Climate Policy, Investment Treaties, and Investor-State Dispute Settlement

Climate policy disputes

In arbitration, most of the disputes brought to the tribunal are usually covered under Climate Policy related disputes and exploring investment treaties for Investor-State Dispute Settlement. In the arbitration world, both climate changes and Investor-state disputes usually deal with investors having a faceoff with host states where the investment is made either directly or indirectly.

There is usually an interaction between Climate Policy related disputes and Investor-state disputes. This article will be considering them.

Climate Policy

Climate policy disputes usually occur when the host state where an investor puts up investment sets up policies or measures that could trigger unfriendly climate changes that leave the investor at a loss. It can also go the opposite way when the hosts state refuses to set up important policies that could have prevented Climate changes that negatively affect the investor.

Usually, for an investor to gain the upper hand against whole states on Climate policy disputes, there must be undeniable evidence that the state action or inactions on climate policies caused the investor’s loss accrued by the investor. However, there are a couple of outlined guidelines by arbitration institutions on climate change-related disputes.

Climate policy disputes,

An International Chamber of Commerce task force, in November 2019, published a climate-related report titled Resolving Climate Change Dispute Through Arbitration and ADR. The report was dedicated to explaining the role of arbitration in resolving international disputes caused or directly related to climate change. The report outlined four standard ways with which arbitration can be used to resolve Climate change disputes.

Other mechanisms help project arbitration as an effective and efficient climate change dispute resolution method. The Paris Agreement includes clauses that give disputing parties the right to accept arbitration for climate change dispute resolution according to the procedures adopted by the Conference of the Parties of the UNFCCC.

Investor-State Dispute Settlement

Investor-state dispute settlement is a treaty or agreement mechanism that gives foreign investors the power and right to sue countries where investment is focused on discriminatory and unhealthy practices. ISDS in Foreign Direct Investment is the system that gives investors well-deserved right to protect their investments and restrict countries from literally playing a fast one.

The major purpose of ISDS is to protect investors and benefit host countries that honestly keep to their laws as outlined. A country that has a reputation of standing with its Investor-state system will attract foreign investors as long as they are friendly.

ISDS is a very important part of arbitration and one of the best and most popular ways. Investors get to protect their rights against host states’ unfair policies, which could be an unfair climate Policy that causes significant investor losses or any other type of unwholesome negotiation not stated in the contract.
However, for Investors to successfully challenge a state, they must include an investment treaty clause in the contract and ensure that the host states give consent, acknowledge it, and beyond significant doubt agrees to it.

There are different types of Investment Treaties, and at least one of them must be included in an Investor-state for ISDS to become functional. With an investment treaty, an investor can resort to an arbitral tribunal instead of going to the National courts of the host state to resolve any contract breach.

The investment treaty in a contract is extremely advantageous as an investor will be offered a fairground, which cannot be guaranteed under the host state national courts.

Climate Policy and Investor-State Dispute Settlement

Both Climate change disputes and Investor-State Disputes are related as both involve the investor taking a host state or corporate entity backed by a state to a tribunal. In fact, climate policy disputes can be categorized under Investor-State Dispute as to the former involve perceived action and inaction of the state on climate policies that led to losses for the investor.


Climate policies are targeted to control how much climate changes affect a contract and how it can result in financial, reputation, and different types of damages for both investors and the corporate entity or host states. With the increase in climate change-related disputes, there is no doubt that host states and corporate entities are being held to a higher standard in implementing a Climate Policy that protects the contract they willingly entered.

Also, as climate change disputes continue to grow, so does Investor-State Dispute Settlement and its related disputes. As we have seen, there is a clear relationship between foreign investment disputes and Climate policy-triggered disputes. In most cases than not, aggrieved foreign investors are the ones who take host states to tribunals and the national courts to claim compensation and remunerations for losses. Hence climate change disputes and investor-state disputes are one of the same coins.

The arbitral tribunal is one of the places to get fair and prevalent justice if you or your firm are involved in an Investor-State Dispute or climate change-related dispute. The tribunal, as already stated, provides an efficient and effective system for Climate Policy and Investor-State Dispute Settlement, and you can be assured of getting fair justice in a situation of an unwholesome policy.

However, while many arbitral tribunals claim to offer great services, you or your firm must ensure that you go for a proven firm with top-class arbitrators. This is extremely important as only experienced arbitrators will be able to analyze, out of the ton of Investment Treaties, the one reached with the host state and how your firm can explore it to get deserved compensation.

Rattsakuten is an arbitration institution you can actually go for if you are looking for a top firm. The firm has built a reputation for providing clients with top services while ensuring they get the best out of a dispute. You can reach the management here for all of your inquiries if you have an Investor-state related dispute or if you want advice before investing in a corporate entity outside your jurisdiction.

About Rattsakuten

Rattsakuten is a leading law firm focused on Commercial Arbitration and Dispute Resolution. Based in Sweden, Rattsakuten handles dispute resolution and Arbitration matters before the SCC (Swedish Chamber of Commerce), ICC, HKIAC, and several other Arbitration tribunals.


Fredrik Jörgensen

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