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Foreign direct investment and the protection of the environment: the border between national environmental regulation and expropriation

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Foreign direct investment and the protection of the environment: the border between national environmental regulation and expropriation


European Energy and Environmental Law Review
Volume 12, Issue 3 (2003) pp. 70 – 82

https://doi.org/10.54648/eelr2003010



Abstract

This article endeavours to set up the border between legitimate non-compensable national environmental measures or regulations and measures that are tantamount to expropriation requiring compensation. Recent investor-state arbitration claims show that whenever a state takes action to protect the environment, the state is responsible for damages to foreign investors protected under an investment treaty. After a brief description of the relationship between the protection of foreign direct investment and the environment, this article addresses in Part II how the vague definition of investment under treaty law, broadens the treaties' scope of application. Part III describes what amounts to a taking under a bilateral investment treaty and the North American Free Trade Agreement (NAFTA), and under international law. Part IV draws the border between legitimate non-expropriatory national legislation aimed at protecting the environment and regulations that are tantamount to expropriation. Part V refers to the issue of whether a proportionate and non-discriminatory regulation aimed at a public purpose, and not in breach of prior commitment requires compensation. Part VI is a conclusion.


Extract




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