Litigating and Arbitrating ESG Disputes in Latin America

This is an Insight article, written by a selected partner as part of Latin Lawyer's co-published content. Read more on Insight

Introduction

‘Ecuador’s new president faces growing ESG challenges.’[2] ‘Argentina seeks to promote ESG-related issuances.’[3] ‘Republic of Peru debuts its Sustainable Bond Framework.’[4] ‘Brazil’s Unigel to build green hydrogen plant with $120 million investment.’[5] ‘IDB Approves $300 Million Loan to Underpin Costa Rica’s Decarbonization Plan.’[6] ‘Colombia to Foster Sustainable, Resilient Growth with IDB Support.’[7] These headlines from the last few years have one important thing in common: they all reflect Latin American countries’ focus on environmental, social and governance (ESG) issues.[8]

ESG’s three pillars of environmental, social and governance issues are addressed to different concerns and measured by different criteria. The environmental pillar focuses on a company’s impact on the natural environment. The social pillar deals with a company’s approach to its stakeholders, including shareholders, employees, and consumers, and encompasses ‘a company’s strengths and weaknesses in dealing with social trends, labour, and politics’.[9] Lastly, the corporate governance pillar ‘pertains to the governance factors of decision-making, from sovereigns’ policymaking to the distribution of rights and responsibilities among different participants in corporations, including the board of directors, managers, shareholders and stakeholders’.[10]

The global focus on ESG has precipitated worldwide pressure for companies to increase shareholder value by enhancing environmental, social and corporate governance performance. The growing call for sustainable investment, and the increasing focus on climate change, diversity, human rights and anti-corruption measures, among other issues, has been accompanied by increased regulation requiring companies to identify and assess ESG risks and impacts, and evaluate their progress toward achieving their stated ESG goals, on the theory that such information is material to the investing public. For example, the Brazilian Securities Commission (known by the acronym CVM) issued Resolution No. 59 on 22 December 2021, establishing, for the first time ever in Brazil, broad disclosure requirements for ESG-related information.[11] Moreover, in 2019, Argentina’s National Securities and Exchange Commission created best-practices guidelines for the issuance of green, social and sustainable securities,[12] and in August 2023, published Resolution No. 696/2023, adopting the National Sustainable Finance Strategy ‘in order to promote the implementation of practices that integrate economic factors, social and environmental aspects in the commercial, financial and investment operations’.[13]

Developing mechanisms to ensure compliance with evolving ESG obligations takes time, mainly because doing so requires companies to implement a new set of principles and policies, as well as ‘to redesign internal controls and compliance programmes, create new functions and acquire additional expertise’.[14] While companies in Latin America endeavour to comply with their ESG obligations, and have even assumed self-led undertakings – not required by any law – to ‘actively manage risks and opportunities related to emerging environmental and social trends, in combination with rising public expectations for better accountability and corporate governance’,[15] the possibility of non-compliance with ESG obligations or the creation of new and independent ESG obligations through a company’s own undertakings have led to a sharp increase in ESG-related disputes. This is especially true with respect to environmental and sustainability-related issues, given the reliance of many national economies in Latin America on agriculture, mining, oil and gas, manufacturing and forestry, among other industries, and also given the fact that Latin America ‘supports rich biological diversity, with around sixty per cent of global terrestrial life found within it, alongside diverse freshwater and marine flora and fauna’.[16]

This chapter analyses the evolution of ESG-related disputes in Latin America by conducting a review of recent available litigation and arbitration cases. As demonstrated below, ESG issues have generated complex disputes in a variety of industries. With respect to litigation in Latin America specifically, there have been an influx of new actions initiated in national courts in the Latin America region, largely as a result of prevailing and new obligations pursuant to national Constitutions, international agreements, and other legislation and regulation aimed at protecting the environment. As to arbitration, there has also been an increase in the incorporation of environmental issues and related claims in both investor–state and commercial arbitrations alike, a trend that is likely to continue in Latin America given the region’s commitments to reduce emissions and protect the environment under international instruments and a recent push to promote renewable energy, which may be in tension with current investments in carbon and other traditional fossil fuels.

ESG in the litigation context

Latin America may be fertile ground for ‘climate change litigation’, that is, disputes that ‘raise material issues of law or fact relating to climate change mitigation, adaptation, or the science of climate change’.[17] In general, climate change litigation ‘often falls into one or more of six categories: (1) climate rights; (2) domestic enforcement; (3) keeping fossil fuels in the ground; (4) corporate liability and responsibility; (5) failure to adapt and the impacts of adaptation; and (6) climate disclosures and greenwashing’.[18] Climate change litigation generally encompasses the ‘E’ and ‘S’ in ESG, mingling both environmental and social components, and may also involve the ‘G’ pillar as well since such disputes may relate to corporate governance principles adopted by companies, particularly corporate practices and public disclosures surrounding environmental and social policies and impacts.[19]

