Achieving Sustainable Development Objectives in International Investment Law

The relationship between foreign investment and sustainable development is contentious. While the UN 2030 Agenda for Sustainable Development prominently supports that foreign investment and sustainable development mutually reinforce each other, international investment law appears to impede rather than encourage sustainable foreign investment. Critics argue that international investment agreements (IIAs) prompt a “regulatory chill effect” that prevents host states from adopting environmental, labor, or social policies, as IIAs require host states to compensate foreign investors for losses caused by these sustainability policies. Controversial IIA provisions are the rules on expropriation and fair and equitable treatment (FET) and the investor-state dispute settlement (ISDS) mechanisms that permit foreign investors to enforce these substantive guarantees against the host state. This chapter discusses the linkages between international investment law and sustainable development, analyzes the shortcomings in traditional IIAs affecting the host states’ sustainable development policies, and explores the various IIA reform approaches to facilitate sustainable foreign investment.