Source: http://courtingthelaw.com/2015/08/05/commentary/investment-law-and-sustainable-development-pakistans-opportunity-to-strike-the-balance/
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Investment Law and Sustainable Development: Pakistan’s Opportunity to Strike the Balance - Courting The Law
UncategorizedAugust 5, 2015 BY Nida Usman Chaudhary
This paper aims to look at the intricate link between foreign investment and sustainable development stressing upon its importance for all, the home and host states, the foreign investors as well as all other stakeholders in the ecological paradigm including the human beings, animals, flora and fauna.
In particular, the paper will focus on the position of Pakistan as regards the international developments in this arena and the trend towards gradual convergence of the two disciplines which is seriously missing from the overall policy objectives of Pakistan when devising foreign investment policies or while drafting their investment treaties.
It will end by discussing why now is the ideal time and opportunity for Pakistan to adopt and embrace this growing international trend of convergence of International Environment with International Investment Law.
Ever since the Stockholm Conference on Human Environment in 1972,[1] the environment and sustainable development objectives have been on the world agenda and efforts have been made to raise the necessary awareness and sensitivity about environmental issues the world over. In particular, climatic change and growing instances of natural disasters have further necessitated the need for continued international cooperation, support and lifestyle adjustments by the people the world over. Many studies have been conducted in the past which highlight this need and governments have consistently made statements towards progressive advancement in protection of environment and renewed their commitments towards sustainable development at several international and regional conferences and events.[2]
As a result, International Environmental Law has today emerged as a completely independent but related field of study as this subject is increasingly making inroads into the political realm of States, their development policies and practices.[3] Even internationally the obligations of States to protect the environment and ensure a safe and healthy standard of living are increasingly being recognized and unprecedented international principles such as the “polluter pays” principle and the like are being developed which have the potential to affect not just the States but also non-state actors which were traditionally out of the reach of public international law as they lacked international legal personality.
Although, despite the attention that this field of study has been receiving, it is pertinent to mention that a lot of these principles and advancements in international environmental law regime still remain largely aspirational in their language and in their force. Given, however, the huge disparity in the stages of economic development of States, it is perhaps not even possible as yet to come up with a binding set of norms and regulations on which a consensus would be reached by the world community. Soft law instruments therefore, fill in the gaps in the meantime and play their persuasive part, which is good, at least to the extent of keeping the issues alive and seeking renewed and progressive commitments from States in this regard.
Having said so however, there is a very interesting development that is increasingly taking shape in another branch of international law which is likely giving a more potent impetus to the environmental and sustainable development concerns. That branch of law, is the international investment law regime which is notably a branch of law that developed much earlier than the nascent environmental law regime we have today and given its nature as well as the scores of investment and finance involved, it is not surprising that the economics involved has led to the faster development of norms and laws as well dispute resolution principles that are in fact binding in nature on the State Parties concerned.
For instance, the Bilateral Investment Treaties (BITs) and Free Trade Agreements (FTAs) as well as Regional or International Investment Treaties (RIAs or IIAs) contain detailed and binding provisions of the framework of rules, rights and guarantees within which investment would be received in the host state. These treaties and agreements are increasingly becoming more and more extensive in their promotion and protection of investment but a few recent ones have also endeavoured to incorporate more balanced provisions especially those pertaining to the maintenance of regulatory powers of the host states to introduce measures for protection of environment, health and safety without the threat and fear of impending investor-state arbitration from the foreign investor or allegations of indirect expropriation et al.[4]
Importance and Benefits of Convergence and the Emergence of a New Global Trend
This edge – the legally enforceable principles and rights – that this branch of international law offers its consumers is perhaps what makes this a more attractive forum to incorporate and infuse sustainable development objectives with as both are closely associated and have the inherent capacity to influence each other in a negative as well as in a positive way. In that, as recognized by the United Nations (UN) in Agenda 21, ‘investment is critical to the ability of developing countries to achieve needed economic growth to improve the welfare of their populations and to meet their basic needs in a sustainable manner… sustainable development requires increased investment, for which domestic and external financial resources are needed’.[5]
In addition to this, the G20 Heads of State noted in 2009 that, ‘we share the overarching goal to promote a broader prosperity for our people through balanced growth within and across nations; through coherent economic, social and environmental strategies; and through robust financial systems and effective international collaboration… We have a responsibility to recognize that all economies, rich and poor, are partners in building a sustainable and balanced economy in which the benefits of economic growth are broadly and equitably shared. We also have a responsibility to achieve the internationally agreed development goals…’ Furthermore, the G20 Heads of States in their 2009 Pittsburg Leaders Statement stated that, ‘we will work together to ensure that our fiscal, monetary, trade and structural policies are collectively consistent with more sustainable and balanced trajectories of growth…’[6]
It is therefore, no surprise that environmental law concerns and sustainable development objectives are increasingly seen to be making in-roads into the foreign investment law regime through the various treaties and agreements.[7]