One of the main factors making Latin America fertile ground for climate change litigation is the fact that many countries in Latin America recognise by law some form of climate rights. Article 2.22 of the Peruvian Constitution provides that ‘every person has the right . . . to a balanced and appropriate environment for the development of life.’[20] In Ecuador, the right to a healthy environment is recognised by Article 14 of the Constitution, which states that ‘the right of the population to live in a healthy and ecologically balanced environment that guarantees sustainability and the good way of living (sumak kawsay), is recognised.’[21] Ecuador’s Constitution also recognises that nature has independent legal personhood, thus giving ‘Pachamama’ (or Mother Earth) legally enforceable rights.[22] The Brazil Constitution grants not only a series of environmental rights, but also duties: Article 225, for example, provides that ‘all have the right to an ecologically balanced environment, which is an asset of common use and essential to a healthy quality of life, and both the Government and the community shall have the duty to defend and preserve it for present and future generations.’[23]

International agreements on climate change may also play an important role in environmental obligations and duties. In Latin America, there are two primary international agreements that create binding legal obligations that may give rise to climate change limitation:

  • the Regional Agreement on Access to Information, Public Participation and Justice in Environmental Matters (the Escazú Agreement), which is a landmark environmental human rights treaty in Latin America and the Caribbean that aims to guarantee the ‘effective implementation of the rights of access to environmental information, public participation in the environmental decision-making process and access to justice in environmental matters, and the creation and strengthening of capacities and cooperation, contributing to the protection of the right of every person of present and future generations to live in a healthy environment and to sustainable development’;[24] and
  • the Paris Agreement Under the United Nations Framework Convention on Climate Change (the Paris Agreement), an international treaty whose goal is to cap global warming to well below 2ºC above pre-industrial levels and commits its signatory states to take action to reduce their emissions in the next few years.[25]

To the extent that such international agreements are ratified by a state, they may give rise to claims against the signatory state. For example, in PSB et al. v. Brazil, four Brazilian political parties, Partido Socialista Brasileiro, Partido Socialismo e Liberdade, Partido dos Trabalhadores, and Rede Sustentabilidade, filed a constitutional action against the Brazilian federal government before the Brazil Supreme Court – Brazil’s highest judicial authority – alleging that it had failed to properly administer the Fundo Clima, a fund created in 2009 to finance projects aiming at the reduction of greenhouse gas emissions.[26]

Referring expressly to the Paris Agreement, the plaintiffs contended that ‘by disbanding the fund’s technical committee responsible for assessing deforestation and disbanding the fund’s governance body, the government has failed its constitutional duty to preserve ecological processes and to protect the natural environment.’[27] In this case – the first-ever climate-related dispute before the Brazilian Supreme Court – a vast majority of justices ruled in favour of the plaintiffs, recognising the federal government’s failure to allocate sufficient resources to the fund. In so doing, the Brazilian Supreme Court conferred upon the Paris Agreement a privileged hierarchical position in the Brazilian legal system and determined that the executive branch has the constitutional duty to provide necessary resources, including financial support, to secure Fundo Clima’s goal to mitigate climate changes.

As illustrated by the PSB case, climate change litigations often involve a sovereign or state-owned entity, which is arguably subject to some form of obligation to oversee or mitigate climate change, either through the state constitution, national legislation or international treaty. Climate-related actions against governments are usually commenced by the party that is purportedly harmed by climate change (including, in some cases, indigenous persons) or their representatives, such as NGOs, specialised organisations, or even (as was the case in PSB) political parties. Another example is Peña, et al. v. Republic of Colombia, et al., where a group of 25 minors filed a tutela, a legal remedy to protect fundamental rights, against the Colombian government seeking to stop deforestation in the Amazon region.[28] Citing constitutional and treaty obligations, the Colombian Supreme Court sided with the plaintiffs and ordered the government to present an action plan to reduce deforestation. The Court’s reasoning, in relevant part, stated that the deforestation of the Amazon provokes in the short, medium and long term ‘an imminent and serious harm to the children, adolescents and adults directly affected by this suit, and, more broadly, to all Colombian citizens, both for present and future generations, since it uncontrollably releases carbon dioxide (CO2) into the atmosphere, producing the greenhouse effect, which transforms and fragments ecosystems, altering water resources and thereby harming the water supply of populated centers and causing soil degradation’.[29]

Similarly, in 2020, a group of nine Ecuadorian girls filed a protective action, effectively seeking a constitutional injunction, against the government of Ecuador in Herrera Carrion et al. v. Ministry of the Environment et al., claiming that gas flaring is unlawful and that Ecuador, by making it a common practice, violated the constitutional rights to health, water, food, sovereignty, a healthy environment and nature. The court of first instance denied the claims on the basis that the plaintiffs had failed to provide evidence to support a violation of fundamental rights. Reversing this outcome on appeal, the Court of Justice declared that Ecuador violated the plaintiffs’ fundamental right to live in a safe and ecologically balanced environment, mainly because Ecuador, in failing to employ pro-environmental technology, transgressed the plaintiffs’ right to a healthy life.[30]

Peru faced a similar suit in 2019 in Álvarez et al. v. Peru, in which a group of seven Peruvian minors, represented by their parents, sued Peru for environmental protection, seeking a court order requiring net zero deforestation in the Amazon by 2025. Based on the Peruvian Constitution and other national legislation, plaintiffs argued that their constitutional rights to a healthy environment, life, water and health had been infringed by Peru, in part because the Peruvian government had taken insufficient action to address climate change.[31] While this case remains pending before the Superior Court of Lima, Álvarez and the other cases recently brought against sovereigns alleging constitutional, statutory or other infringements are evidence of the increased frequency with which sovereigns may be subject to scrutiny and legal action for alleged violations of environmental and social obligations.

