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Home arrow Geography arrow The role of climate change in global economic governance


International investment law has the potential to have a chilling effect on climate change regulation, by raising issues regarding the risk that climate change regulation will expose host states to claims from foreign investors. Our analysis in this chapter shows that legitimate climate change regulation should not trigger liability to compensate foreign investors. However, this may not eliminate the chilling effect, since it is costly for States to defend against such claims even if they do not succeed. Awards of costs against investors who file such claims may discourage such claims, but this may not be sufficient to overcome the chilling effect in the short term. Moreover, the lack of a system of precedents permits tribunals to reach different conclusions on similar issues, which increases the uncertainty regarding the outcome of litigation. Nevertheless, there is room in international investment law for striking an appropriate balance between the right to regulate climate change and right of foreign investors to seek compensation for arbitrary and discriminatory governmental actions.

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