While this is notably still very much the exception, it is nonetheless, hard to deny that the gradual convergence of the two fields is a growing international legal trend. For instance, the approach of international arbitral forums such as ICSID to such provisions is also softening as seen in a North American Free Trade Agreement (NAFTA) Chapter 11 arbitration in the case of Methanex Corporation v United States of America, where the tribunal was examining, inter alia, the compatibility of regulatory powers of States in favor of the environment with the minimum standards of protection guaranteed to foreign investors under NAFTA and held that, ‘as a matter of general international law, a non-discriminatory regulation for a public purpose, which is enacted in accordance with due process and which affects, inter alia, a foreign investor or investment, is not deemed expropriatory and compensable unless specific commitments had been given by the regulating government to then putative foreign investor contemplating investment that the government would refrain from such regulation’.[8] In doing so, the tribunal rejected some of the findings in the earlier infamous case of Metalclad Corporation v United Mexican States in which regulatory measures for environment were held to be expropriation and hence compensable.[9]
Similarly, in Feldman v Mexico an ICSID tribunal noted that, ‘…governments must be free to act in broader public interest through protection of environment, new or modified tax regimes, the granting or withdrawal of government subsidies, reductions or increases in tariff levels, imposition of zoning restrictions and the like. Reasonable governmental regulation of this type cannot be achieved if any business that is adversely affected may seek compensation, and it is safe to say that customary international law recognizes this’.[10]
In addition to this, the modern BITs and FTAs are increasingly incorporating the regulatory right of States to undertake measures to protect environment, health and safety; for instance, the recent BIT concluded between Spain and Libya promotes investment while protecting the environment and requires the Parties to not lower their respective environmental standards for the sake of promotion of foreign investments.[11]
Another landmark development in this regard, is to be found in the Model Bilateral Investment Treaty developed by the Southern African Development Community (SADC) which goes a step further by making it a positive requirement upon investors and their investment to comply with environmental and social assessment screening criteria and assessment processes applicable to their proposed investments prior to their establishment, as required by the laws of host state for such an investment or the laws of home state or the International Finance Corporation’s (IFC) performance standards on environmental and social impact assessment, whichever is more rigorous in relation to the investment in question. The same article further requires the investors and host state authorities to adopt the precautionary approach to decisions that have an impact on the environment as well as to adopt any mitigating or alternative approaches to such investment and even go to the extent of precluding the investment if necessary.[12] SADC Model Treaty also lays down the requirement of maintaining environmental management and improvement systems as per the nature and size of the investment, in line with recognized environmental management standards and good practices and to always endeavor to exceed the legally applicable standards over the life of the investment.[13]
According to a Note on Recent Trends in IIAs and Investor State Dispute Settlement (ISDS) issued by United Nations Conference on Trade and Development (UNCTAD) in February 2015,[14] 11 out of 13 agreements concluded in 2014[15] contain general exceptions on protection of human, animal or plant life or health or the conservation of exhaustible natural resources.[16] Another 11 of these treaties contain a clause that explicitly recognizes that health and safety or environmental standards ought not to be relaxed in order to attract investment. The Note goes on to further highlight that such sustainable development features are supplemented by treaty elements that aim more broadly at preserving regulatory space for public policies of host countries.[17]
Given this data, it is safe to conclude that environmental standards and sustainable development goals are fast becoming part of international investment treaties and more and more countries are embracing this trend. Of note especially are the countries that are either least developed or developing and which are nonetheless, comfortably concluding treaties with more developed States on similar lines such as for instance, Serbia[18], Senegal[19], Cameroon[20], Mali[21], Nigeria[22], and the like.
Pakistan and Environmental Laws – A Brief Overview
According to the Environmental Treaties and Resource Indicators website, Pakistan is Signatory or Party to around 90 international agreements on issues related environment including, but not limited to, issues surrounding air and atmosphere, wild species and ecosystems, land and soil, climatic change, sea, mineral resources and waste and hazardous substances amongst others.[23]
In addition to these standing international obligations, the Constitution of Pakistan (1973)[24] and the subsequent expansive and liberal interpretation of Articles such as security of person and right to life, further reiterate the right of the citizens to clean and decent environment for living.[25]
The Pakistan Environment Protection Act (PEPA) was promulgated in 1997 which mandated that, ‘No proponent of a project shall commence construction or operation unless he has filed with the Government Agency designated by Federal Environmental Protection Agency or Provincial Environmental Protection Agencies, as the case may be, or, where the project is likely to cause an adverse environmental effects an environmental impact assessment, and has obtained from the Government Agency approval in respect thereof.’[26]
The Act also established the Pakistan Environmental Protection Agency (Pak-EPA). The basic functions of Pak-EPA as mentioned on its website, are to enforce the PEPA-1997 and to approve Environmental Impact Assessment (EIA), and the Initial Environmental Examination (IEE) amongst others. Pak-EPA is also mandated to, ‘prepare or revise, and establish the National Environmental Quality Standards (NEQS) with approval of Pakistan Environmental Protection Council (PEPC), take measures to promote research and the development of science and technology which may contribute to the prevention of pollution, protection of the environment, and sustainable development, identify the needs for and initiate legislation in various sectors of the environment, provide information and guidance to the public on environmental matters, specify safeguards for the prevention of accidents and disasters which may cause pollution, and encourage the formation and working of non-governmental organizations, community organizations, and village organizations to prevent and control pollution and promote sustainable development’[27].