In addition to sovereigns and state-owned entities, private parties may also be targeted as defendants in climate change litigation. Such claims are usually based on corporate liability for past contributions to climate change, corporate human rights responsibilities, inadequate disclosure, or disinformation and fraud. For example, in 2020, three members of the Waorani Nation located in the indigenous Miwaguno community; the NGOs Acción Ecológica and Unión de Afectados y Afectadas por las Operaciones de Texaco; and the International Federation of Human Rights filed a protective action in a court in Ecuador against PetroOriental SA, a private Chinese oil company. In this case, the plaintiffs alleged that gas flaring resulting from PetroOriental’s oil extraction in Yasuní National Park, located in the Ecuadorian Amazon, contributed to climate change and constituted a violation of human rights, particularly the rights of nature and indigenous peoples who lived in the area most affected by the practice. More specifically, the plaintiffs argued that the gas flaring emanating from an oil concession operated by PetroOriental not only caused, but still causes, constitutional rights violations, mainly because gas flaring emits greenhouse gases. The Ecuadorian Court of Justice, however, rejected plaintiffs’ argument, reasoning that they had not provided enough evidence of how the gas flaring practice violated constitutional or human rights.[32]

While many cases against private parties concern the environmental and social components of ESG, there has also been an increase in litigation and enforcement actions in Latin America involving corporate governance, and, particularly, anti-corruption efforts and environmental oversight. Enforcement actions might be taken by government regulators to force companies to abide by ESG regulations, including those related to governance. Enforcement actions may also spawn litigation in the form of civil actions brought by private parties for alleged failure to comply with ESG obligations publicised through previous proceedings.

The US Department of Justice (DOJ) and the US Securities and Exchange Commission (SEC), for instance, have been targeting Latin American companies in both criminal and civil matters, as part of ongoing initiatives and guidance provided by US regulators to combat corruption (even international corruption) and oversee compliance with environmental programmes and disclosures. The DOJ has announced a series of actions to help achieve its anti-corruption goals, namely:

  • corporations will need to review their compliance programmes to ensure they adequately monitor for and remediate misconduct;
  • the Justice Department will review the whole criminal, civil and regulatory record of individuals facing investigations;
  • individuals facing investigations before the DOJ will have to identify all people involved in the misconduct and produce non-privileged information about their involvement; and
  • there will be no default presumption against corporate monitors for those negotiating resolutions before the DOJ.[33]

In 2022, the DOJ launched a comprehensive environmental justice strategy ‘to guide the Justice Department’s litigators, investigators, and US Attorneys’ Offices nationwide to advance the cause of environmental justice through the enforcement of federal laws.’[34] Consistent with President Biden’s Executive Order on Tackling the Climate Crisis at Home and Abroad, this strategy aims to take steps towards a more robust enforcement of environmental law.[35]

From the criminal standpoint of corporate liability, the DOJ has prosecuted two foreign financial asset managers in connection with a billion-dollar alleged international money laundering scheme related to the Venezuelan state-owned oil company Petróleos de Venezuela SA.[36] The indictment alleges that certain individuals conspired to launder the proceeds of ‘a corrupt foreign currency exchange scheme involving bribery of Venezuelan officials’ through banks in the United States.[37]

Similarly, during the investigation of Operation Lava Jato in Brazil, the DOJ made substantial efforts to combat corruption, bringing corruption-related charges against corporations and individuals due to criminal activities relating to alleged bribes accepted by public officials in exchange for public concession contracts and other advantages. There has also been a parallel push in many Latin American countries to initiate their own anti-corruption measures, including, for example, the Brazilian Anticorruption Plan, which aims to assist Brazil’s president in implementing policies against corruption,[38] and the Brazilian government’s Federal Decree No. 11,129/2022, which amends the regulations implementing the Brazilian Clean Companies Act, Brazil’s 2013 anti-corruption law, clarifying and detailing, inter alia, ‘procedural mechanisms for the conduct of investigations and negotiation of leniency agreements by the [Office of the Comptroller General] CGU and Brazilian public prosecutors’.[39]

On the civil side, the SEC initiated litigation against a publicly traded Brazilian mining company, Vale SA, contending it has made misleading ESG disclosures to investors about the safety of one dam that collapsed years ago.[40] This enforcement action was the first filed by the SEC’s newly-founded Climate and ESG Task Force, which was initially formed to identify material gaps or misstatements in issuers’ disclosure of climate risks under existing rules.[41] The parties recently settled this dispute.[42]

The above-mentioned cases demonstrate that both the DOJ and the SEC have been vigilant in requiring companies’ compliance with the ESG agenda, a trend that is likely to continue and increase as companies continue to prioritise ESG initiatives and make ESG disclosures an important part of their business models.

