Paradise regained': can sustainable development be achieved when the protection of foreign direct investment is at stake? Examining the case study of Vattenfall v Germany I
| Autor | Viviane Cruz Alves de Carvalho |
| Cargo | Master in International Environmental Law at University of London, UK |
| Páginas | 416-449 |
Revista Eletrônica de Direito Processual – REDP.
Rio de Janeiro. Ano 14. Volume 21. Número 1. Janeiro a Abril de 2020
Periódico Quadrimestral da Pós-Graduação Stricto Sensu em Direito Processual da UERJ
Patrono: José Carlos Barbosa Moreira (in mem.). ISSN 1982-7636. pp. 416-449
www.redp.uerj.br
416
‘PARADISE REGAINED’: CAN SUSTAINABLE DEVELOPMENT BE
ACHIEVED WHEN THE PROTECTION OF FOREIGN DIRECT INVESTMENT
IS AT STAKE? EXAMINING THE CASE STUDY OF VATTENFALL V
GERMANY I1
“PARAÍSO RECONQUISTADO” - É POSSÍVEL ALCANÇAR O
DESENVOLVIMENTO SUSTENTÁVEL QUANDO A PROTEÇÃO DOS
INVESTIMENTOS EXTERNOS DIRETOS ESTÁ EM JOGO? - UM EXAME DO
CASO VATTENFALL VS. ALEMANHA I
Viviane Cruz Alves de Carvalho
Master in International Environmental Law at University of
London, UK. Public Attorney in Rio de Janeiro (Defensora
Pública). London, United Kingdom. E-mail:
616766@alumni.soas.ac.uk
ABSTRACT: Reconciliation between development and environmental protection is one of
the greatest pressing issues of our times and should happen under a full integration model.
In reality, however, political and ‘diplomatic tricks’ left the concept of SD open to
interpretation not to bind policy decisions. Some have argued that SD is already inherent to
the policy of most developed States. This study will demonstrate, however, that even in
developed economies, the implementation of SD still faces difficulties because of the
vagueness of the concept, which enables policy choices that prioritise the protection of FDI
at the expense of environmental protection. The issues generated by these conceptual flaws
are often aggravated by the actual filing or even by the threat of private expensive arbitration
procedures, which generate a “chilling effect” on environmental regulation. The case of
Vattenfall v Germany I will demonstrate that even a State with a strong governance system
faced a foreign intrusion in its environmental policy choices as a result of being sued for
EUR 1.4 billion in ICSID. The study concludes by suggesting that the achievement of SD
can coexist with FDI as long as host States do not waive their policy space to regulate.
1 Artigo recebido em 09/08/2019 e aprovado em 26/12/2019.
Revista Eletrônica de Direito Processual – REDP.
Rio de Janeiro. Ano 14. Volume 21. Número 1. Janeiro a Abril de 2020
Periódico Quadrimestral da Pós-Graduação Stricto Sensu em Direito Processual da UERJ
Patrono: José Carlos Barbosa Moreira (in mem.). ISSN 1982-7636. pp. 416-449
www.redp.uerj.br
417
KEY WORDS: Sustainable development, foreign direct investment, environment,
arbitration, chilling effect.
RESUMO: A conciliação entre desenvolvimento e proteção do meio ambiente é uma das
questões mais prementes do nosso tempo, devendo fundar-se em um modelo de integração
total. Na realidade, no entanto, “artifícios” diplomáticos e políticos deixaram o conceito de
DS aberto a interpretação de modo a não vincular decisões regulatórias. Há argumentos de
que o DS já é inerente à política da maior parte dos Estados desenvolvidos. Este estudo
demonstrará, entretanto, que, mesmo em economias desenvolvidas, a implementação do DS
ainda enfrenta dificuldades por se tratar de um conceito vago, o que propicia escolhas
políticas que priorizam a proteção do IED às custas da proteção do meio ambiente. As
questões geradas por essas falhas conceituais são frequentemente agravadas pela efetiva
instauração ou mesmo pela ameaça de instauração de procedimentos arbitrais privados de
alto custo, o que gera um “efeito inibidor” da regulamentação da proteção ambiental. O caso
Vattenfall vs. Alemanha I demonstrará que mesmo um Estado com um forte sistema de
governança submeteu-se a uma intromissão estrangeira nas suas escolhas de política
ambiental como resultado de um processo de 1,4 bilhão de euros instaurado perante o ICSID.