The Agency may further undertake inquiries or investigation into environmental issues, either on its own accord or upon complaint from any person or organization.[28] The Pak-EPA is further sub-divided into provincial EPAs with each province having its own agency to fulfill the requisite mandate.[29]
In short, Pakistan has exhibited its commitment to the cause of environment in various international and local treaties and laws. Its stance on the promotion of sustainable development is also very clearly illustrated in the preamble of the 1997 Act[30] and various other public interest litigations and suo moto actions by the Supreme Court that have taken place in the country for the sake of development in the environmental context, most notably of which has been the Lahore Canal Widening case.[31]
Given this backdrop, it is imperative to assess the status and condition of environment in Pakistan to see whether it has or has not been able to live up to its various national and international commitments towards environmental preservation and sustainable development; as well as to highlight the degradation and impacts of environmental disasters thereof, so as to assert the need for a more robust and holistic policy shift in our planning and development within the environmental paradigm and to view any and all progress in the country from and within the environmental lens.
In other words, this paper stresses that it is the environmental context that needs to serve as the ‘grundnorm’ of all the development aims, policies, principles and actions for a sustainable future of the country. In doing so, it also needs to be established how ‘going green’ would actually be more beneficial and lucrative for the economy of the country and thus, a more desirable step for Pakistan to take.
The remainder part of the paper would also discuss why ‘now’ is the best time for Pakistan to adopt this growing international legal trend in its policies and principles and, in particular, in its BITs and other model investment agreements.
Pakistan – Environmental Degradation and Impacts
According to the 2014 Yale University’s Environmental Performance Index (EPI) Pakistan ranks at 148th place out of 178 countries in its environmental performance.[32]
Owing to its geographical location, high population and low technological and resource base, Pakistan is extremely vulnerable to climate change impacts such as threats to its water, food and energy security. In recent years, it has witnessed increased variability of monsoon rains and enhanced frequency and severity of extreme events such as floods and droughts. The back to back floods of 2010, 11 and 13, the worst drought during 1999-2003, two cyclones within a month in Karachi/Gawadar coasts in 2008 and increased incidences of landslides in the northern areas of Pakistan bear testimony to the ugly face of climate change in the country.[33]
In addition to this, Pakistan is faced with other serious environmental challenges which include inter alia, air and water pollution, land degradation, depleting glaciers, increase in deforestation and loss of biodiversity, increased health risks and diseases, reduced agricultural productivity and fertility of livestock due to heat stress.
Pakistani scholars, columnists, activists and members of the civil society have also actively written about the impacts of environmental degradation that this country is facing and have noted very serious affects that this may have on the economics of the country, especially on reduced agricultural productivity which is the lifeline of the populace as well as on health and safety of individuals especially children.[34]
Just recently, the Federal Minister for Climate Change Mr. Mushahidullah Khan also warned that Pakistan’s disease burden and its overall impact on socio-economic development gains made in recent year will further escalate. He highlighted that the increasing levels of carbon pollution and climate change posed a grave risk to the health and well being of people in countries like Pakistan and would lead to a rise in avoidable deaths in the coming years. Over 14 million Pakistanis, out of which the majority were children, he said were living with asthma and were prone to other allergens and respiratory diseases caused by air pollution.[35]
Haroon Mustafa Janjua, another freelance columnist noted earlier in 2014 that climate change, water, energy, pollution, waste management, salinity and water logging, threats to biodiversity and others that were ‘too numerous to count’ were the major environmental issues currently confronting Pakistan. He further noted the high vulnerability of this country to challenges posed by climatic change that were impacting the national, social and economic landscape.[36]
He said that the impacts of climatic change such as melting glaciers and increased floods as well as desertification, droughts and famine were ‘leading towards reduced agricultural productivity, decrease in the already scanty forest cover from too rapid a change in climatic conditions to allow natural migration of adversely affected plant species, and increased intrusion of saline water in the Indus delta that is adversely affecting coastal agriculture mangroves and the breeding grounds of fish’[37]
In addition to this he noted that, ‘the fast growing population poses a significant challenge for Pakistan. The existing environment management capacity cannot sustain such a large population while providing a good quality of life. Despite the devolution of the federal ministry of environment and transfer of more powers to the provinces, the state of environment has been in a shambles.’[38]
The Ministry of Finance in its Economic Survey of 2013-14 also noted that environment degradation was fundamentally linked to poverty in Pakistan, which along with growing urbanization was causing intense pressures on the environment. This is because the poor are directly dependent upon natural resources for their livelihood such as agriculture, hunting, forestry, fisheries etc.[39]
The Pakistan Economic Survey of 2013-14 states that as per the estimate of experts, environmental degradation may cost its economy over Rs 365 billion every year of which inadequate water supply, sanitation and hygiene accounts for Rs 112 billion, agricultural soil degradation Rs 70 billion, indoor pollution Rs 67 billion, urban air pollution Rs 65 billion, lead exposure Rs 45 billion and land degradation and deforestation Rs 6 billion. Some experts have even gone on to suggest that environmental degradation costs may have increased beyond Rs 450 billion per year.[40]
Thus, as we can see from the preceding paragraphs, there is most definitely an inextricable link between poverty, environmental degradation and natural disasters and Pakistan stands to be at a highly vulnerable position in this regard.