ESG in the arbitration context

ESG-related disputes may also arise in the context of an investment instrument between foreign investors and a state, or the commercial relationship between two or more parties governed by a private contract. In both cases, arbitration may be relied upon as a means of adjudicating these disputes.[43] This is largely due to the acclaimed advantages arbitration has with regard to litigation. Unlike litigation, arbitration proceedings take place outside of any national court system, and may provide a more neutral forum for the parties with additional procedural flexibility. Parties’ ability to appoint their own arbitrators to adjudicate an ESG-related dispute may offer an important comparative advantage, given the ‘necessary expertise to identify and clarify the salient issues, for which ordinary courts may lack the requisite experience and subject-matter’.[44] Moreover, arbitration institutions, such as the International Chamber of Commerce, have taken steps to provide guidance to parties, counsel and arbitrators as to the unique challenges and opportunities posed by ESG-related disputes, which may help facilitate resolution of disputes.[45] On the other hand, given the public policy importance of ESG – and, in particular, environmental impacts and climate change – resolution of such disputes through arbitration, and particularly commercial arbitration, which generally proceeds confidentially, has engendered opposition from some commentators.[46]

Regardless, there appears to have been a sharp uptick in cases involving some environmental component in recent years. A 2021 study by the London School of Economics identified at least 13 investor–state arbitrations in the past 10 years that included some challenge to environmental or climate change combating measures,[47] and the number of such arbitrations may increase as governments in regions like Latin America coalesce around the need to adopt ambitious and, in some cases, seemingly abrupt, measures to pursue their environmental initiatives and ESG goals.

Latin American countries have been incorporating environmental language in their investment instruments since the early 2000s. This early language largely sought to confirm a state’s right to regulate the environment and public health. For example, the 2008 Peru–Japan bilateral investment treaty (BIT) provides that the countries’ investment goals ‘can be achieved without relaxing health, safety and environmental measures of general application’.[48] Some Latin American countries have more expressly sought to protect the state’s right to engage in legitimate environmental regulation in modern BITs or free trade agreements; for example, the 2018 Argentina–United Arab Emirates BIT specifies that ‘it is inappropriate to encourage investments by relaxing domestic measures relating to health, environment or other regulatory objectives’.[49]

Such substantive provisions on environmental protection may ‘offer host States potential avenues of defence and counterclaims against aggrieved investors in respect of the State’s conduct’.[50] Thus, although investor–state arbitration is commonly accepted as a mechanism by which a foreign investor can initiate claims against a foreign state, some more recent cases involving an environmental component have featured states presenting:

  • the defence that the domestic measures in question were a necessary and proportionate action required to protect the environment; and
  • counterclaims against foreign investors that have allegedly caused environmental impacts in the foreign state.

In Perenco Ecuador Ltd v. Republic of Ecuador and Empresa Estatal Petróleos del Ecuador (Petroecuador), Perenco Ecuador Limited, a French-owned oil and gas company, initiated claims against Ecuador and Petroecuador, Ecuador’s national oil company, under the 1996 Ecuador–France BIT and two contracts for the exploration and exploitation of hydrocarbons in the Amazon. The claims arose out of ‘Ecuador’s enactment of legislative measures which increased its participation under the Participation Contracts on “extraordinary revenues” earned under the Contracts’.[51] Perenco contended that such actions violated the fair and equitable treatment standard and unlawfully expropriated its investment. Ecuador counterclaimed that Perenco caused environmental damages while operating the oil blocks under the participation contracts.[52]

Although Perenco raised jurisdictional challenges to Ecuador’s ability to allege counterclaims against it, the arbitral tribunal ultimately agreed with Ecuador’s argument ‘that if a legal relationship between an investor and the State [which] permits the filing of a claim by the State for environmental damage caused by the investor’s activities and such a claim is substantiated, the State is entitled to full reparation in accordance with the requirements of the applicable law’.[53] While the tribunal granted an award of partial damages to Perenco, the tribunal also awarded, based on independent expert determinations, US$54 million to Ecuador for its environmental counterclaim, finding that Perenco was strictly liable for ‘any contamination in excess of regulatory standards shown to have occurred after 20 October 2008 up until the Consortium suspended operations on 16 July 2009,’[54] according to the Ecuadorian Constitution.[55] The dispute underlying the Perenco case also gave rise to a similar investor–state arbitration – Burlington Resources Inc v. Republic of Ecuador – in which the tribunal similarly awarded US$41 million in damages from environmental counterclaims.[56]

In another foundational investor–state arbitration involving ESG, Urbaser SA and Consorcio de Aguas Bilbao Bizkaia, Bilbao Biskaia Ur Partzuergoa v. The Argentine Republic, the Spanish investor Urbaser and two other foreign investors initiated claims against Argentina under the Argentina–Spain BIT, leading Argentina to advance a counterclaim that the investors had failed to provide the necessary investment into the disputed concession contract, thus violating their obligations under international law based on the human right to water.[57] The arbitral tribunal recognised Argentina’s right to assert counterclaims and initially found that the investors ‘operating in the privatised water and sewage services sector in Greater Buenos Aires [were] in principle obliged under international law ‘not to engage in activity aimed at destroying’ and ‘to abstain’ from violating the population’s human right to water’.[58] However, the arbitral tribunal dismissed the counterclaim, concluding that there was no underlying breach to support the counterclaim and that damages had not been demonstrated.[59]

