Investor-State Dispute Settlement and the Future of the Precautionary Principle

Free trade agreements can be traced back to the ancient empires which existed before the Common Era.

World Trade Organisation, World Trade Report 2011, 49, available athttps://www.wto.org/english/res_e/booksp_e/anrep_e/world_trade_report11_e.pdf (last visited May 4, 2016).

GATT, and later, the WTO, facilitated the growth of the global economy in the later twentieth and twenty-first centuries, and offered an independent dispute settlement service in the form of the WTO’s dispute settlement body and appellate panel. These offered a means of settlement of trade disputes that avoided, initially at least, some of the political and diplomatic hurdles presented by state-state negotiation. However, the WTO seems to have become a victim of its own success. Viviane de Beaufort takes the view that despite its considerable success in attempting to broker agreements between 159 states, progress at the WTO has foundered on: “confrontations between states”; the increasingly complex nature of the negotiations which have moved from concerns with tariffs to complex technical matters such as phytosanitary protection and intellectual property; and the rise of “concerns on sovereignty.”

Viviane de Beaufort, The European Union and the New Face(s) of International Trade, 1 Int. Bus. L. I. 39, 41 (2015).

In recent times, the United States has been particularly active in embracing this model of trade and, since its first free trade agreement with Israel in 1985, is now party to 20 free trade agreements,

For a list of the U.S. free trade agreements seehttps://ustr.gov/trade-agreements/free-trade-agreements (last visited May 4, 2016).

This increase of BITs and investment chapters in free trade agreements is coupled with a spectacular increase of case load in investor-state dispute settlement (ISDS) fora. The last summary of the case load statistics for the International Centre for the Settlement of Investment Disputes (ICSID) indicated that 52 applications were currently registered. Just a decade earlier, in 2005, the figure was approximately half that (at 27 applications), and in 1995 was a mere three applications.

The ICSID Caseload - Statistics, International Centre for the Settlement of Investment Disputes, (Issue 2016-1) at 7, Chart 1, available athttps://icsid.worldbank. org/apps/ICSIDWEB/resources/Documents/ICSID%20Web%20Stats%202016-1%20 (English)%20final.pdf

The reasons for the rise in popularity in BITs and the introduction of investment chapters in free trade agreements, particularly the recent Mega-Treaties are not difficult to find. There are distinct advantages to states in brokering agreements directly and, as Caroline Foster has pointed out, such agreements “encourage and support international commercial private actors’ freedoms to invest, disinvest, repatriate capital, buy and sell goods and services, employ, navigate, exploit communal resources, and take business decisions.”

Caroline Foster, A New Stratosphere? Investment Treaty Arbitration as ‘Internationalized Public Law’, 64 Int’l & Comp L.Q. 461, 462 (2015) (citing T.W. Waelde). For a wider treatment of the advantages and disadvantages of ISDS see Ahmad Ali Gouri, The Evolution of Bilateral Investment Treaties, Investment Treaty Arbitration and International Investment Law, Int. A.L.R. 14, 189-204 (2011); Mojtaba Dani & Afshin Akhtar-Khavari, The Uncertainty of Legal Doctrine in Indirect Expropriation Cases and the Legitimacy Problems of Investment Arbitration, 22 Widener L. Rev. 1 (2016); Rudolf Dolzer, Fair and Equitable Treatment: Today’s Contours, 12 Santa Clara J. Int’l L. 7 (2013); Becky L. Jacobs, Perplexing Paradox: “De-Statification” of “Investor-State” Dispute Settlement? 30 Emory Int’l L. Rev. 17 (2015-2016); Ivan Pupolizio, The Right to an Unchanging World Indirect Expropriation in International Investment Agreements and State Sovereignty, 10 Vienna J. on Int’l Const. L. 143 (2016); Gus Van Harten & Martin Loughlin, Investment Treaty Arbitration as a Species of Global Administrative Law, 17 Eur. J. Int’ l 121-50 (2006).