Pakistan – Efforts and Responses as regards Environmental Challenges and why they may be inadequate
Given its vulnerable state of environment, Pakistan has repeatedly expressed its desire and commitment towards alleviating and addressing the environmental challenges and in achieving the Millennium Development Goals (MDGs), particularly the targets under Goal 7 which aims to ensure environmental sustainability.
In this regard, the Government of Pakistan is stated to believe in the creation of opportunities for the present generation without compromising on the potential of future generations to meet their developmental needs.[41] It has also implemented various policies and programmes which are the by-products of the National Environment Action Programme (NEAP). These include amongst others, the National Environment Policy – which serves as the overarching framework for environmental intervention, the Air and Water Quality Monitoring, Clean Drinking Water for All, Pakistan Wetlands Programme, National Sanitation Policy, Sustainable Land Management to combat desertification in Pakistan, Watershed Management in Tarbela Reservoir and Energy Efficiency and Renewable Energy.
Some of the more recent and important programmes at the federal level during 2013-14 included the establishing of the National Multilateral Environmental Secretariat (Islamabad), the Clean Development Mechanism Cell (Islamabad), the Centre for Sustainable Organization (Islamabad) and the development and Implementation of Water and Sanitation Management Information System in Pakistan (Islamabad) etc.[42]
The focus of the Government therefore, appears to be on improving the air and water quality, the sanitation and solid waste management, promotion of green businesses, protection of ecosystems, disaster management and the like.
However, an important observation was made in the Annual Plan 2013-14 of the Ministry of Planning, Development and Reforms, which stated that, ‘the 18th Amendment to the Constitution of Pakistan (1973) is a turning point in Pakistan’s environmental management history, presenting another challenge to the provincial governments to plan more effectively and implement carefully’[43]. It further highlighted that, ‘In provinces, the institutions are to be restructured and realigned while the Provincial Governments needs to take over the forestry sector development programme for carbon sequestration, clean drinking water programme, environmental monitoring, watershed management programme, sustainable land management programme, sanitation programme etc, to continue the effort for sustainable development in the country’[44].
Another very important point that needs to be stressed and which, as can be seen from the preceding paragraphs, appears to be missing from the overall philosophy and policy of the Government is that it is no longer advisable to take a monistic approach and deal with environmental challenges in isolation. These need to be viewed holistically, keeping the entire sustainable developmental paradigm in mind and hence the increasing inter-play and interconnection between environment, business and development can no longer be treated in lieu of each other.
In other words, the increasing impact on the environment as a result of large scale investment including foreign direct investment (FDI) in large infrastructure projects, concessions or other ventures can no longer be viewed separately as falling within the purview of international investment law and not environmental law per se as the two are so closely associated and linked that one cannot be devoid of the other. This gradual convergence of the increasing impacts of FDI on environment in host economies is fast being recognized as a factual reality on the global plane which is why most of the modern international investment treaties, BITs and FTAs that are being developed and signed by international community now include provisions that directly deal with environment standards and preclude the host state governments from lowering the same in order to attract investments as discussed above.
Pakistan therefore, can no longer achieve what it has set out to by solely focusing on action plans and programmes that deal only with environmental matters without first stepping back and taking a holistic and comprehensive policy approach towards making environmental concerns central to all developmental questions. An overall paradigm shift from development to sustainable development is required not just for programmes and action plans which concern the environmental agencies but also those which concern our trade and investment regimes and the overall legal structure of the country.