David R. Aven et al. v. Republic of Costa Rica is another case that highlights the state’s ability to bring environmental counterclaims.[60] There, investors brought claims under the Dominican Republic–Central America–US FTA, which arose out of Costa Rica’s termination of their hotel, beach club and villas construction project, following the revocation of an environmental viability permit on the grounds that the property in question included wetlands and a protected forest. Costa Rica counterclaimed for breach of mandatory rules of environmental protection set forth in the Costa Rican Forestry Law, alleging that claimants’ actions ‘unlawfully impacted a wetland, which caused environmental damage to the Project Site’, thus claimants should repair the damage caused to the ecosystem.[61] The tribunal issued an award finding that Costa Rica did not breach the FTA but dismissed Costa Rica’s counterclaim, reasoning that it did not meet the necessary requirements to state a counterclaim under Article 21 of the UNCITRAL Arbitration Rules, since there was ‘no precise statement of the facts supporting the claims but rather a reference to expert reports attached to those pleadings [and] Costa Rica only made a general reference to environmental damages in the Las Olas Project site attributed to the Claimants’ activity’.[62]

The state’s right to present counterclaims – based on environmental issues or not – is not universally accepted today and was certainly controversial not many years ago. In Spyridon Roussalis v. Romania,[63] the foreign investor brought claims ‘arising out of disagreements over compliance with a post-investment obligation related to its purchase of shares in a large frozen-food warehousing facility from the Romanian government’s privatization authority’.[64] Romania asserted several counterclaims against Mr Roussalis and two of his companies, Continent SRL and Continent SA, ‘arising out of the failure of Claimant and Continent SRL to make the USD1.4 million investment on which Claimant bases his Investment Claim’.[65] The arbitral tribunal disagreed with the investor, finding the actions of Romania did not amount to violations of the 1997 Greece–Romania BIT. Addressing Romania’s counterclaims, the tribunal, by majority, concluded it had no jurisdiction to entertain them due to the parties’ lack of consent. According to the majority, ‘the BIT imposes no obligations on investors, only on contracting States. Therefore, where the BIT does specify that the applicable law is the BIT itself, counterclaims fall outside the tribunal’s jurisdiction.’[66]

Professor Michael Reisman, in his capacity of arbitrator appointed by respondent (Romania), filed a dissenting award concluding that the tribunal did have jurisdiction to entertain Romania’s counterclaim, for:

when the States Parties to a BIT contingently consent, inter alia, to ICSID jurisdiction, the consent component of Article 46 of the Washington Convention is ipso facto imported into any ICSID arbitration which an investor then elects to pursue [and] such counterclaim jurisdiction is not only a concession to the State Party: Article 46 works to the benefit of both respondent state and investor. In rejecting ICSID jurisdiction over counterclaims, a neutral tribunal – which was, in fact, selected by the claimant – perforce directs the respondent State to pursue its claims in its own courts where the very investor who had sought a forum outside the state apparatus is now constrained to become the defendant.[67]

As seen above, Professor Reisman’s view has gained some traction in investment arbitration in recent years, especially in cases where states are seeking some sort of environmental damages.

These cases demonstrate how arbitration can be used by states both as a sword and a shield to confront issues of environmental harm within their borders, and counsel that investors should exercise caution prior to bringing claims against states that could entail an environmental component.

While states’ ability to bring counterclaims against investors for purported environmental or human rights violations is one way that states can affirmatively seek recovery in ESG disputes through arbitration, investors and other parties can also use arbitration to bring claims against the state, not for regulatory action, but for purported failure to take action to advance climate change initiatives or other related obligations to preserve the environment. In these situations, however, claimants may face a high standard to make their case. Depending on the relevant treaty provisions and applicable substantive law, it may be more or less burdensome for claimants to show that the state had a direct obligation to preserve the environment, that the state failed to act when it should to protect the environment, and that the state’s failure was the proximate cause of the damages sought by claimants in this regard.

For example, in the investment dispute between Peter Allard and the government of Barbados, initiated under the 1996 Barbados–Canada BIT, Mr Allard, as a Canadian foreign investor who invested in the acquisition and development of a sanctuary in Barbados, claimed that the state ‘failed to take reasonable and necessary environmental protection measures and, through its organs and agents, has directly contributed to the contamination of the Claimant’s ecotourism site, thereby destroying the value of his investment’.[68] Mr Allard, however, did not persuade the tribunal that his decision to cease running the sanctuary as an ecotourism business derived from environmental degradation allegedly caused by the state.[69]