Este estudo conclui sugerindo que o alcance do DS pode coexistir com o IED, desde que os
Estados recebedores do investimento não renunciem à sua autonomia de regulamentação.
PALAVRAS-CHAVE: Desenvolvimento sustentável, investimento externo direto, meio
ambiente, arbitragem, efeito inibidor
INTRODUCTION
‘Paradise Regained’ is the title of a poem by Milton, which emphasizes the idea of
reversals. A paradise that is lost is eventually recovered after the endurance of an epic
journey. The reconciliation between development and environmental protection is one of the
most important pressing issues of our times. Widespread ecological degradation has already
taken place and, for that reason, the achievement of SD is one of the central objectives of
Revista Eletrônica de Direito Processual – REDP.
Rio de Janeiro. Ano 14. Volume 21. Número 1. Janeiro a Abril de 2020
Periódico Quadrimestral da Pós-Graduação Stricto Sensu em Direito Processual da UERJ
Patrono: José Carlos Barbosa Moreira (in mem.). ISSN 1982-7636. pp. 416-449
www.redp.uerj.br
418
IEL.2 Nevertheless, the implementation of SD is a hard task, despite the efforts undertaken
towards this goal. The explanation for such difficulty is that the concept of SD was ‘vague
enough’ to gather consensus around its formulation, but it remains too vague to be effectively
implemented.3
Chapter One shall elaborate on the idea of SD, elucidating why the vagueness of the
concept brings difficulties for its practical applicability. The chapter shall further include
arguments for the reason why SD is a rule of international customary law,4 mentioning the
ICJ’s jurisprudence on the issue. Chapter One finally concludes with an explanation on how
States’ duties towards the environment function under IL through the lens of SD, clarifying
that SD rather than a rule to constrain States’ behaviour implies the right to develop
sustainably.
The second chapter is also divided into three sections. Firstly, it will contrast FDI
protection under IL with foreign investors’ duties towards the environment, highlighting that
while States bear hard law obligations to protect FDI, foreign investors have no similar
commitments towards the environment. Secondly, it will expose the role of FDI in
undermining the environmental sovereignty of peoples, which consequently reflects on
States’ lack of policy space to regulate on environmental issues. Thirdly, and in order to
contextualise this key concern, this study will reveal ICSID’s pitfalls with regards to
addressing environmentally related arbitration disputes, further exploring the regulatory
chill that arises out of either the filing of a costly arbitration case or even out of the mere
threat of arbitration.
Chapter Three starts by briefly providing some background information about the
international arbitration case Vattenfall v Germany I,5 settled in ICSID, critically analysing
the chilling effect that resulted from such a settlement in terms of Germany’s environmental
policy. Moreover, the chapter shall also critically reflect on relevant primary sources of
2 SANDS, Philippe et al. Principles of Inter national Environmental Law. New York: Cambridge Un iversity
Press, Third Edition, p.15, 2014.
3 VINUALES, Jorg e E. ‘The Rise and Fall of Sustainable Development’, 22/1 Rev. Eur. Community & Int’l
Envtl. L. 3, p.5, 2013.
4 SANDS, Philippe et al. Principles of Inter national Environmental Law. New York: Cambridge Un iversity
Press, Third Edition, p.208, 2014.
5 Vattenfall AB, Vattenfall Europe AG, Vattenfall Europe Generation AG v. Federal Republic of Germany,
ICSID Case No. ARB/09/6, Award of the Arbitral Tribunal [2011], available at
November 2019.
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