In other words, we need to advocate development that is sustainable and one that is mindful of the environmental context in all our departments such as trade, commerce, investment, human rights etc and not just those which fall under environmental agencies. This is because, even for them to work efficiently and effectively, they would require a legal cover to practically and legally achieve their ends without fear of impending claims from foreign investors, to which the investors are likely to be otherwise entitled, if the BITs or agreements under which they come are not in sync with the environmental policies and principles of the receiving state.
In that, if the BITs and investment agreements are devoid of developments, policies, action plans and programmes of the environmental agencies, then a clash and conflict is likely to result which will underpin and undermine the environmental regime. This is because foreign investors traditionally and usually have a binding legal cover under the commitments that the host state makes in its BITs and joint ventures as a result of which foreign investors enjoy vast rights including but not limited to, Most Favored Nation (MFN) rights, National Treatment (NT), Fair and Equitable Treatment (FET) and most importantly, the stabilization clause, found mostly in the joint venture agreements between investors and States, which has the affect of ‘freezing’ the law in point for that foreign investor and so no future legal changes are applicable to them or their investments for the life and duration of their agreement.
Current Status of Pakistan’s BITs
Currently, Pakistan is signatory to some 48 BITs, almost all of which comply with the traditional model and structure of BITs which focused primarily on promotion and protection of investments, economic cooperation and enhancement of economic growth. In the traditional models reference to non-discriminatory environmental measures by host states were neither mentioned nor exempted from investor claims and such treaties were mostly all lopsided favoring and ensuring protection and standards of treatment for foreign investors while subjecting all the duties on to host states to ensure the same for them. Some of such BITs made it incumbent upon host states to “ensure favorable conditions” in the country generally for the investments to thrive and to offer physical security to them. Foreign investors could repatriate all of their profits and host states were barred from taking any measures that may tantamount to expropriation etc, in default of which claims under binding international arbitration laid before them.
Hence, gradually, the regulatory powers of the host states to regulate and legislate as per their democratic mandate and their social contract with their people diminished and instances of reverse discrimination were created so much so that investors and even locals began to engage in treaty and nationality shopping to derive the benefits from the blanket protections guaranteed under BITs to foreign investors.[45] In other words, it became more favorable to do business in one’s own country as a foreign investor as opposed to as its citizen.
Of these 48, only the 2012 Pakistan-Turkey BIT currently allows non discriminatory measures to be adopted by host states which are designed to protect human, animal, or plant life or health or the environment and conservation of living or non-living exhaustible natural resources as a general exception.[46] Although, the revised BIT with Germany of 2009 also mentions that measures taken for reasons of public security and order, public health or morality shall not be deemed ‘treatment less favourable”,[47] it does not specially include environment or its conservation thereof nor does its preamble make the environmental and sustainable development a context within which investments are to be sent and received. In addition to these, the 2006 Pakistan-China FTA is one other exception that entertains environmental considerations but mainly within its preamble and not the actual text.
Having said so however, it is encouraging to see that Pakistan too is working on its own template of a BIT and is in process of reviewing and revising its former BITs. In fact, the Pakistan Board of Investment (BOI) has already renegotiated a few of its agreements as seen above.[48] However, it is interesting to note that the focus of the review and revision of these BITs as well as the reason pitched for developing a Pakistani Model Investment Treaty seem to be very narrow and focus only upon one aspect of international investment law, which is the investor-state arbitration and dispute resolution. The legal experts are reported to have suggested to the BOI that it should terminate its existing BITs in place and focus on Alternative Dispute Resolution (ADR), encouraging brokering mediation between investor and the State.[49] These experts have suggested that in the new BIT template, clauses especially related to arbitration in the existing BITs may be reviewed wherein mutual consultations for dispute resolution should be encouraged while advance agreement on arbitration procedures to be adopted should be made obligatory upon the parties.[50]
In this way, most of the review and renegotiation seems to be based on reforming this particular aspect of the BITs instead of taking a holistic and comprehensive approach to address the overall concerns of the country. While it has rightly been suggested that the country’s own BIT model would and should be [italics added] to safeguard the interest of the State;[51] mere focus on introducing mediatory and conciliatory tiers to dispute resolution and allowing the BOI more scope and room for dealing with investor-state disputes as a first resort might only just be half the battle won and not the complete victory in the war against environmental degradation.
