The Role of Transnational Self-Regulated Norms in Advancing Environmental Accountability of Foreign Investors in Investor-State Dispute Settlement Tribunals

Abstract

This dissertation aims at mitigating the critical tension between promoting Foreign Direct Investment (FDI) as a financing mechanism for the 2030 Agenda for Sustainable Development and the frequent neglect of environmental protection within the investor-state dispute settlement (ISDS) system. While International Investment Agreements (IIAs) and the ISDS tribunals they create are meant to facilitate foreign investment flow, this framework has historically favored investor protections over a host State’s right to regulate environmentally. This has created an imbalance where foreign investors enjoy protective rights but have limited corresponding international environmental obligations. The dissertation’s main goal is to propose a legally sound path for holding foreign investors environmentally accountable within the current ISDS framework, asking if transnational self-regulatory norms can be used as substantive law to impose international environmental obligations on investors during investment disputes. Through doctrinal and theoretical analysis, it proposes using the systemic interpretation approach found in Article 31(3)(c) of the Vienna Convention on the Law of Treaties to determine if a transnational norm qualifies as a relevant and applicable rule of transnationalized customary international law for interpreting an investment treaty. To make this practical, the research uses the United Nations Global Compact (UNGC) as a case study, showing how it can be invoked as substantive law to hold investors accountable for environmental damage and confirming that a doctrinally and theoretically solid path exists for integrating investor obligations into investment arbitration. Ultimately, the dissertation concludes that by treating qualified transnational self-regulatory norms as substantive law, ISDS tribunals can achieve a meaningful balance between investor rights and responsibilities, transforming investment arbitration from an impeding setting into a tool for fostering environmentally responsible investment and helping to achieve the goals of the 2030 Agenda for Sustainable Development. This research is especially timely, as its arguments align with recent developments like the International Court of Justice’s Advisory Opinion on climate change litigation, which underscores the urgent need to integrate environmental norms into international law.