Interestingly, states have relied on environmental carve-out provisions to justify some governmental measures that could have been harmful to investors. As a defence, states have occasionally argued that purported treaty violations caused by them were in fact measures adopted to comply with those states’ environmental treaty obligations, and therefore would not amount to any treaty violations themselves. In Eco Oro Minerals Corp. v. Republic of Colombia,[70] Eco Oro brought claims against Colombia concerning the measures adopted by Colombia in connection with the páramo ecosystem in the Santurbán highlands that allegedly destroyed the value of Eco Oro’s investments in the country’s mining sector. Colombia contended that there could be no breach of the Canada–Colombia FTA of 2008 since the measures challenged by Eco Oro were taken by the government to protect the environment in accordance with Article 2201(3) of the treaty.[71] The arbitral tribunal, however, found that Colombia was still liable for compensation regardless of the environmental exception. There was a similar outcome in Infinito Gold Ltd. v. Costa Rica,[72] involving the development of a gold mine at Crucitas de Cutris in the economically depressed area of Cutris de San Carlos in northern Costa Rica. As a result of the environmental carve-out in Annex I, Section III(1) of the Canada–Costa Rica BIT of 1998,[73] Costa Rica argued that it could not be held liable for the measures challenged by Infinito Gold because they ‘were adopted to maintain and/or enforce measures aiming at protecting the environment from possible negative effects of open-pit mining’.[74] The tribunal rejected Costa Rica’s view, concluding that, as interpreted in accordance with other provisions, ‘Annex I, Section III(1) is not a carve-out from the BIT’s protections, but rather a reaffirmation of the State’s right to regulate [and it] does not exempt the Respondent from liability for breaches of the substantive protections granted by the BIT.’[75]

The growing focus on ESG and Latin American states’ increased willingness to enact environmental measures and enter into international agreements and coalitions to help combat climate change will likely only lead to a further uptick in both investor–state and commercial arbitrations. In particular, as it relates to the Paris Agreement, Latin American governments and companies have started, and will continue, to undertake efforts to meet the relevant goals set forth therein, including engaging in the transition towards renewable energy.

Latin American countries’ energy transition is likely to originate new investor–state and commercial arbitrations alike. As it relates to investment arbitration, investors in traditional fossil fuels may attempt to challenge state action that imposes ‘increased costs for investments in carbon-intensive industries’,[76] or seek compensation for their inability to operate carbon-based investments as a result of a state’s policy encouraging decarbonisation.[77] In Latam Hydro LLC and CH Mamacocha SRL v. Republic of Peru, an investor–state case arising out of a renewable energy project, two US investors brought an International Centre for Settlement of Investment Disputes (ICSID) arbitration against Peru, contending that the country made promises designed to induce foreign investment in its renewable energy sector, but did not honour these promises and instead caused the ‘financial destruction of a 20-megawatt hydroelectric project near the Mamacocha Lagoon in Arequipa, Peru’ and ‘five (5) related hydroelectric projects upstream of the Lagoon’.[78] While the case remains pending, the investors have claimed that Peru’s purportedly wrongful measures violated their right to be treated fairly and equitably, expropriated the Mamacocha project, and conferred more favourable treatment to other foreign investors.[79] The case will be interesting to watch as a potential future precursor as to how investment tribunals may approach cases regarding renewable energy projects in Latin America.

An increase in commercial arbitrations – which are generally confidential and therefore may be more difficult to track than publicly-disclosed investor–state cases – arising from ESG concerns is also likely, as government measures with respect to the energy transition may affect companies’ regular contractual performance. In such cases, parties may seek to invoke various legal doctrines, such as changed circumstances that make compliance with contractual obligations too burdensome for one of the parties, or force majeure and hardship, to excuse contractual performance in light of regulations that make a business venture more difficult or less profitable than before, although such legal doctrines are generally subject to a heightened standard. More generally, government regulations may squeeze or reduce the financial returns for contractual counterparties or otherwise alter the prevailing economic equilibrium between the parties, which in general may produce a more contentious contractual relationship that is more likely to generate disputes. Drafting contracts properly and with a great deal of care may become even more important in this context. In an attempt to prevent ESG-related arbitrations arising from contractual interpretation, parties should give attention to the language they use in their agreements at the outset and well before any dispute can arise, avoiding as much ambiguity as possible.

Furthermore, Latin American companies’ initiatives toward cleaner energy might ‘impact contractual relationships with governments, third parties (such as suppliers, contractors, and other vendors in the supply chain) as well as workers whose current contractual conditions are likely to change’.[80] Many contracts, for example, contain health, safety, security and environmental provisions, which are frequently used in the energy sector and describe the activities a contracting party should carry out to ensure it will comply with health, safety, security and environmental policies of a certain jurisdiction or company.[81]

Conclusion

Latin America has long been a forum for climate change and environmental disputes. With an increased focus on ESG, including the incorporation of additional rights and obligations through countries’ Constitutions, new legislation and regulations, and international agreements committed to combating climate change and social issues, such disputes are likely to continue and escalate.

In general, this chapter reveals that the recent litigation and arbitration cases involving ESG in Latin America often involve sovereigns and state-owned entities. States and state-owned entities are often defendants in the litigation context, given the obligations they undertake to initiate and oversee climate change and other ESG-related initiatives, and the desire by allegedly aggrieved parties – such as indigenous groups or environmental NGOs – to use litigation to enjoin or enforce certain behaviour, though private parties may also be subject to such ESG-related actions. As it relates to arbitration, arbitration tribunals convened either pursuant to an investment instrument or a commercial agreement may adjudicate ESG claims and have experienced a recent uptick in cases involving some environmental component or environmental counterclaims specifically.

