Green investment disputes: the interaction between investment arbitration and the climate change agenda

Abstract

The purpose of this paper is to anticipate how disputes concerning renewable energy investment will evolve in the context of climate urgency. Specifically, it explores the role of investment arbitration awards and their impact on the climate change dialogue. This approach revolves around the predominant global consensus that renewables constitute an unprecedented tool to mitigate the alarming effects of climate change without neglecting economic development. While states had initially passed aggressive campaigns to foster the expansion of clean projects, the impact of the global financial crisis heavily pressured public budgets, giving rise to a wave of green investment arbitrations. These cases revived the underlying tension between investors’ legitimate expectations and states’ sovereign right to regulate in the public interest. From that experience, states will inevitably redesign their incentive schemes. In the current Covid-19 scenario, the role of renewables will be particularly discussed. Although the pandemic was initially acknowledged to be beneficial for the climate situation, it is expected that the rebound effect of the crisis recovery will be devastating in terms of emissions. In this setting, this paper explores the pathways to empower tribunals to reach climate change-friendly interpretations. The outcome of this research is that renegotiating treaty provisions or expecting new investment instruments to be reached would not be effective for that purpose. Instead, the outcome of this research suggests that the most viable route would be to revisit existing standards already included in investment agreements (such as the notion of transnational public policy) through a climate law perspective.