Improving Environmental Protection in Investor-State Dispute Settlement

Abstract

Investor-state dispute settlement (ISDS) is an arbitral mechanism included in many international investment and trade agreements.  Defenders of ISDS argue that it spurs international investment and economic growth in the Global South, but much debate has arisen over the impacts of ISDS on the capacity of low- and middle-income countries to protect their environmental interests.  Opponents of ISDS contend that the system heavily favors investors, thereby discouraging states from pursuing environmental regulation for fear of risking a suit in ISDS, and that the lack of transparency in ISDS makes it nearly impossible to assess the environmental impacts of awards and settlements.  This Note argues that ISDS must be reformed to better protect states’ environmental interests and proposes two mechanisms to do so: first, requiring a “fairness hearing” for all ISDS awards and settlements implicating environmental interests and, second, requiring that arbitral panels consider and disclose the environmental impacts of ISDS awards or settlements. These reforms are necessary to level the playing field for investors, states, and all other actors impacted by international investment.