However, there are some distinct disadvantages to ISDS. In particular, it permits aggrieved investors to take host states directly to international arbitration; it is not necessarily the case that the investor need first exhaust domestic remedies,

E.g. Article 26 of the ICSID Convention states that “A Contracting State may require the exhaustion of local administrative or judicial remedies as a condition of its consent to arbitration under this Convention” (emphasis added) see Convention on the Settlement of Investment Disputes between States and Nationals of Other States, Mar. 18, 1965 17 U.S.T. 1270, 575 U.N.T.S. 159, art. 26, available athttps://icsid.worldbank.org/apps/ICSIDWEB/icsiddocs/Documents/ICSID%20Convention%20English.pdf (last visited May 4, 2016). [hereinafter ICSID Convention] (Note that the preamble to the 2000 BIT between Croatia and the United States (signed by President Clinton) states that international arbitration is available to investors as an alternative to domestic courts.)

The paper will examine just one aspect of ISDS, but one which has profound implications for regulatory sovereignty in nation states. At issue is the question of whether BITs and investment chapters in recent Mega-Treaties permit investors to challenge regulatory decisions on the basis, inter alia, that they amount to a lack of fair and equitable treatment for investors or are tantamount to expropriation of their assets. This is most likely to arise where regulation is based on an interpretation of scientific data (often related to public health or environmental protection) which is susceptible to different regulatory responses. In the European Union such decisions are often predicated on the precautionary principle - which is an important element of European primary law

Treaty on the Functioning of the European Union (Consolidated Version), 2008 O. J. (C 115), 47, art. 191(2).

However, rather than discuss this issue in purely abstract and theoretical terms, an attempt has been made to analyse the possibilities through a real-life and current issue, namely the European Commission’s restriction on the use of neonicotinoid insecticides. Hence this paper will assess what the possibilities might be were an investor to challenge this restriction under the terms of the proposed (though partly hypothetical)

The putative text of the TTIP is not generally made available to interested parties outside the EU Commission and the U.S. State Department. However, the European Commission has recently redrafted the proposed investment chapter and published it online, albeit in different stages of completion, see infra note 128 and associated text. The Commission draft is available athttp://trade.ec.europa.eu/doclib/docs/2015/september/ tradoc_153807.pdf (last visited May 31, 2016).

The European Commission has been at great pains to reassure concerned parties (including the “European Parliament, Member States, national parliaments and stakeholders”

Press Release, European Commission, Commission Proposes New Investment Court System for TTIP and other EU Trade and Investment Negotiations, IP/15/5651 (Brussels, Sept. 16, 2016), available athttp://europa.eu/rapid/press-release_IP-15-5651_en.htm

The Commission was perhaps well-advised to issue this reassurance since scrutiny of the operation of investment chapters in existing agreements, by analysis of the arbitral decisions that have emerged from them, could lead an analyst to a rather different conclusion. This Part will examine the general nature of the protections for environmental regulatory sovereignty in typical investment agreements, proposed and extant, before examining, in Part III, some of the arbitral decisions which have engaged with these types of provisions.

Modern model investment treaties such as the 2012 U.S. Model BIT

2012 U.S. Model Bilateral Investment Treaty, available athttp://www.state.gov/documents/organization/188371.pdf.

This recognises the well-established fact that weakening environmental regulatory standards can have the effect of distorting trade and seeks to avoid a race to the bottom in terms of environmental protection.

Though it must be said that this protection is a relatively recent addition to the U.S. Model BIT and this provision does not feature in the older BIT agreements entered into by the United States, see id.

The 2012 U.S. Model BIT also recognises the sovereignty of states in promulgating environmental regulation. Article 12(5) states that:

Thus treaties based on the 2012 U.S. Model BIT not only attempt to protect the sovereignty of states in maintaining, adopting and enforcing environmental regulation but also ensure that states do not weaken protection in order to attract investment.

The Comprehensive Economic and Trade Agreement (CETA) between Canada and the European Union, concluded in September 2014,

Though still to be signed and ratified by the parties as of June 10, 2016. The document has undergone legal analysis in the European Union, the text of which was released in December 2015 [See In Focus: Comprehensive Economic and Trade Agreement (CETA), http://ec.europa.eu/trade/policy/in-focus/ceta/index_en.htm (last visited June 10, 2016)]. The consolidated text, issued on February 29, 2016 is available athttp://ec.europa.eu/trade/policy/in-focus/ceta/index_en.htm.

