The World Investment Forum organized by UNCTAD is coming up. It will run from 16 to 20 October in Abu Dhabi. Hundreds of high-level state and non-state actors are going to discuss solutions to reform the International Investment Agreements-IIAs- regime in order to aim at increasing investment in sustainable energy and deal with the climate crisis.[1]  According to Paris Agreement, greenhouse gas emissions need to be reduced by 45% by 2030 and reach net zero emissions by 2050. That means that annual clean energy investment worldwide needs to triple to $4 trillion by 2030.[2] The objective is challenging if we consider the risks and challenges that old investment treaties represent for states. 

Currently, 2,300 old-generation IIAs (signed between 1959-2011) are still in force.[3] In general, these treaties make it more challenging for states to exercise their regulatory powers in order to balance the tensions between the public interest and investor interest.  Many of them are drafted with broad provisions, without general exceptions and any explicit references for sustainable investment transition. It is undeniable that old treaties are the grounds to the majority of the Investor State Dispute Settlement-ISDS-, as they overcome the number of new treaties. 

Following UNCTAD data, fossil fuel sector and renewable energy embrace a quarter of total ISDS cases.[4]Fossil fuel investors have initiated over 15 per cent (219) of treaty-based arbitral proceedings. Although all of them are not related to climate measures or the protection of environment, old treaties are crucial to challenge measures aligned with restricting or phasing out fossil fuels.  Renewable energy sector has brought at least 119 IIA-based cases. In this sector, most cases were fostered by investors from developed countries against developed countries. Spain was the country most affected, reaching about 45 per cent of cases. Claimants challenged adjustments on reduction in incentives for green energy through feed-in-tariffs. [5]

Different efforts have been made to reform the IIAs regime. UNCTAD for instance has designed an IIA toolbox to promote sustainable energy investment, which includes four actions areas, such as i.) promoting and facilitating sustainable energy investment; ii) technology transfer and diffusion; iii) right to regulate for climate action and the energy transition, and iv) corporate social responsibility.  To reform IIAs, states have the option to terminate, amend, renegotiate or negotiate new treaties. However, the gap between new treaties and old treaties is significant.  Approximately, there are 221 new treaties in contrast to 2,300 old treaties.[6] These numbers suggest that old treaties are the main tools that can trigger claims related to the transition from fossil fuels to renewable energies. In addition, the idea to terminate old treaties on a unilateral basis is not always the best choice if it is considered the effects of sunset clauses. They can survive the termination of the treaty for about 5-15 years, so there is too much at risk.

The World Investment Forum is a space to debate about IIAs reform’s drawbacks and advantages in light of the urgent climate change action. The protection of foreign investment in times of global warming, it cannot be done at the expense of global values in the benefit to humanity.  Any reform should reduce the risks of ISDS claims faced by the states due to the transition to low carbon economies. Without sacrificing the core of the rule of law, IIAs regime needs to be more flexible and ensure states more regulatory space on sustainable investments. Now, this is a concern for developing and developed states. 

[1] United Nations UNCTAD. World Investment Forum. Energy transition calls for faster investment treaty reforms https://worldinvestmentforum.unctad.org/update/energy-transition-calls-faster-investment-treaty-reforms

[2] United Nations UNCTAD. Investment facilitation in international investment agreements: trends and policy options. IIA Issues Note, September 2023, Issue 3, p.2

[3] United Nations UNCTAD. Trends in the investment treaty regime and a reform toolbox for the energy transition, p.10

[4] Ibid, p.13 

[5] Ibid

[6] United Nations UNCTAD. Investment facilitation in international investment agreements: trends and policy options. IIA Issues Note, September 2023, Issue 3, p.3