Environmental Discrimination in International Investment Law

Abstract

<p>One emerging tension between environmental law and international investment law stems from the differential treatment of foreign investors required by environmental regulation which may violate the non-discrimination clause in investment treaties. This article identifies three groups of environmental differentiations: impact-based, jurisdiction-based and treaty based. Impact-based differentiation refers to the polluter/non-polluter distinction, which includes the differential treatment of private actors based on their relative environmental impacts, location, size, public opposition, and administrative feasibility. However, foreign investors with similar environ mental impacts may be subject to differential treatment for other reasons, including (1) jurisdiction-based differentiation, meaning the multi-jurisdictional environmental governance in the host state leads to different environmental standards enacted by federal, state, and local authorities; and (2) treaty-based differentiation, arising from states’ obligations under international environmental treaties to accord differential treatments to private actors based on their nationalities. All three types of differentiations may violate the non-discrimination clause in investment treaties. The article proposes a real tension test to reconcile the tension between environmental protection and non-discrimination through a three-step analysis. In its conclusion, this article applies the real tension test to the recent Bilcon v. Canada case as an illustration of the test’s application in arbitration practice.<br></p>