Hence the principal changes to the investment chapter in CETA were to create a bespoke Tribunal and Appellate Tribunal for the purposes of investor-state dispute settlement, including bespoke rules for the appointment of members of the arbitration and appellate tribunals. This is in contrast to the original text of CETA which drew on the existing services of ICSID. The new version makes use of certain of the rules of the ICSID Convention and of the ICSID Secretariat’s services but the arbitration hearings themselves will take place outside the ICSID system. This change was made to assuage some of the concerns, particularly in Europe, over the appointment and independence of ICSID arbitrators and the unavailability of appeal against ICSID arbitration decisions under Article 53(1) of the ICSID Convention.

In terms of CETA’s protection of environmental regulation in state parties’ territories, the investment chapter makes several concessions. Under Section B of CETA (Market Access),

Comprehensive Economic and Trade Agreement, supra note 34, arts. 8.4 and 8.5.

Similarly, for the purposes of Section D of CETA (Investment Protection),

Id. arts. 8.9-8.14.

The recently agreed TPP uses similar language in its investment chapter in relation to performance requirements:

In relation to the TPP investment chapter as a whole, a general provision is included in Article 9.15:

The latest text of the investment chapter of the putative TTIP - though evidently incomplete

E.g. there are references to National Treatment and Most Favoured Nation Status at Annex II (Public Debt) to section 2, paragraph 2, seesupra note 27. This paragraph refers to “ Section 1: Liberalisation of Investments”, but the full text of this section is not yet included in this Commission document; a separate document on investment protection is still under negotiation (see infra note 128).

Very similar protections for important public interest matters are to be found in other, more established, trade agreements such as the North American Free Trade Agreement (NAFTA) and these, unlike the texts of CETA, TTP and TTIP, have been the subject of arbitral decisions. For example, the preamble to NAFTA, inter alia, exhorts the three state parties to “STRENGTHEN the development and enforcement of environmental laws and regulations”

North American Free Trade Agreement, supra note 9, Preamble.

On the face of it such provisions should prevent interference with the environmental regulatory sovereignty which states must exercise in the public interest and prevent the dismantling of existing regulation as a means of attracting foreign direct investment. However, the reality has not always reflected these expectations. Some arbitral decisions have suggested that investor interests can, in certain circumstances, outweigh the right of a state to exercise sovereignty. It is to these decisions that we now turn.

Most ISDS proceedings have taken place under the auspices of the ICSID and a number of these have involved challenges based on attempts - at least on the face of it - to protect the environment or to preserve local sovereignty in respect of activities perceived to be environmentally unacceptable or contrary to local or national public health imperatives.

Perhaps the most controversial of these was the Metalclad arbitration, issued in August 2000 and heard under the Additional Facility rules of the ICSID Convention.

Metalclad Corporation ν. The United Mexican States, ICSID Case No. ARB(AF)/97/1, Award (Aug. 30, 2000).

In short, the U.S. and Canadian investors in Metalclad were seeking to show that the lack of transparency in the operation of the Mexican regulatory system relating to hazardous waste sites, and the decision of the local municipality to create a nature reserve which included the entire site (thereby rendering it inoperable), amounted to a lack of fair and equitable treatment and to measures tantamount to expropriation.

The decision in relation to Article 1105(1) was based on the fact that there was considerable uncertainty on the part of the Mexican federal, state and municipal authorities as to which of them was in fact responsible for the permitting of hazardous waste facilities.

Metalclad Corporation ν. The United Mexican States, supra note 50, ¶¶ 78-101. The tribunal found that responsibility rested solely with the federal authorities and that the municipality’s refusal to grant building permits on the basis of environmental considerations, rather than restricting their scrutiny to “appropriate construction considerations” (Id. at ¶ 86) amounted, in effect, to an ultra vires exercise of power. It could be argued of course, that “environmental impact considerations” are legitimate construction considerations when assessing physical construction or site defects. After all, the physical construction of a site itself has an impact on the environment and a full environmental impact assessment should take account of construction as well as subsequent operation of a landfill site. Furthermore, if an environmental impact assessment does not adequately analyse the suitability of the site itself (in terms of geological suitability, treatment of leachate to water and land, emissions to air and so forth) then how can the site itself be said to suitable, and hence free from defect. However, the Tribunal chose to construe these terms more narrowly and, unlike the author, had the benefit of hearing or reading both parties’ expert evidence in full.

