A Quasi-Normative Conflict: Resolving the Tension between Investment Treaties and Climate Action

Abstract

<p>The conflict between investment treaties and climate action is escalating due to recent investment arbitration cases challenging States' fossil fuel phase-out measures as violations of investment treaty obligations. As countries continue to implement climate mitigation and adaptation measures across various industries, this tension is expected to result in a rise in climate-related investment arbitration claims. The current literature has primarily presented the tension between investment and climate treaties as a vertical conflict, with investment treaties having a chilling effect on States' climate regulation. The common defence for States' regulation has been based on their ‘right to regulate’. It remains unclear whether there exists a horizontal conflict between investment and climate treaties, primarily due to the flexible nature of climate treaty obligations. However, a sovereignty-based justification fails to recognise the international obligation of climate action and is insufficient for reconciling the conflict. This article delves into the intricate nature of the conflict between States' climate measures and their investment treaty obligations and argues that the conflict exhibits a ‘quasi-normative’ nature, given the combination of binding climate obligations, permissive implementation methods and normative expectations of ambition. The article suggests that investment treaties should include clearly defined conflict clauses that outline the scope of the conflict between investment and climate treaties and establish specific mechanisms for resolving such conflicts.<br></p>