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Centre for Commercial Law Studies

The Contribution of Free Trade Agreements and Bilateral Investment Treaties to a Sustainable Future

Professor Rafael Leal-Arcas publishes his most recent research on free trade agreements, bilateral investment treaties, and sustainability

27 May 2020

Professor Rafael Leal-Arcas, Jean Monnet Chair holder in EU International Economic Law at Queen Mary University of London, has just published his most recent research, titled “The Contribution of Free Trade Agreements and Bilateral Investment Treaties to a Sustainable Future”, Zeitschrift für Europarechtliche Studien – ZEuS, Vol. 23, Issue 1/2020, pp. 3-76.

You can download the article via SSRN.

Abstract

We argue that international trade law may be the solution to decarbonize the economy and invest in renewable energy, but there must be effective measures agreed by the international community. That would require agreeing on preferential trade agreements (PTAs) with environmental and sustainable development chapters on a unilateral, bilateral, or plurilateral basis, as multilateral agreements have proven to be increasingly difficult to negotiate. This paper will assess the feasibility of including such chapters through an analysis of existing environmental and climate change-content in recent PTAs. Equally, recent developments in newer bilateral investment treaties (BITs) show that there is a positive shift towards explicit inclusion of sustainable development issues into their wording (e.g. states’ right to adopt sustainable development-oriented regulation). Reference to sustainable development issues may appear in different parts of a BIT, e.g. as a general objective of the treaty in a preamble, as a separate obligation of the state parties or investors, or as an exception to the substantive protection standards, such as prohibition of unlawful indirect expropriation. Specific position and wording of sustainable development provisions determine to what extent such provisions will be binding and enforceable against state parties. Certain BITs contain only a broad reference to sustainable development without clear practical consequences, while others list sustainable development obligations that may be enforced in practice, e.g. by means of state to state dispute settlement mechanism or, if such obligations are imposed on foreign investors, as a counterclaim brought by a host state against an investor. Finally, we analyze how efforts to modernize the Energy Charter Treaty may contribute to sustainable development.