However, aspects of the panel’s comments on the Article 1110 infringement were much more controversial. Much of the decision appeared to follow logically from the Article 1105 finding, on the basis that such a degree of opacity in the regulatory and legal process was not only unfair and inequitable treatment, but on such a serious scale as to qualify also as a measure tantamount to expropriation. However, the panel went further and considered the state governor’s decision to issue an Ecological Decree which encompassed the site as part of the Article 1110 analysis:

This was to attract considerable informed criticism and adverse judicial treatment in the aftermath. Many commentators considered that the Tribunal - which was led by no less a figure than Professor Sir Elihu Lauterpacht, CBE, QC - had construed the term “indirect measures tantamount to expropriation” unacceptably widely and in such a way as to trespass on the legitimate exercise of state sovereignty in environmental matters. Professor Phillipe Sands has characterised the Tribunal as taking “a very broad approach to the definition of expropriation”

Philippe Sands, Lawless World 133 (2005).

The decision received judicial scrutiny at the hands of Judge David F. Tysoe of the Supreme Court of British Columbia.

It was stated earlier that arbitration under the ICSID Additional Facility rules are not subject to Article 53(1) of the ICSID Convention (which forbids appeals against decision made under the ICSID Rules) and hence may be appealed in a suitable national court. Thus because the Metalclad arbitration had been held in Vancouver, the Supreme Court of British Columbia had jurisdiction to hear the appeal under the terms of British Columbia’s International Commercial Arbitration Act, R.S.B.C. 1996 c. 233. SeeThe United Mexican States ν. Metalclad Corporation & Attorney General of Canada & La Procureure Générale du Québec on Behalf of the Province of Québec - intervenors [2001] BCSC 664.

Turning to the question of whether the passing of the Eco-Decree amounted to a measure tantamount to expropriation, Tysoe, J. was not able to conclude that the Tribunal had been patently unreasonable in reaching its decision. However, he did conclude that the definition of expropriation used by the Tribunal was “sufficiently broad to include a legitimate rezoning of property by a municipality or other zoning authority.”

Id. ¶ 99.

The importance of the Metalclad decision lies partially in its demonstration of the power of arbitral decision-making vis-à-vis sovereign interests and in the potential of international trade law principles to influence the shape and form of local and national regulatory measures.

Though it should be noted in passing, in the interests of balance, that the tribunal’s award of US$16.7m against Mexico represented only 18.5% of the original claim of US$90m Metalclad’s projected profits were not awarded on the basis, inter alia, that the waste site had never operated as such.

What then, is the legacy of the Metalclad decision on fair and equitable treatment and expropriation, and to what extent has it been followed subsequently by other tribunal panels? This is not such a straightforward question to answer for a number of reasons. Firstly, arbitral tribunals decide each case on the facts before them and the terms of the underlying agreement and hence the common law doctrine of stare decisis is not appropriate. Secondly, there is no requirement for ICSID arbitral awards to be published - and many are not, or are published as excerpts only.

Though in recent times there is a marked preference for full publication, probably in the interests of transparency and in an attempt to improve the public perception of the legitimacy of the decisions.

It is worth noting, however, that not long after the Metalclad decision was issued, the NAFTA rules were altered in respect of the meaning of fair and equitable treatment. The NAFTA Free Trade Commission adopted, on July 31, 2001, a Note of Interpretation entitled “Minimum Standard of Treatment in Accordance with International Law.”

See Apotex Holdings Inc. ν. United States of America, ICSID Case No. ARB(AF)/12/1, Award (Aug. 25, 2014) ¶9.3.

And yet, barely three years after Metalclad arbitration, Mexico found itself back at ICSID facing similar claims of lack of fair and equitable treatment and expropriation relating to another hazardous waste landfill site - this time far to the north-west in the Municipality of Hermosillo, in the State of Sonora in Mexico.

Tecmed Medioambientales Tecmed S.A. ν. United Mexican States, ICSID Case No. ARB(AF)/00/2, Award (May 29, 2003).

The Metalclad decision arose again in Waste Management Inc, yet another ICSID case involving Mexico.

