Free Trade vs. Environmental Protection: A Dead End in an Interest-polarized Position – Remarks in Accordance with the Reform of ISDS Procedures

Abstract

With the liberalization of trade and the expansion of world trade, foreign investment is becoming more important. This can take the form of multilateral free trade agreements or the continuously spreading bilateral agreements. These agreements settle the relationship among the parties, with special regard to the instruments and procedures for enforcing the protection of investments. More and more critical voices can be heard about alternative dispute resolution forums, due to the lack of environmental considerations. In the major part of the cases, the interests of foreign investors are damaged by environmental regulations, and thus an irreconcilable conflict can arise between investment protection and environmental protection. In this paper, we review the question of state liability, as the measures restricting investments are created by individual or normative state acts. After that, we analyse the judicial legitimacy of the various investment court systems and their principle rules. In our point of view, not the existence of a court system in itself means a threat to environmental protection, but the lack of environmental regulations for investors. If, in addition to the rights of the investors there would be obligations as well, it could create a sustainable equilibrium due to the balancing of competing interests.