Ari D MacKinnon

Cleary Gottlieb Steen & Hamilton LLP

Ari D MacKinnon is a partner at Cleary Gottlieb in the New York City office. His practice focuses on dispute matters in Latin America with a particular emphasis on international arbitration and corruption issues.

Ari has successfully represented a number of major Latin American oil and gas, energy, infrastructure and pulp and paper companies as well as other clients in disputes in the region. He speaks regularly in Latin America on topics related to arbitration and crisis management. Ari has experience conducting arbitration and corruption-related disputes matters in both English and Spanish.

Ari has been recognised as a banded lawyer for international arbitration by Chambers Latin America, Chambers Global and Chambers USA. Latinvex has named Ari one of ‘Latin America’s Rising Legal Stars’. The Legal 500 has recognised Ari as a ‘Next Generation Partner’ for international arbitration, and for six consecutive years (2017–2022) he has been recognised by Benchmark Litigation and features on their ‘40 & Under Hot List.’

Ari joined Cleary Gottlieb in 2009 and became partner in 2015. He received a JD from New York University School of Law. He received a MA from Middlebury College and a BA from Grinnell College.

Katie L Gonzalez

Cleary Gottlieb Steen & Hamilton LLP

Katie L Gonzalez is an associate at Cleary Gottlieb in the New York City office. Her practice focuses on international litigation and arbitration, with an emphasis on Latin America. Katie has experience representing international and domestic clients (both sovereign and private entities) in international arbitration matters, as well as in state and federal courts.

Katie served on the organising committee of the 2021 New York Arbitration Week (after having served as the organising committee secretary in 2020), which is populated by a small group of senior members of the arbitration community. As an associate, Katie has often been asked to participate in panels regarding her practice, particularly her expertise in Latin America. Katie is an associate member of the Chartered Institute of Arbitrators, and is also a member of ArbitralWomen, Young ICCA and ICC YAAF. Katie is an alternate director of the New York International Arbitration Center (NYIAC) Board of Directors, where she also serves as the co-chair of the Foreign Lawyers Committee and a member of the Programming Committee. Katie is a member of the ICDR Young & International Board and the AAA-ICDR Publications Committee.

Katie joined Cleary Gottlieb in 2017 after graduating from Harvard Law School. She received her BA from Dartmouth College, where she was Phi Beta Kappa.

Gustavo F Vaughn

Cesar Asfor Rocha Advogados

Gustavo F Vaughn is currently a partner at Cesar Asfor Rocha Advogados, in Brazil. Between August 2022 and May 2023, Gustavo was an international lawyer at Cleary Gottlieb in their New York City office. Gustavo joined Cleary Gottlieb in 2022 after securing an LLM degree from Columbia Law School, where he received the Award for Exceptional Performance and Contribution to ARIA. His practice focuses on complex litigation and arbitration.

Gustavo is a member of the Chartered Institute of Arbitrators, alumni adviser of the American Review of International Arbitration, academic coordinator of the Arbitration Channel and co-chair of REAL Academic Council. He is also a member of the Brazilian Arbitration Committee (CBAr), Young ITA and other institutions related to arbitration and civil procedure.


Footnotes

[1] Ari D MacKinnon is a partner and Katie L Gonzalez is an associate at Cleary Gottlieb Steen & Hamilton LLP. Gustavo F Vaughn is a partner at Cesar Asfor Rocha Advogados.

[2] Charles Waine, ‘Ecuador’s new president faces growing ESG challenges’, , 16 April 2021, https://pemedianetwork.com/transition-economist/articles/finance/2021/ecuador-s-new-president-faces-growing-esg-challenges.

[3] ‘Argentina seeks to promote ESG-related issuances’, BNamericas, 15 January 2021, https://www.bnamericas.com/en/news/argentina-seeks-to-promote-esg-related-issuances.

[4] ‘Republic of Peru debuts its Sustainable Bond Framework’, BNP Paribas, 17 December 2021, https://cib.bnpparibas/republic-of-peru-debuts-its-sustainable-bond-framework/.

[5] ‘Brazil’s Unigel to build green hydrogen plant with $120 million investment’, ESG News, 26 July 2022, https://esgnews.com/brazils-unigel-to-build-green-hydrogen-plant-with-120-million-investment/.

[6] ‘IDB Approves $300 Million Loan to Underpin Costa Rica’s Decarbonization Plan’, ESG News, 21 July 2022, https://esgnews.com/idb-approves-300-million-loan-to-underpin-costa-ricas-decarbonization-plan/.

[7] ‘Colombia to Foster Sustainable, Resilient Growth with IDB Support’, IDB News, 17 November 2021, https://esgnews.com/idb-approves-300-million-loan-to-underpin-costa-ricas-decarbonization-plan/.

