investment-82aafb6e303afa44.pdf

This briefing by the Center for International Environmental Law examines how modern investment treaties and investor-to-state dispute settlement (ISDS) mechanisms can undermine environmental regulations and public health protections by allowing foreign investors to sue host states for 'indirect expropriation'.

• Modern investment treaties have expanded the definition of expropriation to include 'indirect expropriation' (also known as 'disguised' or 'creeping expropriation'), which can encompass state actions that normally fall under police powers. Tribunals have interpreted these rules to include regulations intended to protect public health and the environment, potentially reversing the 'polluter pays principle' by forcing governments to compensate investors for the costs of complying with environmental laws.
• Since the early 1980s, bilateral investment treaties (BITs) have shifted dispute resolution from state-to-state arbitration to investor-to-state arbitration, allowing foreign investors to sue host states directly. This has led to a significant increase in cases; for instance, the World Bank's International Center for the Settlement of Investment Disputes (ICSID) handled only six BIT cases from 1966 to 1997, but had 43 pending cases under BITs and NAFTA in the 2001 fiscal year alone.
• The document cites three case studies where investment rules conflicted with public interest or environmental goals: a NAFTA panel upheld a U.S. investor's challenge to Canada's ban on polychlorinated biphenol (PCB) waste exports; Bechtel Corporation used a Dutch-Bolivian treaty to seek US$25 million from Bolivia following the privatization of Cochabamba's water system; and Mexico was forced to pay US$16 million to Metalclad after a local community blocked a hazardous waste facility by declaring the site an ecological preserve.
• The author criticizes the current arbitration process for lacking transparency, bypassing host country judicial systems, and lacking an effective appellate process. To address this, the briefing suggests the World Summit on Sustainable Development (WSSD) develop a framework that balances investor protection with the right of governments to regulate in the public interest, requires the exhaustion of local remedies before international arbitration, and ensures public scrutiny of deliberations.

APA

Center for International Environmental Law (n.d.). investment-82aafb6e303afa44.pdf. https://www.ciel.org/wp-content/uploads/2015/03/investment.pdf

Chicago

Center for International Environmental Law. investment-82aafb6e303afa44.pdf. n.d. https://www.ciel.org/wp-content/uploads/2015/03/investment.pdf.

Wikipedia

{{cite report |author=Center for International Environmental Law |title=investment-82aafb6e303afa44.pdf |url=https://www.ciel.org/wp-content/uploads/2015/03/investment.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{centerforinternationalenvironmentallawndinvestment82aafb6e303afa44pdf, author = {{Center for International Environmental Law}}, title = {{investment-82aafb6e303afa44.pdf}}, institution = {Center for International Environmental Law}, url = {https://www.ciel.org/wp-content/uploads/2015/03/investment.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }