January 2013
  • December 2012
  • November 2012
  • October 2012
  • September 2012
  • August 2012
  • July 2012
  • June 2012
  • May 2012
  • April 2012
  • March 2012
  • February 2012
  • January 2012
  • December 2011
  • November 2011
  • October 2011
  • September 2011
  • August 2011
  • July 2011
  • June 2011
  • May 2011
  • April 2011
  • March 2011
  • February 2011
  • January 2011
  • December 2010
  • November 2010
  • October 2010
  • September 2010
  • August 2010
  • July 2010
  • June 2010
  • May 2010
  • April 2010
  • March 2010
  • February 2010
  • January 2010
  • December 2009
  • November 2009
  • October 2009
  • September 2009
  • August 2009
  • July 2009
  • June 2009
  • May 2009
  • April 2009
  • March 2009
  • February 2009
  • January 2009
  • December 2008
  • November 2008
  • October 2008
  • September 2008
  • August 2008
  • July 2008
  • June 2008
  • May 2008
  • April 2008
  • March 2008
  • February 2008
  • January 2008
  • December 2007
  • November 2007
  • October 2007
  • September 2007
  • August 2007
  • July 2007
  • June 2007
  • May 2007
  • April 2007
  • March 2007
  • February 2007
  • January 2007
  • December 2006
  • November 2006
  • October 2006
  • September 2006
  • August 2006
  • July 2006
  • June 2006
  • May 2006
  • April 2006
  • Show More
February 23, 2015 8:58AM

Suing Governments for their Environmental Policy under International Law

By Simon Lester

SHARE

Some folks over at Heritage have a new Issues Brief in which they argue for including an Investor State Dispute Settlement (ISDS) mechanism in the U.S.-EU trade deal being negotiated right now.  In a nutshell, ISDS lets foreign investors sue host country governments in an international tribunal when they feel certain of their rights have been infringed.

I’ve been critical of ISDS.  I do see the potential that such international rules have for protecting property rights, but I worry about other aspects of the rules.  One issue is that these rules protect the rights only of foreign investors.  Using Venezuela as an example, there’s an assumption that the courts there can’t help much with protecting rights. To some extent, ISDS is a response to that. So, if Exxon feels its operations there have been badly treated by the Venezuelan government, it can use the ISDS mechanism to have recourse to an international tribunal.  However, if a small Venezuelan dry cleaner is being subject to governmental abuse, it’s just out of luck.  To me, that seems problematic.  Focusing on the wealthy seems like a fundamentally unbalanced way to protect property rights.

But beyond that, these investment obligations are not limited to protecting property rights.  There are much broader provisions that allow foreign investors to sue for, well, lots of things, and perhaps just about anything.  Here’s an example from a Canada-Barbados investment treaty:

… Mr. Peter Allard, Canadian owner of the Graeme Hall Nature Sanctuary, contends that the Government of Barbados has violated its international obligations by refusing to enforce its environmental laws.

…

Mr. Allard acquired the land for the Sanctuary in the mid-1990s and subsequently developed it into an eco-tourism facility. In the notice of dispute, Mr. Allard claims to have taken numerous steps to contribute to the sustainability of the Sanctuary only to have such efforts thwarted by the acts and omissions of Barbados.

Mr. Allard asserts that Barbados’ acts and omissions have severely damaged that natural ecosystem relied upon to attract tourists to the Sanctuary. Consequently, Mr. Allard contends that Barbados failed to provide his investment full protection and security and fair and equitable treatment in accordance with the Canada-Barbados BIT.

With respect to Barbados’ omissions to protect the Sanctuary, Mr. Allard argues that Barbados has, among other things, failed to: (i) prevent the repeated discharge of raw sewage into the Sanctuary wetlands, (ii) investigate or prosecute sources of runoff of grease, oil, pesticides, and herbicides from neighboring areas, and (iii) investigate or prosecute poachers that have threatened the wildlife within the Sanctuary.

To sum all that up: A Canadian who invested in Barbados is suing the Barbados government under an investment treaty for failure to protect its environment in accordance with its domestic law.

Will this claim succeed?  It's not clear.  But what is clear is that the scope of these obligations is extremely broad and vague, enough so that it’s worth law firms’ time and money to explore the boundaries.  This is why I wrote that these agreements are more about litigation than liberalization.

Now, it may be that, in this particular case, the government of Barbados was behaving badly (“discharge of raw sewage” is rarely a good thing). I’m not familiar with the facts of the case, so I can’t say for sure who’s right and who’s wrong here.  But the larger issue is, what exactly is the scope for when foreign investors can sue governments for failing to protect the environment? Among his claims, the investor says he has not been provided with “fair and equitable treatment.” That’s a potentially broad obligation, which can be used in a lot of ways.  It’s not too hard to imagine, say, a claim that a government’s failure to take action against climate change was a violation. If you believe climate change needs to be addressed, you might cite to various international reports on climate change, and argue that the impact of climate change on your business is “unfair,” and the government needs to do something.  (To further illustrate the broadness of these obligations, if, in the alternative, you were skeptical of climate change, you might point to other climate data, and argue that actions that governments have taken against climate change (e.g., cap and trade) have harmed your business in a way that is “unfair.”)

The environment isn’t my area of expertise, so I’ll leave it to others to decide what our environmental problems are and what we should do about them. But it seems to me that an international law obligation that allows foreign investors to sue governments on the basis that they have not protected the environment, or have protected it too much, is kind of a big deal, and something that we should understand the scope of a little better than we do now. (And keep in mind, there is nothing special about the environment here – all domestic policy areas are in play). These issues are being litigated in international courts, and we should have a better sense of what that means before we extend ISDS further through new trade agreements.

Related Tags
Energy and Environment, Trade Policy, Herbert A. Stiefel Center for Trade Policy Studies

Stay Connected to Cato

Sign up for the newsletter to receive periodic updates on Cato research, events, and publications.

View All Newsletters

1000 Massachusetts Ave, NW,
Washington, DC 20001-5403
(202) 842-0200
Contact Us
Privacy

Footer 1

  • About
    • Annual Reports
    • Leadership
    • Jobs
    • Student Programs
    • Media Information
    • Store
    • Contact

Footer 2

  • Experts
    • Policy Scholars
    • Adjunct Scholars
    • Fellows
  • Events
    • Upcoming
    • Past
    • Event FAQs
    • Sphere Summit

Footer 3

  • Publications
    • Books
    • Cato Journal
    • Regulation
    • Cato Policy Report
    • Cato Supreme Court Review
    • Cato’s Letter
    • Human Freedom Index
    • Economic Freedom of the World
    • Cato Handbook for Policymakers

Footer 4

  • Blog
  • Donate
    • Sponsorship Benefits
    • Ways to Give
    • Planned Giving
Also from Cato Institute:
Libertarianism.org
|
Humanprogress.org
|
Downsizinggovernment.org