A BIT of a problem: how investment law hampers climate policy

This vlog will explore the relationship between international investment law, specifically bilateral investment treaties, and climate policy. Bilateral investment treaties (BITs) are agreements between states and companies that state the particular terms and conditions for investments. The unique thing about these treaties is that when terms are being violated, the investor can take the state to a separate court rather than domestic courts. These courts have been criticized by NGOs focused on corporate power such as the Transnational Institute and SOMO for lacking transparency and hampering social and environmental policies. How does this relate to climate policy and is there a way to circumvent BITs or even use them to the advantage of environmental rights? We talked to international law master student Theo Albert to find out.

Video: The problem with bilateral investment treaties (BITs)

Further reading

Case study: Vattenfall v. Germany I. (n.d.). Retrieved May 13, 2019, from https://isds.bilaterals.org/?case-study-vattenfall-v-germany-i&lang=en

Firger, M. and Gerrard, M. Reconciling International Investment Law and Climate Change Policy. (2011). Climate Change and Law Collection. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1733985

Miles, K. (2008). International Investment Law and Climate Change: Issues in the Transition to a Low Carbon World. SSRN Electronic Journal. doi:10.2139/ssrn.1154588

TransCanada initiates NAFTA arbitration against the United States over rejection of Keystone XL pipeline. (n.d.). Retrieved May 14, 2019, from https://www.iisd.org/itn/2016/02/29/transcanada-initiates-nafta-arbitration-against-the-united-states-over-rejection-of-keystone-xl-pipeline/

Vinuales, J. E. (2010). Foreign Investment and the Environment in International Law: An Ambiguous Relationship. British Yearbook of International Law,80(1), 244-332. doi:10.1093/bybil/80.1.244

4 thoughts on “A BIT of a problem: how investment law hampers climate policy

  1. Hey thanks for the insight into the legal landscape of climate policy.
    It seems like this field offers a lot of potential to better deal with climate policies if we play our cards right.

    I was wondering if there are any similar cases in the Netherlands though.
    Last year for example RWE and Uniper threatened to sue to the dutch government since they claim that the regulations to shut down coal power plants in the Netherlands were too strict and would damage their investments.
    They therefore demand either a relaxation of the law or a compensation.
    https://nos.nl/artikel/2232471-energiebedrijven-overwegen-rechtsgang-om-kolencentrales.html

    Is this comparable with the Bilateral investment treaties that you listed?
    If so, maybe there is the possibility to turn this dispute around in the way you mention in your VLOG and protect the wellbeing of our planet and humans instead of protecting the money of these two companies.

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  2. Thank you for your response, and for pointing us to this article! Based on the article, it seems like the dispute is concerned with the fact that the Dutch government plans to shut down the coal power plants by 2025 or 2030, despite RWE’s permit to exploit the power plant until 2040. The problem with bilateral investment treaties is not necessarily the fact that companies can claim their investments were damaged by a certain policy, but the agreements in these treaties on how to settle these kinds of disputes, which are often settled by independent, intransparent courts that often prioritize corporate interests. I couldn’t find the exact agreements between the Dutch government and RWE and Uniper, but I suppose it is possible that this is indeed what is at stake here. I don’t think they actually ended up suing the government, though.

    Coincidentally, I found that today Greenpeace sued RWE, Uniper and Engie because the biomass they are using is likely not won in a sustainable way. So hopefully this dispute is indeed turning around like you mentioned!

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  3. Interesting topic you chose to vlog about!
    In your vlog you mention to possible solutions to the problems with BIT’s. The first one being to try and persuade your government not to sign BIT’s. Although I agree that this is one of the only things we as citizens can do against BIT’s, I do think that the chance that such an action is successful will be very small. Since BIT’s often involve huge investments in the country in question, the country will have a very large incentive to sign the treaty. In addition, even if countries are aware of the far reaching consequences the BIT can have, they might still be willing to sign in also out of fear that if they don’t sign the company will move to another country and they will lose the investment. Furthermore, while we here in the Netherlands we live in a democracy and can openly critique the actions by our government, in many other countries this can be a very dangerous thing to do, making it far less likely that people will protest BIT’s. Thus although this could indeed be an option for action, I do not think this would be a very effective solution.
    The other solution you mention is to bring about a change through case law. You say that if people would see nature as an investment people could sue companies who pollute the environment. However, I was wondering how you see this change coming about since now environmental law and trade law (under which I assume investment law would fall) are very strictly separated. And while for trade law there are indeed effective enforcement mechanisms in place, this is not at all the case for environmental law. Thus I was wondering how you saw this change occurring?

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  4. Thank you for the comment! To the first question I would say that some states are already proving disenchanted with these trade agreements. Australia, for example, has already said it will not sign any deal that allows international investor-state dispute settlement mechanisms and there is a rise in actions and public distaste for these deals. Rising public pressure should be used to affect electoral change, and if not, general striking is also an option. In regards to the second question, yes this would require a reinterpretation of international environmental law. Under most interpretations in international law, expropriation of private assets is permitted for the “public good”. So in order to do this, states must be pushed to declare protecting the environment for the “public good”. Examples may include declaring a “climate emergency”. If enough states do this, international law custom can change.

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