Columbia’s Center for Climate Change Law has released a white paper entitled Potential Liability for Climate-Related Measures under the Trans-Pacific Partnership. The Trans-Pacific Partnership (TPP) is currently being negotiated by twelve Pacific-rim countries (Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam). If negotiations are successful, this “mega-treaty” will be the largest free trade agreement to date, initially governing 40 percent of the world’s GDP and 26 percent of the world’s trade.
As with most negotiations for free trade agreements (FTAs), all TPP negotiations are confidential. The lack of access to information about the status of negotiations has raised concerns that the agreement will fail to provide for sufficient safeguards for environmental protection and counteract climate change mitigation and adaptation efforts. In January, 2014, a draft of the environmental chapter was leaked to the public. The leaked text revealed weak environmental protections without meaningful enforcement provisions. A previous blog post discussed why despite the U.S.’s firm stance on the inclusion of a robust and enforceable environment chapter, it has proposed to weaken climate change provisions in the text.
The new publication from the Center for Climate Change Law, written by CCCL Fellow Meredith Wilensky, addresses an aspect of the TPP that receives less attention from the environmental community- investment. Investment chapters are relevant to climate change because they can create a risk of liability for measures taken by host states to combat climate change. FTAs usually provide investor protection provisions that impose standards of conduct on host countries in their dealings with foreign investors. Many also establish an Investor-State Dispute Settlement (ISDS) mechanism that permits aggrieved investors to initiate arbitration for compensation where a host country violates such provisions. Under preexisting investment agreements, investor protection provisions have been interpreted broadly to require compensation for a number of actions taken by governments to protect the environment and public health. To date, governments have paid out hundreds of millions under the U.S. international investment agreements alone, over half of which have pertained to natural resource, environmental, and energy policies. Given trends in arbitral practice, potential liability under the TPP may discourage Parties from adopting climate change regulations or make enforcement of such regulations economical unviable.
Despite the risks associated with ISDS, a draft of the TPP investment chapter leaked in 2012 revealed that all Parties, except Australia, have agreed to submit to ISDS. The white paper examines the leaked text to assess whether the TPP investment chapter adequately shields governments from risk of liability for climate change policies. The paper concludes that while the draft text demonstrates an effort on the part of TPP negotiators to reduce risk of liability for legitimate regulations promulgated in the public interest, the efforts are insufficient to protect from risk of liability. To address this risk, the paper provides suggested reforms with respect to investor protection provisions and the structure of ISDS generally to ensure that the final agreement not only expands trade and international investment, but also supports all Member States in their efforts to combat climate change.