Environmental Clauses in Investment Arbitration: Deep Roots, Green Shoots and Dead Wood

Abstract An assumed conflict between international investment law and environmental protection has driven many States to negotiate investment treaty clauses that reaffirm their policy space. But what on earth is policy space? Are we sure that environmental and investment protection are conflicted? Now that environmental clauses have been interpreted by tribunals, which functions, if any, are they serving in investment arbitration? In addressing such questions, this article defends an integrated hierarchy of environmental over investment protection, affirmed by the International Court of Justice and wider practice, whereby a State’s presumptive right to regulate for environmental protection is inherently limited by a test of manifest disproportionality. Against that normative baseline, we are better equipped to assess whether environmental clauses have affirmed or diverged from a State’s rights and obligations under general international law. The article introduces a typology of 12 environmental clauses in investment treaties, examined in light of arbitral practice and organised according to three stages of analysis: jurisdiction (legality, exclusion, exemption, denial of benefits); breach (conflict, affirmation, clarification, implementation, non-regression); and exception (justification, reservation, investor obligation). Ultimately, this article identifies which clauses reflect general international law (deep roots), may enhance environmental protection (green shoots) or make negligible contribution (dead wood).