Towards Climate Change Justice: Renewable Investment Arbitration and Beyond

1. Towards Climate Change Justice: Renewable Investment Arbitrationand Beyond Monica Feria-Tinta 21 November 2016

2. Relevance of Paris Agrement . • Renewable Investment Arbitration – “Right to Regulate” • European Court of Justice • 3. Third Party Interventions in investment arbitration (Role of NGOs) • 4. Climate change justice?: Human Rights Arbitration

5. Charanne: The facts • By means of a decree (RD 1565) a 30-year limit on the tariffs had been imposed. • By means of primary legislation (RDL 14/2010) an annual cap on the number of hours the claimants could sell their electricity production benefiting from the regulated tariff had been introduced. • The changes also introduced new technical requirements that implied significant new costs for the investors, and new access tolls to the transmission networks of electrical energy.

6. Charanne: The investors’ position • Indirect Expropriation • The claimants alleged that all these changes had amounted to an indirect expropriation because together they gave rise to a significantly negative effect upon the enjoyment and economic profitability of their investment. • They argued that the destruction of the totality of the investment is not required to amount to an expropriation but that it sufficed, a significant or substantial interference with the investment as the Vivendi v Argentina award reflected. • Violation of fair and equitable treatment • They also argued that fair and equitable treatment under the ECT demands the maintenance of a stable and predictable legal framework for the investments. In this case they argued, their legitimate expectations had been frustrated.

7. Charanne When does legislation designed to attract investors give rise to a legitimate expectation against future reform? Legislative changes introduced in the sector were an expression of its Sovereign right to regulate. Right to a tariff was not an acquired right -its modification was legitimate. Meeting the fair and equitable treatment standard under the ECT does not mean to freeze a legal framework in place or the equivalent to a stabilization clause.

8. Charanneon “legitimate expectations” Tribunal: “An investor may derive legitimate expectations either from specific commitments addressed to it personally(i.e. stabilization clause) or (b) rules that are not specifically addressed to a particular investor but which are put in place with a specific aim to induce foreign investments and on which the foreign investor relied in making his investment”, No specific commitments had been adopted by Spain (i.e. neither stabilization clause or a declaration by Spain addressed to the investors) [United Nations Conference on Trade and Development, “Fair and Equitable Treatment, UNCTAD Series on Issues in International Investment Agreements II”, 2012, p. 69]

9. Charanne: Right to regulate How is the balance struck between protection of investments and a State’s “right to regulate”? (Methanex v EE.UU; Electrabel, Charanne) Electrabel principle: “While the investor is promised protection against unfair changes, it is well established that the host State is entitled to maintain a reasonable degree of regulatory flexibility to respond to changing circumstances in the public interest. Consequently, the requirement of fairness must not be understood as the immutability of the legal framework […]”(§ 500 citing Electrabelvs Hungary, Part VII, p. 21, § 7.77) Tribunal: need to carry out a due diligence analysis of the legal framework of the host country on the part of the investors

10. Harmonization approach-Systemic interpretation Looking at public international law not as a fragmented universe but as a unity. (Vienna Convention on the Law of Treaties- Art 31 “Master Key”) Principle that should there be a “hierarchy” between norms to be applied-Tribunal to determine this from the perspective of public international law, applying rules of interpretation under the Law of Treaties. (Charanne, RREEF case (Jurisdiction), Yukos) Charanne: “It is universally accepted that an arbitral tribunal not only has the power but also the duty to apply EU law.” RREEF: “ There is no disharmony or conflict between the ECT and EU”(at §82) “EU law does not and cannot trump public international law” Yukos: Art. 31 of the VCLT key in the set aside of the Yukos award by Dutch court.

11. Investment Arbitration and (CJEU): Convergence of forums No implied disconnecting clause within the ECT for intra-EU relations (Electrabel,Charanne, RREEF case (Jurisdiction)) Charanne: • The tribunal rejected the arguments of Spain that there existed in the ECT an “implied disconnecting clause” for intra-EU relations which disconnected EU State members from the ECT, in their relations among them. This was in the view of the arbitral tribunal, ultimately a matter of interpretation of the ECT in accordance with article 31 of the Vienna Convention on the Law of Treaties. • “There is no rule of EU law that prevents Member States of the EU from resolving their issues with investors from other Member States by means of arbitration. Nor is there any rule of EU law that prevents an arbitral tribunal from applying EU law to resolve such a dispute.”

12. Third Party Intervention in investment arbitration • Role of NGOs/Intergovernmental Organisations • BiwaterGauffvs United Republic of Tanzania, ICSID Case no ARB/05/22 [July, 2008] [Tanzania-UK BIT] • “given the nature of the Project, the issue of investor responsibility in this case must be assessed in the context of sustainable development and human rights” • “human rights and sustainable development are facts that condition the nature and extent of the investment, responsibilities, and the balance of rights and obligations between the investor and the host State.” • Right to access to clean water. “every man, woman and child has the right to a reliable system of clean water and good sanitation” • Human Rights considerations (right to health): Philip Morris v Uruguay case

13. Human Rights Arbitration International Arbitration tribunal on Business and Human rights The Tribunal to contribute to the Implementation to all three Pillars of UN Guiding Principles on Business and Human Rights • State duty to protect (Pillar One) • The Corporations responsibility to respect (Pillar 2) • Access to remedy (Pillar 3)

14. Thank You MFeria-Tinta@20essexst.com London 20 Essex Street London WC2R 3ALTel: +44 (0)20 7842 1200Email: clerks@20essexst.com Singapore Maxwell Chambers #02-09 32 Maxwell Road Singapore 069115Tel: +65 62257230Email: clerks@20essexst.com