Waste Management Inc. ν. United Mexican States, ICSID Case No. ARB(AF)/00/3, Award (Apr. 30, 2004).

The Waste Management Inc Tribunal did refer to the Metalclad decision, and appeared to acquiesce in Justice Tysoe’s characterisation of the interpretation of tantamount to expropriation as “extremely broad.”

Id. ¶¶ 153-4 & 159.

Expropriation also arose in the case of Lucchetti where a conservation order (Decree 258) was placed on an area including a pasta factory owned by an investor based in Chile.

Empresas Lucchetti S.A. v. Republic of Peru, ICSID Case No. ARB/03/04 (2005).

Evidently this entirely “closed and … removed” the factory - a clearer example of expropriation would be difficult to imagine. However, given that it was for the purposes of environmental protection (i.e. in the public interest) and appeared nondiscriminatory in the sense that all outlets in that area were similarly affected, it would have been interesting to see how the Tribunal would have approached it. In the event Lucchetti’s claim failed on technical grounds

The dispute between the Peruvian authorities and Lucchetti was considered to have started before the bilateral investment treaty between Chile and Peru came into force and hence did not fall within its terms. Article 6 of the Peru-Chile Bilateral Investment Treaty is concerned with expropriation in similar, though not identical, terms to NAFTA Article 1110, Id. ¶ 25.

In 2012, the Metalclad decision was invoked against Venezuela in Mobil Investment Canada Inc.

Mobil Investment Canada Inc. & Murphy Oil Corp. ν. Venezuela, ICSID Case No. ARB(AF)/07/4.

However, more recently still, the Metalclad decision was invoked in Gold Reserve Inc.

Gold Reserve Inc. v. Bolivarian Republic of Venezuela Case, ICSID No. ARB(AF)/09/1 (2014).

In a long and often difficult appraisal,

Occupying some 242 pp.

The Gold Reserve Tribunal also discussed the question of expropriation, and again invoked the Metalclad decision,

Id. ¶ 635.

Venezuela was also on the receiving end of another huge expropriation award at the end of 2014 in Venezuela Holdings B.V

Venezuela Holdings B.V. $. Bolivarian Republic of Venezuela, ICSID Case No. ARB/07/27 (2014).

All these decisions were the result of disputes which went all the way to full assessment of the merits of the parties’ positions and at least each party’s position was fully pleaded. However, there are instances where the threat of ISDS proceedings appear, at least on the face of it, to have resulted in a “chilling” of regulatory measures without the benefit of detailed argument. The use of threatened proceedings to influence the exercise of regulatory sovereignty has caused even more disquiet, not least because it is difficult, if not impossible, to assess the extent of its influence.

One of the starkest examples of this “use” of ISDS is the 1998 Ethylcorpdecision.

Ethyl Corporation v. The Government of Canada, UNCITRAL, Award on Jurisdiction 24 (June 1998), available athttps://www.uncitral.org/transparency-registry/registry/data/can/ethyl_corporation.html.

In the event, however, the merits of the claim were never addressed as the Canadian Government instead reached an out of court settlement with Ethylcorp, doubtless owing to lack of confidence that it could win on the merits in another arbitral forum. Though this response cannot be thought of as a classic regulatory chilling in that the provision was promulgated and remained in place after the challenge rather than preventing its genesis in the first place, it does illustrate that even where a public health measure is put in place for entirely bona fide public health reasons supported by sound science, the investor can nevertheless use the threat of arbitration to protect its investment. Further illustration of this tactic, albeit in a different context, can be observed in the campaign by Phillip Morris against plain packaging regulations in Uruguay and Australia.

Philip Morris Brands Sárl, Philip Morris Products S.A. & Abal Hermanos S.A. ν. Oriental Republic of Uruguay, ICSID Case No. Arb/10/7; Philip Morris Asia Limited (Hong Kong) ν. The Commonwealth of Australia, UNCITRAL, PCA Case No. 2012-12.

