Investor-Community Conflicts in Investor-State Dispute Settlement: Rethinking “Reasonable Expectations” and Expecting More from Investors

Abstract

Within the fraught field of investor-state dispute settlement, no cases are more controversial than those in which an investor seeks damages for the cancellation of a project following an outcry by local communities over potential environmental or social impacts. Tribunals have almost always ruled for the investor in these cases, typically reasoning that the cancellation frustrated the investor’s “reasonable” or “legitimate” expectations. This Article argues that tribunals have often overlooked or downplayed factors that should limit investors’ expectations when undertaking high-impact projects, including specific aspects of domestic environmental law and the host state’s international human rights and environmental obligations. The Article also examines factors beyond investor expectations that may be relevant to liability or quantum in such cases, including local remedies and emerging standards of conduct with which investors should be expected to comply. Finally, the Article shows that the proposed interpretive framework is consistent with the texts of investment treaties and their underlying rationales and could address a number of concerns that threaten these treaties’ long-term viability.