In September 2009, a Canadian investor, Peter Allard, instituted proceedings before the Permanent Court of Arbitration against Barbados, for breaches of the Agreement between the Government of Canada and the Government of Barbados for the Reciprocal Promotion and Protection of Investments, signed on 29 May 1996 (Canada-Barbados BIT). In particular, the investor claimed that his US$35 million investment, an eco-tourism project in Barbados (Graeme Hall Nature Sanctuary) underwent indirect expropriation, due to Barbados’s failure to fulfill its environmental obligations, deriving from both domestic legislation as well as international environmental law. In 27 June 2016, the Tribunal issued the much-anticipated award, ultimately rejecting the claim of the investor. Even though, prima facie, this appears to be yet another investment dispute (albeit with environmental components), a closer look to the facts of the case provides an interesting insight.
Peter Allard is a renowned Canadian businessmen and activist, who, back in 1994, acquired a 34.25 acres piece of land on the south coast of Barbados, through his indirectly owned corporation Graeme Hall Nature Sanctuary Inc. (GHNSI), incorporated in Barbados. It is noteworthy that the Graeme Hall is a significant mangrove forest and migratory bird habitat in Barbados. Allard’s investment contributed to the sustainable development of Barbados in a series of ways, by, inter alia, performing environmental studies of the Graeme Hall wetlands, restoring the natural environment of the Sanctuary, and providing educational services for the local population and tourists. The GHNSI attracted thousands of visitors during the period it was operating, from April 2004 to March 2009. However, Allard claimed that the legal standards protecting his eco-tourism project were violated because of Barbados’ introduction of new legislation, as well as of its failures to mitigate environmental degradation.
In fact, Allard claimed that Barbados’ failure to implement its environmental laws and to abide by its environmental obligations destroyed the value of his $35 million investment in an ecotourism project on 34.25 acres of natural wetlands on the south coast of Barbados (the Graeme Hall Nature Sanctuary). In its Request for Arbitration, the investor further asserted that Barbados has failed to prevent the discharge of sewage into the wetlands, to maintain adequate drainage of the area, to investigate and prosecute the sources of polluting effluents, and to prosecute wildlife poachers, allegedly in disregard of domestic environmental laws and international treaties.
The Arbitral Tribunal ultimately held that Barbados had not indirectly expropriated Allard’s investment (since revenues continued to flow in from its use as a cafe). With respect to alleged violations of other standards of protection stipulated in the Canada-Barbados BIT, the Tribunal likewise rejected Allard’s claims, primarily due to his failure to present convincing evidence leading to the violation of the BIT Standards of Protection by the Respondent’s. In addition, with respect to the BIT Standard of Protection on Full Protection and Security, the Tribunal found that Barbados had exercised the required level of due diligence. Nonetheless, both the submission of the claims on behalf of Allard, as well as the Tribunal’s analysis, merit particular attention. The Claimant, in fact, equated the interpretation of the scope of the standards of protection under the BIT with the fulfillment/failure to meet the corresponding standards of environmental protection; in other words, Allard’s claims were formulated in such a way that should Barbados be found to have violated the BIT, it would have inescapably be found to have failed to fulfill its obligations under the Convention on Biological Diversity and the Ramsar Convention.
The Tribunal ultimately stated that Barbados had met the required standard of due diligence, since the State had taken reasonable steps to protect the sanctuary, inter alia through the establishment of a Committee for its preservation. In holding so, it also noted that “[t]he fact that Barbados is a party to the Convention on Biological Diversity and the Ramsar Convention does not change the standard under the BIT, although consideration of a host State’s international obligations may well be relevant in the application of the standard to particular circumstances”. This reasoning has favorable elements towards consideration of a State’s ‘cluster’ of international obligations: even though they cannot lead to a change of the actual BIT standard, such obligations can be of relevance during its analysis for the purposes of an arbitration. The holding seems to be a first step towards, even if not equating, at least infiltrating a BIT standard with connotations of environmental standards.
Being the first of its kind, the award comes at a crucial time during which the Investor-State Dispute Settlement (ISDS) is subject to heavy criticism from the public and NGOs. Especially during the recent negotiations on the Transatlantic Trade and Investment Partnership and the EU-Canada Comprehensive Economic and Trade Agreement, civic society had launched grand campaigns -which continue to echo- upon concerns on the effects of investments on health, labor issues and the environment. Such campaigns have been met by reactions from investment lawyers and researchers, who speak of a ‘propaganda’ against the ISDS system. Whichever side of the debate one finds himself on, it is worth nothing that such strong reactions against the ISDS system appear to be belated, since this system dates back several decades, with around 3000 BITs in force to-date. Indeed, the investor has a powerful tool to directly challenge measures taken by a State against his interests (a mechanism already known in the case of human rights); nevertheless, it has to be underlined that the States themselves have opted for ISDS and continue to do so. Reaping the benefits of foreign investment through guaranteeing protection under treaties (BITs or Multilateral Agreements) entails abiding by the rules contained in these treaties, which in many cases provide the legal certainty foreign investors needed to invest; it is, quintessentially, a situation of pacta sunt servanda.
Investment Arbitral Tribunals have, in many cases, considered environmental law upon invocation by the Respondent State, and have upheld a State’s right to regulate. Thus, it is evident that investment arbitration is open to examining issues of environmental law without always ruling in favor of foreign investors at all costs. The case of Allard v. Barbados paved the way for a creative approach to the ISDS, by invoking a State’s environmental obligations as a ‘sword’ rather than a shield. Should the claims of Allard have been successful, Barbados would not have been obliged to change its legislation in order to ensure the improvement of environmental protection standards; yet, the large sums of money that follow an award in favor of the investor, could affect a State’s environmental policy, with a view to avoiding further adverse outcomes and the compensation amounts they would entail. As it appears, we might well envisage a constructive transformation of the ISDS into an instrument of pressuring governments to maintain the same levels of environmental protection, if not higher.
- Peter A.Allard (Canada) v. The Government of Barbados, PCA CaseNo.2012-06 (hereafter Allard v. Barbados), Award of 27 June 2016 (hereafter Allard v. Barbados).
- For more information on the Sanctuary, see also http://www.graemehall.com.
- Allard v. Barbados, Notice of Dispute of 8 September 2009.
- Allard v. Barbados, Award of 27 June 2016, para.264.
- Ibid., para.178.
- Ibid., para.244.
- The most notable campaign within European borders, would be the campaign against the TTIP and CETA multinational trade agreements, which include relevant chapters on investment protection. For more information, see https://stop-ttip.org.
- For an overview, see N.Lavranos, Profiting from Anti-ISDS Propaganda, 11 October 2016, available at http://kluwerarbitrationblog.com/2016/10/11/profiting-anti-isds-propaganda/
- The Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention), which established the International Centre for Settlement of Investment Disputes (ICSID) entered into force in 1965 [see, Rudolph Dolzer & Christoph Schreuer, Principles of International Investment Law (Cambridge University Press 2012), p.9] ICSID is the largest centre for the settlement of international investment disputes.
- See Rudolph Dolzer & Christoph Schreuer (n 9), p.13-15.
- See indicatively, Parkerings-Compagniet AS v. Republic of Lithuania, ICSIDCaseNo.ARB/05/8, Award of 11 September 2007.
About the author
Lawyer, Researcher, MEPIELAN Centre, Panteion University of Athens, Greece