This is because a serious issue for most of the countries that are revising and revisiting their BIT policy and agreements is the concerns raised by mounting arbitrations in foreign tribunals by investors and companies against States for measures that are thought to be within the regulatory powers of the host state such as for instance environmental measures etc. The outcry comes from decisions of tribunals such as ICSID in cases such as Metalclad which have given expansive interpretations to the provisions in BITs undermining the role of the host state to safeguard the interest of its own citizens. Hence, the idea of reforming the BIT policy and agreements internationally is not just to curtail or revise the investor-state dispute resolution provisions but overall to make the investment agreements less lopsided, more certain and balanced in a way that ensures regulatory space for the host state for adopting and taking measures in interest of health and environment etc. The whole idea is to make the investment law regime and BIT framework more ‘green’ so to say, so that what does and does not fall within purview of expropriation is clearer and so that both parties know with greater certainty the kind of measures they may or may not bring a claim in foreign arbitration against. The idea is to specifically allow/exempt certain non-discriminatory regulatory measures that a host state adopts from the ambit of measures capable of being termed as expropriation of interest of foreign investors to allow them the opportunity and the right to regulate in accordance with their democratic mandate, social contract and international human rights and environmental law obligations such as those found in MDGs for instance.
Hence, if Pakistan truly wishes to accomplish and address its environmental challenges, efforts will need to be made in an inter-dependent and inter-disciplinary way involving all stakeholders. It is no longer possible to develop laws and policies in isolation of each other as that often leads to conflict and incoherence. This is also why mere focus on reforming dispute resolution provision will not achieve the desired result of ‘safeguarding the interest’ of the State so to say; and while a separation of powers has been an important legal concept, it is no longer plausible in an increasingly inter-dependent and inter-connected world where the problems are multifold and multifarious in nature.
Benefits of Adopting the Sustainable Development Trend in Investment Provisions
The UNCTAD Investment Policy Framework for Sustainable Development Report states very clearly in its preface that, ‘At a time of persistent crises and pressing social and environmental challenges, harnessing economic growth for sustainable and inclusive development is more important than ever. Investment is a primary driver of such growth. Mobilizing investment and ensuring that it contributes to sustainable development objectives is therefore a priority for all countries and for developing countries in particular. Against this background, a new generation of investment policies is emerging, pursuing a broader and more intricate development policy agenda, while building or maintaining a generally favourable investment climate. “New generation” investment policies place inclusive growth and sustainable development at the heart of efforts to attract and benefit from investment.’[52]
Addressing the climate change and other challenges posed by environmental degradation and large scale exploitation of natural resources is therefore on the top in the list of the agenda of international organizations as well as the developed states but it is of prime relevance for the developing and transitional economies as these are the countries that are bearing the major brunt of such degradation.
By placing environmental considerations as the foundation for economic growth and receiving foreign investment that complies with the ‘green’ objectives, each state is fulfilling a global responsibility that it has under International Environment and Human Rights Law towards not only its own citizens, but also towards the peoples of the world at large.
Foreign investment that does not undermine the environment and more importantly foreign investment specifically for the improvements and enhancement of the environment such as clean energy for example leads to further creation of jobs and alternative resources which serves as a double advantage for the people of the State and the world at large. In that, not only does the State end up saving its depleting non renewable natural resources, but is also able to create a whole new industry for people to work in. This leads to an overall rise in the standards of health and living of the people and addresses the circular impact of poverty-environmental degradation-poverty conundrum.
With a growing awareness of the impacts of large scale investments on the environment of host states and a consequent rise in the demand for cleaner and greener companies, rejection of GMOs and Monsanto in recent years and a volte face towards organic food production, the consumers and people of the world, especially the developed world, are making their choices very obvious in favour of the responsible companies and exerting an influence on the supply side of the curve. Hence, the investments that come in under the ‘green’ laws and policies, would have more support of the consumers who are fast going green so there is every benefit to the companies, investors, the state, the citizens, the environment and the world at large for adopting the green trend.
The future therefore, lies in energy conservation, organic production and environmental friendly techniques of management and operation to which the world is adapting and adopting. If these growing international trends are not embraced, developing countries such as Pakistan may fall far behind in their quest for a greater slice of the market share as the demand for ‘green’ is on the rise.
Currently, the wind is flowing in the direction of embracing greater environmental considerations and Pakistan must benefit from this trend for the sake of its citizens, its resources, its future and the world at large because if it does not, it has the vulnerability of sinking into oblivion.
Now is the time for pressing for an inclusive approach and for negotiating and bargaining the preservation of environment in its agreements as there is profound support for this approach in the international community and a developing state such as Pakistan would only benefit from such a trend.
In doing so, it needs to be appreciated that efforts on one plane alone will not be sufficient until they are merged with other disciplines such as for instance trade and investment. This is because investment and trade law has greater enforceability and binding force given its intricate and established dispute resolution processes therefore, a holistic and comprehensive approach whereby the investment/trade law meets environmental concerns is the only way forward to achieve and meet the pressing environmental challenges of this century for the benefit of the current as well as the future generations.
