Climate Change Clauses in International Investment Agreements: An Analytical Survey

Abstract This article investigates how States have reflected the urgent need for climate action in their international investment agreements. It reviews the wording of 109 international investment agreements that contain specific climate change language. The practice is slowly gaining momentum across States and grouping of States, but concerns at present chiefly the EU, Chile, the UK, New Zealand and Australia. The review indicates that the overwhelming majority of States did not consider that the urgent need to implement climate actions required them to update their international investment agreements. The few States that did so merely shoehorned climate change considerations into their traditional environmental clauses, although new practices are emerging in this area. In addition, the few investment treaty parties that engaged with climate change did not seek to make climate-friendly investments markedly more attractive than climate-neutral or climate-hostile ones. The main obligations that they created in respect of climate change mirror largely those existing under the climate change regime and relate to cooperation, facilitation and promotion activities. The normative content of these obligations is even more diluted when they are worded—as is often the case—as obligations to make efforts to cooperate, to promote or to facilitate. States also sought to shield the parties’ ability to adopt climate change measures through clauses protecting their regulatory powers, borrowing often from the wording of the so-called second generation of investment treaties. Recent practice in the context of the Energy Charter Treaty allows individual parties to reduce the investment treaty protection they grant with respect to existing or future fossil fuel investments. Although much more is required for investment treaties to reflect the urgent need for climate action fully, including more significant participation of non-Annex I countries in the practice, the wide breadth of the clauses surveyed suggests that all the key elements of a multilateral agreement on investment, trade and climate change are on the table.