Thus there is plenty of precedent for the use of threats of arbitration to control regulation deemed to be economically threatening to an overseas investor. This gives rise to the question of whether regulatory measures adopted to protect public health or the environment in the European Union might potentially be open to challenge under the putative investment chapter of the TTIP by investors based in the U.S. Self-evidently the answer is yes by virtue of the mere existence of the investment chapter. However, there is an added nuance to challenges to environmental measures in the European Union since so many of them are based on the precautionary principle. It is contended that the different perceptions of this principle on both sides of the Atlantic presents an avenue of attack on regulatory measures in the European Union. Challenges to regulatory measures may be undertaken on the basis that the precautionary principle may be a disproportionate and non-scientific response which results in regulation based on fear and irrationality not on sound science.

The precautionary principle has been described in the U.S. as a “paralyzing principle” (Cass R. Sunstein, The Paralyzing Principle, Regulation 32-37 (Winter 2002-2003)). Sunstein was later to write an entire text devoted to “debunking” the principles (Cass R. Sunstein, Laws of Fear: Beyond the Precautionary Principle (2005). However, criticism of the principle is not confined to the US; many prominent European commenters have also pointed out the irrationality and indeterminacy of the principle (see Lawrence Kogan & Lucas Bergkamp, Trade, the Precautionary Principle, and Post-Modern Regulatory Process: Regulatory Convergence in the Transatlantic Trade and Investment Partnership 4 Eur. J. Risk Reg. 495, 499ff. (2013).

The precautionary principle is, in essence, the idea that lack of scientific uncertainty about a potentially harmful phenomenon, product or process should not, of itself, be a barrier to the taking of precautionary measures. The origins of the principle are somewhat obscure but it is generally traced back to Swedish and German environmental policies (Vorsorgeprinzip) of the 1970s. It has also been said to have been highly influential at the London Dumping Conference of the International Maritime Organisation in 1972, which gave rise to the Convention on the Prevention of Marine Pollution by Dumping of Wastes and Other Matter (MARPOL) which marked the beginning of the precautionary approach to the disposal of waste at sea.

Kevin Stairs & Peter Taylor, NGOsand the Legal Protection of the Oceans: A Case Study, in The International Politics of the Environment 110-41, 120ff. (Andrew Hurrell & Benedict Kingsbury eds., 1992).

By 1998, the precautionary principle had become part of the legal order of the European Communities by virtue of the Treaty of Amsterdam 1997, which inserted a new Article 131(2) into the Treaty on European Union; essentially the same text is now incorporated in Article 191 of the Treaty on the Functioning of the European Union which states that:

Unfortunately the principle itself is not further defined in the Treaty. Some clarification is contained within the official “Communication from the Commission on the precautionary principle” of 2000

Communication From the Commission on the Precautionary Principle, Commission of the European Communities, COM(2000) 1 final available athttp://eur-lex.europa.eu/ legal-content/EN/TXT/PDF/?uri=CELEX:52000DC0001&from=EN (last visited Oct. 29, 2016).

However, the Communication also points out that

Thus the operation of the precautionary principle is envisaged as part of a wider risk assessment strategy where there is evidence that the risk exists, but the magnitude of that risk cannot be quantified with certainty. It is perhaps unfortunate that the term “sufficient certainty” in paragraph three of this extract receives no further elaboration particularly as it is in the response to the lack of sufficient certainty by policy and lawmakers that the controversy surrounding the precautionary principle inheres. The literature devoted to the general nature of the precautionary principle, the disagreement about its use, role and implementation across the Atlantic, and its role within trade law is voluminous

See e.g. Cass R. Sunstein, supra note 92; Lawrence Kogan & Lucas Bergkamp, supranote 92; Roberto Andorno The Precautionary Principle: A New Legal Standard for a Technological Age, 1 J. Int’l Biotechnology L. 11, 11-12 (2004); Jacqueline Peel, The Precautionary Principle in Practice: Environmental Decision-Making And Scientific Uncertainty 1-24 (2005); Nicolas A. Ashford, The Legacy Of The Precautionary Principle In U.S. Law: The Rise of Cost-Benefit Analysis and Risk Assessment as Undermining Factors in Health, Safety and Environmental Protection, in Implementation the Precautionary Principle: Approaches from the Nordic Countries. the EU and the United States 352-78 (Nicolas de Sadeleer ed., 2007); Lawrence Kogan, What Goes Around Comes Around: How UNCLOS Ratification Will Herald Europe ’s Precautionary Principle as U.S. Law, 7 Santa Clara J. Int’l L. 23 (2009); Lucas Bergkamp, Legal and Administrative Systems: Implications for Precautionary Regulation, in The Reality of Precaution, Comparing Risk Regulation in the United States and Europe 434-79 (Jonathan B. Weiner, Michael D. Rogers, James K. Hammit, & Peter H. Sand eds., 2011); Elisa Vecchione, Is It Possible to Provide Evidence of Insufficient Evidence? The Precautionary Principle at the WTO, 13 Chi. J. Int’l L. 153 (2011); Elizabeth Fisher, Transnational Risks and Multilevel Regulation: A Cross-Comparative Perspective Framing Risk Regulation: A Critical Reflection, 47 Cornell Int’l L.J. 445 (2013). A search of the HeinOnline database for “The Precautionary Principle" yields 7,165 hits, more than 2000 of them in the last decade and 457 of them in the last two years alone.