Pakistan’s Opportunity to Strike the Balance
The timing is ideal for Pakistan and it will not be incorrect to suggest that it has never been placed in a better position before this time to address these matters in such a holistic way as it does today. This is because it is already in the process of developing a model treaty which is likely to serve as the basis for all our future course of action in this regard and if that treaty is not a comprehensive and holistic piece which takes account of all aspects that go in favor of a more balanced treaty, then a very good opportunity will have been missed by the concerned authorities. This I am saying after assuming that interests of the State would include inter alia rights to regulatory space and not just to a more consultative and participatory dispute resolution process. By positively allowing the State the right to take non-discriminatory regulatory measures for environment, health and safety etc, the authorities will further be diminishing the instances and basis for the claims of foreign investors against the State which is why I am of the opinion that reforming dispute resolution clause alone will not be sufficient.
The world has shown the way in allowing sustainable development provisions to make in-roads into investment agreements and Pakistan has absolutely no excuse for not tending to this phenomena and embracing this international trend especially when it, as a developing nation, is at a serious risk of environmental degradation and has in fact been experiencing the impacts of environmental harm in its daily life in form of natural calamities, droughts, floods, and climatic change very frequently in recent years.
It is therefore hoped that the concerned authorities will take this time and opportunity to develop a multi-disciplinary approach to their reform and review agenda and policies and make the environmental concerns the linchpin of all development considerations at various levels.
[1] Available at http://www.unep.org/Documents.Multilingual/Default.asp?documentid=97&articleid=1503
[2] For instance, the G8 Heads of State in their declaration Responsible Leadership for a Sustainable Future highlighted the role investment plays in ensuring sustainable growth. For full text see, www.g8italia2009.it/static/G8_Allegato/G8_Declaration_08_07_09_final,0.pdf ; See also, G20 Leaders Statement, Pittsburgh Summit September 24-25, Annex, Core Values for Sustainable Economic Activity, paras 3, 5 available at www.g20/pub_communiques.aspx
[3] For instance, Canada is an excellent example of a country that has infused sustainable development and environmental concerns in its national as well international development policies. The Foreign Affairs, Trade and Development Canada website identifies core areas of priority on which Canada will base its international assistance in development upon and which notably includes, environmental sustainability as well as sustainable economic growth available at http://www.international.gc.ca/development-developpement/priorities-priorites/index.aspx?lang=eng. It is also one of the leading countries to have concluded several BITs in recent years which promote sustainable development and requires a State to not lower their environmental, health and safety standards in order to attract investment, see Note 1, Feb 2015 issued by UNCTAD on Recent Trends in IIAs and ISDS available at http://unctad.org/en/PublicationsLibrary/webdiaepcb2015d1_en.pdf
[4] See for instance, the 2009 BIT between Kingdom of Spain and the Great Socialist People’s Libyan Arab Jamahirya, the 2012 BIT between Turkey and the Islamic Republic of Pakistan, the 2014 FTA between Australia and the Republic of Korea, the 2014 BIT between Canada and Serbia as well as the 2014 Additional Protocol to the Framework Agreement of the Pacific Alliance.
[5] Agenda 21: Programme of Action for Sustainable Development, Report of the UNCED, Vol. U.N. GAOR, 46th Sess., Agenda Item 21, UN Doc A/Conf.151/6/Rev.1 (1992), 31 I.L.M. 874, at para 2.23.
[6] G20 Leaders’ Statement, Pittsburgh Summit September 24-25 para 5 and Annex, Core Values for Sustainable Economic Activity, paras 3, 5 available at www.g20.org/pub_communiques.aspx
[8] Methanex Corporation v USA, ICSID, 3 August 2005, Part IV, Chap. D 7.
[9] Metalclad Corporation v United Mexican States, ICSID Case No ARB (AF)/97/1, 30 August 2000; (2001) 16(1) ICSID Review-Foreign Investment Law Journal 165.
[10] Marvin Feldman v Mexico, ICSID Case No ARB (AF)/99/1 2002: (2003) 42 ILM 625, 669.
[11] Art 8.4 and 8.5 of BIT between Spain and Libya, 2009.
[12] Art 13.1, SADC Model Bilateral Investment Treaty, July 2012 available at http://www.iisd.org/itn/wp-content/uploads/2012/10/sadc-model-bit-template-final.pdf
[13] Ibid Art 14
[14] Available at http://unctad.org/en/PublicationsLibrary/webdiaepcb2015d1_en.pdf
[15] For which the text was available at time of review.
[16] IIA Issues Note No.1 on Recent Trends in IIAs and ISDS, Feb 2015, UNCTAD at p 3, para 3 available at http://unctad.org/en/PublicationsLibrary/webdiaepcb2015d1_en.pdf
[17] Ibid para 4
[18] See the 2014 BIT between Canada and Serbia.
