CYIL vol. 13 (2022)

CYIL 13 ȍ2022Ȏ INTEGRATING CLIMATE CHANGE ELEMENTS INTO INTERNATIONAL INVESTMENT… duration, the commitment of capital or other resources, the expectation of gain or profit or the assumption of risk. Investment must be made in accordance with the applicable law and the domestic law of the host contracting party. The latter requirement is particularly important in the climate change context as it forces investors to comply with the environmental standards of the relevant country, including for example conducting environmental and climate impact assessment, in order to benefit from the international investment protection. Based on the prevailing academic literature and arbitral tribunal practice the investment shall possess both the legal and economic characteristics. What is interesting is that the ultimate economic impact (positive or negative) of the investment for the host country (e.g., transfer of technology, infrastructure etc.) is outside international investment law consideration. In the context of attempts to formulate an objective test for ascertaining the meaning of investment as used in Article 25 of the ICSID Convention, a controversial arbitral practice has emerged making the ‘contribution to host State’s economic development’ part of the definition of investment. The criterion of the significance of an investment for the host country’s economic development in order to qualify as a protected investment was first suggested in the decision Fedax v Venezuela 34 and reconfirmed in 2001 in a decision Salini v Maroco 35 that became the famous Salini test. 36 As there were different views on what actually constitutes economic development many subsequent tribunals questioned the Salini test, its feasibility, and benefits of the economic development requirement. 37 Subsequent treaty practice confirms that there is no consensus in this regard. 38 The impact of foreign direct investment itself, including for example the evaluation of its compatibility with a host State’s environmental or human rights and labour standards, has not been measured as part of the investment treaty regime. The investment project does not necessarily need to lead to development of the host country and it will still be covered by the protection of the relevant IIA. As stressed by other authors, international investment law is not aimed at promoting development as a form of development aid. 39 34 Fedax N.V. v The Republic of Venezuela, ICSID Case No. ARB/96/3, Decision of the Tribunal on Objections to Jurisdiction, 11 July 1997, para. 43. 35 Salini et al. v Kingdom of Morocco, Decision on Jurisdiction, 23 July 2001. 36 As stated in the Salini v Marocco decision, the test requires a protected investment to have four characteristics: ‘[…] The doctrine generally considers that investment infers: contributions, a certain duration of performance of the contract and a participation in the risks of the transaction […]. In reading the Convention’s preamble, one may add the contribution to the economic development of the host State of the investment as an additional condition. […]’. See Salini et al. v Kingdom of Morocco, Decision on Jurisdiction, 23 July 2001, para. 52. 37 See e.g., Phoenix Action, Ltd. V The Czech Republic, ICSID Case No. ARB/06/5, Award, 15 April 2009, para 82. See also ŠTURMA, P. and BALAŠ, V. Mezinárodní ekonomické právo . [ International Economic Law ] 2 nd Edition. Praha: C.H. Beck, 2013, pp. 352–354 and decisions referred therein. 38 For example, India Model BIT 2015 requires a significance of the foreign investment for the development of the host country. Similarly, the SADC (Southern African Development Community) Model BIT 2012. No such requirement is, however, contained in model treaties of the European countries, e.g., Italy Model BIT 2022 or the Czech Republic Model BIT 2016. Accessible at: https://investmentpolicy.unctad.org/international investment-agreements/model-agreements. 39 See e.g., SCHACHERER, S., HOFFMANN, R. T. International investment law and sustainable development. In: KRAJEWSKI, M. and HOFFMANN, R. T. Research Handbook on Foreign Direct Investment . Cheltenham: Edward Elgar Publishing, 2019, p. 564, and other authors cited therein.

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