This chapter examines how investor-State dispute settlement (ISDS) influences the balance between investment protection and climate change¬. It looks first at the jurisdiction of investment tribunals and remedies available under ISDS, in order to explain when and what kind of claims investors can raise, and who can participate in arbitral proceedings. Second, this chapter critically reviews applicable law in investment arbitration, and the role of environmental law rules and principles therein. It is argued that ISDS limited jurisdiction to determine only whether there has been a violation of investment law provisions does not pose a systemic “threat” to climate change protection, since tribunals cannot make authoritative findings on the existence of environmental harm. On the contrary, investment tribunals tend increasingly to pay due consideration to national or international law rules on climate change and show deference to host states when the latter provide evidence supporting the legality of climate change-related measures. Besides, investment tribunals can indirectly address potential environmental harm caused by investors by excluding them from the scope of investment protection, or take their conduct into account in the merits or in the calculation of damages. Finally, although ISDS has been heavily criticized for not allowing third parties to participate in proceedings, a growing number of arbitration rules and investment treaties enable the submission of amici curiae, that presents a first positive step towards strengthening inclusiveness and legitimacy of ISDS.
The chapter explores the emergence of the EU as a global actor in the field of international investment law and policy. Therefore, it examines first the legal framework concerning the assumption of powers in the field of foreign investment by the EU. Secondly, it looks into the accommodation of the EU within the existing regime of international investment law. The chapter places particular emphasis on the EU mechanism providing for transitional arrangements for Member State BITs and the EU mechanism on financial responsibility. Finally, it explores the content of EU investment agreements, identifying the key contributions that the EU has developed in this field and its importance as a ground-breaking normative actor. In light of the above, the conclusion is drawn that although the EU’s record has not been quantitatively impressive, it is qualitatively substantial, paving the path for a new legal framework on FDI regulation.