On the whole law- and policy-makers in the United States take a negative view of the precautionary principle

It has been suggested that the term “precautionary approach”- widely preferred in the United States - reflects a preference, rather than a binding principle, John S. Applegate, The Precautionary Preference: An American Perspective on the Precautionary Principle 6 Human & Ecological Risk Assessment 413 (2000). Note however, that the reality of this distinction in practice has been questioned; see Nicholas A Ashford, supra note 99, at 354; see also Joachim Zander, The Application of the Precautionary Approach in Practice 268 (2010).

Of course a European may justifiably express some scepticism of this conclusion in the face of U.S. attitudes to the uncertainty relating, for example, to climate change among certain influential members of the U.S. polity who ignore the science altogether in favour of leftist conspiracy theory.

See e.g. Jean-Daniel Collomb, The Ideology of Climate Change Denial in the United States, 9 Eur. J. Am. Stud. (2014), http://ejas.revues.org/10305. See also, Republicans’ Leading Climate Change Denier Tells the Pope to Butt Out of Climate Change Debate, The Guardian, Thurs, 11 June 2015, available athttps://www.theguardian.com/environment/2015/jun/11/james-inhofe-republican-climate-denier-pope-francis.

Whatever the realities of implementation, the difficulties with the precautionary principle as a concept are not scientific in origin. There is general consensus and mutual respect between U.S. and European scientists in relation to the scientific method itself, and hence in relation to the degree of uncertainty associated with a particular phenomenon, product or process. Disagreement emerges in relation to the most appropriate response to the uncertainty. A cost-benefit analysis approach places a higher premium on scientific rationality and regulation should only be imposed where a “significant risk” exists. The preference for this paradigm in the United States has been traced to Supreme Court precedent in the 1980s which “helped to ensure America’s economic and technological advancement and competitiveness during the past several decades”,

Lawrence Kogan & Lucas Bergkamp, supra note 92, at 497, citing Industrial Union Department, AFL-CIO ν. American Petroleum Institute, 448 U.S. 607, 639 (1980).

Hence disagreement over approaches to precaution are disagreements over doctrinal interpretation rather than over science or law as such. It is this that makes regulations based on the precautionary principle peculiarly vulnerable to attack in arbitral proceedings, since arbitrators are asked to rule, not so much on the quality of the science underpinning a regulation or even the act of regulation itself (though this is sometimes challenged), but rather the rationality of the regulatory response to that science. An investor might invite a tribunal to find that a regulatory response is not based on sound science, or is too cautious to be justifiable given the lack of sufficient scientific certainty. As such, it may amount to a lack of fair and equitable treatment, or a measure tantamount to expropriation. Challenges on these grounds under the proposed TTIP are plausible, and the next section uses a hypothetical challenge based on a current EU restriction to analyse the possibilities of success.

An illustrative example of the operation of the precautionary principle in the European Union is to be found in regulations that implement the current partial restriction of the use of a class of chemicals known as the neonicotinoid insecticides (hereinafter neonics). Developed in the 1980s, principally by the chemical companies Bayer, Syngenta and Sumitomo Chemical, the neonics are a class of systemic insecticides (taken up by all parts of the plants to which they are applied), which attack the central nervous systems of pest insects which feed on the plants with fatal effect, but with none of the environmental persistence or high mammalian toxicity associated with the previous pyrethrin, pyrethroid, organophosphate and organochlorine alternatives.

