Law and Climate Change: Balancing Investors’ Legitimate Expectations and States’ Climate Commitments

On 30 August 2024, as part of Singapore Convention Week, the International and Comparative Law Research Center held a panel discussion in Singapore titled “Law and Climate Change: Balancing Investors’ Legitimate Expectations and States’ Climate Commitments”.  The Asian Academy of International Law was the information partner of the event.

The speakers of the event were:

• N. Jansen Calamita, Head of Investment Law & Policy at Centre for International Law, Research Associate Professor (CIL) of Faculty of Law at National University of Singapore;

• Antony Crockett, Partner, Herbert Smith Freehills (Hong Kong);

• Benoit Mayer, Associate Professor at the Faculty of Law of the Chinese University of Hong Kong (CUHK LAW);

• Mark McLaughlin, Assistant Professor of Law, Singapore Management University, Singapore International Dispute Resolution Academy;

• Tigran Ter-Martirosyan, Partner of TIVACO Experts (Singapore);

• Stefanie Schacherer, Assistant Professor of Law, Yong Pung How School of Law, Singapore Management University.

The discussion was moderated by the Center’s experts – Alexandra Khlebnova, Head of Climate and Environment, and Ekaterina Petrenko, Expert on Public International Law.

The event was attended, among others, by representatives of the Ministry of Law (Singapore), UNCITRAL, lawyers from international law firms, representatives of research organizations, and media.

Participants discussed how the international climate change regime affects the landscape of investment arbitration and energy disputes, and talked about recent developments, cases and emerging trends at the intersection of law, investment and climate change. During the discussion, the speakers tried to find a balance between the interests of investors on the one hand and the need to address climate change on the other

The event was opened by Alexandra Khlebnova and Ekaterina Petrenko, who highlighted the existing conflict between the obligations of States in the areas of investment protection and mitigating climate change and the related problem of coordinating the interests of States and the interests of investors.

N. Jansen Calamita raised the issue of aligning investment protection objectives with climate change goals and highlighted how this alignment is reflected in investment agreements. In particular, he touched upon the main instruments contained in such agreements: the right to regulate, which allows a State to take measures in support of public aims of environmental protection (and how this right varies and evolves depending on the text of a particular agreement), “shall not prevent” clauses, general exceptions and others.

Mark McLaughlin noted the need to take into account the views and interests of local communities when investing and thus emphasized the importance of investors obtaining a “social license to operate”. He also highlighted the peculiarities of dispute resolution through mediation assisted by the investment ombudsman.

In following up on the previous topics, Stefanie Schacherer spoke about what State measures can lead to the emergence and increase in the number of proceedings. She also provided an overview of the categories of proceedings with a focus on the types of cases that may arise in ISDS.

In his presentation, Antony Crockett elaborated on the concept of legitimate expectations of the investors and how it is transformed in the context of a State’s implementation of climate policies and vice versa if the State does not fully comply with its climate commitments. He also emphasized the importance of investor due diligence and noted that it could be an investor’s stand-alone obligation. A breach of such an obligation could form the basis for counterclaims by States and could also be taken into account by a tribunal when deciding on compensation.

Benoit Mayer spoke about States’ obligations to mitigate climate change and where they stem from. He also focused on the content of such obligations using examples of recent cases (e.g. Urgenda v. the Netherlands, Gloucester Resources Ltd v. Ministry of Planning, Verein KlimaSeniorinnen v. Schweitz) and advisory opinions of international judicial bodies, highlighting the importance of advisory opinions in the context of investment law and arbitration. He also highlighted the issue of compensation for damages due to climate change and possible difficulties in proving it (in particular, in analyzing causation).

Tigran Ter-Martirosyan concluded the discussion with an overview of the methods, factors, and complexities of damages assessment in different categories of disputes, as well as the impact of ESG on the content of the assessment. In particular, the focus was on valuation in the context of breach of investors’ legitimate expectations and how tribunals have approached the analysis of these issues in recent proceedings.