The implementation of sustainable development as a requirement by ICSID tribunals: a proposal for a sustainability standard

There is a growing call to integrate Sustainable Development Goals (‘”SDGs’”) into the general archetype of foreign direct investment (‘”FDI’”). FDI of course has great potential to lead to the creation of new jobs, the eradication of poverty and the potential to raise the income of entire regions. However, it also has a detrimental impact on the environment. The call for the integration of the SDGs has been reinforced with the emergence of the importance of sustainable development at a global level. Examples of initiatives on this matter include the 2030 Agenda for Sustainable Development. Recent UNCTAD reports have also identified a trend where sustainable development and non-commercial considerations were emphasized in the conception of the notion of investment.
Nevertheless, this trend is yet to be reflected in a clearer manner in the current practice of Investor-State Dispute Settlement (‘ISDS’”ISDS”) that falls under the International Centre for Settlement of Investment Disputes (‘(“ICSID’ICSID”) arbitration procedure. There is thus an urgent need for the integration of sustainable development principles into the understanding of investment arbitration under ICSID practice.
In the absence of a clear application of elements of sustainable development in ICSID arbitration, this article explains the ongoing difficulties faced by ICSID tribunals in the application and recognition of ensuing norms, such as sustainable development, within the definition of ‘investment’. The paper also discusses that ICSID tribunals should be better equipped with the necessary tools to effectively and meaningfully engage with norms that are inherently fact and project-specific. The main contribution of the paper lies in a proposal for a sustainability and optimization standard that could be applied as a potential solution for these shortcomings.