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Strengthening the ability of U.S. investment agreements to protect the environment has been a bipartisan policy goal for over a decade. Provisions to advance environmental protection first appeared in Article 12, entitled “Investment and the Environment,” of the 2004 Model bilateral investment treaty (BIT) while the 2012 U.S. Model BIT significantly expanded and strengthened Article 12. Even more extensive environmental obligations and related provisions appear in U.S. free trade agreements, alongside chapters on investment and trade.
In the model BIT, the central feature of Article 12 is a commitment for signatories not to “…waive or otherwise derogate from…environmental laws…or fail to effectively enforce those laws…as an encouragement for the establishment, acquisition, expansion, or retention of an investment in its territory.” The U.S. model BIT, and similarly framed investment chapter texts in U.S. FTAs, also protect the ability to regulate (whether concerning the environment or other areas) in nondiscriminatory, bona fide ways (e.g., consistent with national treatment and most-favored nation commitments, among others). In part due to the importance of the right to regulate to the United States, it has clarified key concepts such as the Minimum Standard of Treatment (model BIT Article 5, Annex A) and expropriation (model BIT Article 6, Annex B) in its investment texts.
These environmental protection principles are reinforced in Annex B which explicitly limits the exposure of environmentally sensitive, nondiscriminatory regulatory actions to investor claims of indirect expropriation.
Interestingly, a claim filed by a Canadian investor under the Canada-Barbados BIT (Allard v. Barbados) could demonstrate how investment agreements could protect the environment. In this particular claim, the Canadian investor alleged that Barbados’ failure to enforce its environmental laws and to abide by its international treaty obligations had destroyed the value of his $35 million investment in an ecotourism project on 34.25 acres of natural wetlands on the south coast of Barbados (the Graeme Hall Nature Sanctuary). The claim documents also assert that Barbados has failed to prevent the discharge of sewage into the wetlands, to maintain adequate drainage of the area, to investigate and prosecute the sources of polluting effluents, and to prosecute wildlife poachers, allegedly in disregard of domestic environmental laws and international treaties, including the Convention on Wetlands of International Importance and the United Nations Convention on Biological Diversity (Barbados is a party to both treaties).
According to the claim documents, Allard initially acquired the land for the Graeme Hill Sanctuary in the 1990’s. The 34.25 acres of the sanctuary are located within Barbados’ last significant mangrove forest and migratory bird habitat, which, according to the investor’s claim documents, the Barbados government rezoned in 2008 for commercial and residential development.
The investor is seeking the restitution of his interest in the Graeme Hill Sanctuary either through adequate environmental remediation or financial compensation. However, the Canada-Barbados BIT only authorizes Investor-State Dispute Settlement (ISDS) tribunals the power to award monetary damages or restitution of property for losses due to government expropriation. The treaty does not give a tribunal the power to mandate that a party change its laws or its implementation of those laws, so presumably the investor must reach a settlement with the Barbados government to obtain environmental remediation that would preserve the sanctuary. Notably, if this investment were protected by an up-to-date U.S. investment text, the investor could ask the U.S. government to seek bilateral consultations to persuade the host government to provide the environmental remediation the investor apparently prefers.
While each treaty-based arbitration is sui generis, a tribunal award for the Canadian investor could have significance for the environmental NGOs that privately purchase land all over the world to preserve it as wilderness or parkland. Among such organizations that work internationally to conserve wilderness and protect biodiversity through private or public-private arrangements are The Nature Conservancy, The World Land Trust, Conservation International, the African Wildlife Foundation, the Audubon Society, and the Wildlife Conservation Society. In a world in which government resources available to conserve wilderness areas are shrinking in absolute and real terms, the ability of private NGOs to marshal donor funds to preserve the world’s remaining wild lands could effectively augment government conservation efforts. Treaty-based protections would reduce the risk of such investments and further their growth. This can only have a positive impact on both local and global environmental trends.
U.S. international investment agreement texts have come a long way over the past two decades. Bipartisan reform has produced a balanced set of negotiating objectives that not only opens markets and protects the rights of U.S. investors but also advances U.S. policy goals in labor rights, transparency, the rule of law, and environmental protection. Treaty-based dispute resolution, despite frequent accusations of environmental harm, can support private efforts to advance conservation and environmental protection.
Greg Hicks is a State Department fellow at CSIS. The views expressed herein are those of the author and do not necessarily reflect the views of the U.S. Department of State or the U.S. government.
Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).
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