[19] See the 2014 BIT between Canada and Senegal.
[20] See the 2014 BIT between Cameroon and Canada.
[21] See the 2014 BIT between Mali and Canada.
[22] See the 2014 BIT between Canada and Nigeria.
[23] In that, Pakistan has so far signed various Multilateral Environmental Agreements (MEAs) including Kyoto Protocol, United Nations Framework Convention on Climate Change (UNFCCC), Agreement for the Establishment of a Commission (LOCUST), Agreement on Aquaculture Centres in Asia, Basel Convention, Convention on International Trade in Endangered Species, Convention on Protection of World Cultural and Natural Heritage, Paris (1972), International Plant Convention, Montreal-Protocol (1987), The Ramsar Convention on Wetlands, United Nations Convention on Biological Diversity, United Nations Convention on the Law of the Sea, United Nations Convention to Combat Desertification and Vienna Convention for Protection of Ozone Layer (1985), see http://sedac.ciesin.org/entri/countryProfile.jsp?ISO=PAK .
[24] See Art 9, 14, 38 and 184 (3) of the Constitution of Pakistan 1973.
[25] Zia v Wapda, PLD 1994, Supreme Court, 693.
[26] See Article 12 of Pakistan Environment Protection Act, 1997.
[27] See http://environment.gov.pk/about-us/. A detailed list of environmental laws, regulations, policies, procedures, checklists , standards, guidelines and directorates can also be found at PAK-EPA website at http://environment.gov.pk/information-services/
[28] Art 6 (2) PEPA, 1997, available at http://environment.gov.pk/act-rules/envprotact1997.pdf. See also http://environment.gov.pk/about-us/.
[29] Art 8, PEPA, 1997 available at http://environment.gov.pk/act-rules/envprotact1997.pdf.
[30] The preamble of the 1997 Act reads as follows, “An Act to provide for the protection, conservation, rehabilitation and improvement of the environment, for the prevention and control of pollution, and promotion of sustainable development WHEREAS it is expedient to provide for the protection, conservation, rehabilitation and improvement of the environment, prevention and control of pollution, promotion of sustainable development, and for matters connected therewith and incidental thereto;” available at http://environment.gov.pk/act-rules/envprotact1997.pdf .
[31] SMC No 25 of 2009, available at, http://www.supremecourt.gov.pk/web/user_files/file/smcno25of2009.pdf .
[32] http://epi.yale.edu/epi/country-rankings
[33] Pakistan Economic Survey 2013-14, Ministry of Finance, p 247-248, available at http://finance.gov.pk/survey/chapters_14/16_Environment.pdf .
[34] Saadia Qamar in her article in The Nation noted that, “Environment related factors cause roughly one third of all children mortality in Pakistan, the highest rate in South Asia.” See, Saadia Qamar, The Nation, 28 February 2009, available at http://nation.com.pk/Business/28-Feb-2009/Environment-degradation-causes-huge-economic-losses-to-Pakistan
[35] Daily Times, 11 May 2015, p A3 available at http://www.dailytimes.com.pk/national/11-May-2015/climate-change-will-aggravate-disease-burden.
[36] ‘Environmental Degradation in Pakistan, Haroon Mustafa Janjua, Daily Times, March 03, 2014 available at http://www.dailytimes.com.pk/opinion/03-Mar-2014/environmental-degradation-in-pakistan
[37] Ibid, Para 2
[38] Ibid, Para 3
[39] See Supra Note 34, p 245.
[40] See Supra Note 34, P 245, para 2.
[41] Ibid, p 245, para 1.
[42] Ibid, p 246, para 1 – 2.
[43] Annual Plan 2013-14, Ministry of Planning, Development and Reform p 139, para 13.5.2 available at http://pc.gov.pk/annual%20plans/2013-14/13-Environment.pdf.
[45] It has been alleged in a case that two Egyptian nationals had changed their nationality in order to bring a claim against Egypt before ICSID under Italy-Egypt BIT, see International Institute of Sustainable Development, Investment Treaty News, 27 May 2007, www.investmenttreatynews.com.
[46] Article 5, Pakistan-Turkey BIT 2012.
[47] See Article 3(2) of Pakistan-Germany BIT 2009.
[48] The 1959 BIT with Germany was revised in November 2009, the one with Kuwait in February 2011 and Turkey in April 2012.
[49] Amin Ahmed, ‘New Bilateral Investment Treaty Model’, Dawn News, para 14, 2 March 2015 available at http://www.dawn.com/news/1166720 .
[50] Ibid para 16.
[51] Ibid para 2.
[52] ‘Investment Policy Framework for Sustainable Development’, UNCTAD, available at http://unctad.org/en/PublicationsLibrary/diaepcb2012d5_en.pdf .
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