See United States Agency for Toxic Substances and Disease Registry, https://www.atsdr.cdc.gov/phs/phs.asp?id=785&tid=153 (pyrethrins and pyrethroids), http://www.atsdr.cdc.gov/substances/toxchemicallisting.asp?sysid=39 (organophosphates) and http://www.atsdr.cdc.gov/PHS/PHS.asp?id=353&tid=62 (organochlorines) (last visited 20 June 2016).

Initially, Council Directive 91/444/EEC

Council Directive 91/444/EEC, 1991 O.J. (L 230), 1.

These restrictions were justified on the basis of a report, commissioned by the European Commission,

Question No. EFSA-Q-2012-00556, approved on 31 May 2012.

These recommendations were viewed with some equivocation in the member states of the European Union

At the March 2013 meeting of the Standing Committee of the Food Chain and Animal Health - the body with responsibility for advising the Commission on plant product safety - 27 representatives of the member states failed to reach the qualified majority vote required to recommend the restrictive proposal put before them. Thirteen countries voted in favour of the proposal, nine against, and five abstentions. A similar split occurred in a subsequent appeal. Owing to this failure, the Commission was then able to put forward its own proposal. For a more detailed discussion of the process see Emma Downing supra note 114, at 10-12.

The central regulation which introduced these restrictions, EU Regulation (EC) No. 1107/2009, is explicitly based on the precautionary principle.

See EU Regulation (EC) No. 1107/2009, 2009 O.J. (L 309), 1, Preamble clause (8), arts. 1(4) and 13(2).

The question is whether - should the TTIP come into being in anything like its current form - Bayer, Syngenta or Sumitomo could seek to challenge the restriction under the terms of the TTIP draft investment protection section

See infra note 128 for further explanation of this document.

As this paper was being completed, the TTIP negotiations entered their 15^th round

EU and US Trade Negotiators Seek to Get TTIP Talks back on Track, The guardian, Fri, Sept. 30, 2016, https://www.theguardian.com/business/2016/sep/30/ttip-eu-and-ustrade-negotiators-seek-to-get-talks-back-on-track.

Where environmental sovereignty is concerned the text of the TTIP includes, at first sight, quite strongly worded provisions to permit nation states to maintain and enhance environmental protection. However, very similar provisions to these appear in other investment and trade agreements but they have not necessarily prevented investors from seeking compensation for the loss of their investment (or the value of it) as a result of local, regional or national measures designed to protect the environment or public health. Such claims have invariably been based on the fair and equitable treatment principle and/or on the basis that the measures represent measures tantamount to (indirect) exropriation. It is also the case that such claims do not necessarily need to reach the merits stage in order to bring about the desired effect as illustrated in the Ethyl Corp decision discussed above.

The current text of the TTIP does not suggest that it is likely to be significantly more resilient to such claims than many of its forbears. In fact, given that so much of the regulation in environmental matters and public health in the European Union is based on a version of the precautionary principle which is far more “precautionary” than envisaged in principle 15 of the Rio Declaration, investor claims which seek to attack its rationality are probably more likely.

Of course the final version of the TTIP may contain explicit protection for the precautionary principle, but, if this merely repeats the provision in CETA, then it is unlikely to prevent claims based on equivocal scientific evidence such as the restrictions currently in place for neonicotinoid pesticides. Moreover, the provision of a bespoke tribunal and appeal system within TTIP may not necessarily make claims founded on the irrationality of regulatory responses to the precautionary principle any less plausible or any more likely to fail.

Investment protection agreements have the potential to enhance environmental protection if they encourage greater transparency of regulation by the host state so that the investor is certain about the regulatory environment into which they are entering and know the risks. However, the approach of investment tribunal panels themselves needs to change in order to take a broader view of purposes of arbitration in an era of climate change, loss of biodiversity and the need to preserve ecosystem services. It can no longer be appropriate merely to consider the private property rights of investors as the primary consideration. The public interest in environmental quality and the need to adapt to environmental pressures by sovereign authorities must play a greater part. In the long run this is in the interests of investors also. However, it is the elected sovereign authorities who must be permitted the final word in how this is brought about rather than corporate entities who primary purpose is the generation of profit.