[8] ‘ESG is generally used ‘to describe criteria or standards by which companies can be measured with respect to a broad range of socially desirable ends.’ Ruti Smithline, Hayley Ichilcik, et al., ‘ESG in Latin America and the Rise of the Social Pillar’, Latin Lawyer, 3 May 2022. Despite its recent boom, the term ‘ESG’ was first attributed to a report released during the Global Compact Leaders Summit in 2004. John Hill, Environmental, Social, and Governance (ESG) Investing: A Balanced Analysis of the Theory and Practice of a Sustainable Portfolio 13 (2020).

[9] ‘Understanding the ‘S’ in ESG’, S&P Global, 24 February 2020, https://www.spglobal.com/en/research-insights/articles/what-is-the-s-in-esg.

[11] ‘CVM Resolution No. 59,’ 22 December 2021, https://conteudo.cvm.gov.br/legislacao/resolucoes/resol059.html. In addition to its Resolution No. 59, the CVM has recently demonstrated that the Brazilian capital markets is focused on advancing the ESG agenda. For example, in the end of 2022 the CVM published Resolution No. 175, which aims to regulate the investment fund industry in Brazil and has relevant provisions addressing ESG concerns (‘CVM Resolution No. 175,’ 28 December 2022, https://conteudo.cvm.gov.br/legislacao/resolucoes/resol175.html). Another example from 2022 is the publication of the thorough study titled A agenda ASG e o mercado de capitais - Uma análise das iniciativas em andamento, os desafios e oportunidades para futuras reflexões da CVM, which brings to light, among other things, how different countries worldwide deal with the disclosure process, including the relevant patterns adopted for disclosing (‘CVM divulga estudo sobre ESG e o mercado de capitais,’ 26 May 2022, https://www.gov.br/cvm/pt-br/assuntos/noticias/cvm-divulga-estudo-sobre-esg-e-o-mercado-de-capitais).

[12] The purpose of the ‘Guidelines is to provide the market with a best practices and standards guide for the issuance of green, social and/or sustainable securities (GSS Securities) aimed to spread international standards and rules to assess eligible assets. Each of the GSS Securities labels is defined according to the benefits obtained by the projects or activities to be funded. Thus, “green” securities are focused on projects or activities with environmental benefits, “social” securities are focused on projects or activities with social benefits, and “sustainable” securities are a combination of both.’ ‘Guidelines for issuance of green, social and sustainable securities in Argentina’, Comisión Nacional de Valores, 2019, https://www.sbfnetwork.org/wp-content/assets/policy-library/50_Argentina_Guidelines_for_issuance_of_social_green_and_sustainable_securities_2019_CNV.pdf.

[13] Ministry of Economy of Argentina, The National Strategy for Sustainable Finance was approved, 8 August 2022, https://www.grantthornton.com.ar/en/insights/articles/national-strategy-for-sustainable-finance/.

[14] Francesca Odell, Jonathan Kolodner, and Lisa Vicens, ‘New US Enforcement Priorities and Their Impact on Latin American Companies’, Latin Lawyer, 10 December 2021.

[15] ‘Who Cares Wins’ 1, United Nations Department of Public Information ed., 2004.

[16] ‘The State of Biodiversity in Latin America and the Caribbean: A Mid-Term Review of Progress Towards the Aichi Biodiversity Targets’, United Nations Environment Programme – UNEP, May 2016.

[17] David Markell and JB Ruhl, ‘An Empirical Assessment of Climate Change in the Courts: A New Jurisprudence or Business as Usual?’, 64 Florida Law Review,15, 27 (2012) (developing definition of ‘climate change litigation’).

[18] ‘Global Climate Litigation Report: 2020 Status Review’ 13, United Nations Environment Programme/Sabin Center for Climate Change Law eds., 2021.

[19] Given the prominence of, and stark increase in, climate change litigation, various organisations have sought to develop databases tracking and analysing such cases involving environmental rights and obligations. For example, Columbia’s Sabin Center for Climate Change Law maintains a comprehensive database of cases related to climate change litigation. See ‘Climate Change Litigation’, Columbia Climate School Sabin Center for Climate Change Law, https://climate.law.columbia.edu/content/climate-change-litigation. The Platform for Climate Litigation in Latin America and the Caribbean, a collaborative project led by the Inter-American Association for Environmental Defense with the support of other Latin American organisations concerned with climate justice in the region, similarly has a database evaluating climate change litigation. See ‘Climate Litigation for a More Just Region’, Climate Litigation Platform for Latin America and the Caribbean, https://litigioclimatico.com/es.

[20] Constitution of the Republic of Peru, Article 2.22.

[21] Ecuador additionally links environmental rights to other rights such as education, health, and freedom. The Ecuador Constitution provides the ‘right to a decent life that ensures health, food and nutrition, clean water, housing, environmental sanitation, education, work, employment, rest and leisure, sports, clothing, social security and other necessary social services.’ Constitution of the Republic of Ecuador, Article 66.2.

[22] Constitution of the Republic of Ecuador, Article 71 (providing that ‘Nature, or Pacha Mama, where life is reproduced and occurs, has the right to integral respect for its existence and for the maintenance and regeneration of its life cycles, structure, functions and evolutionary processes.’).

[23] Constitution of the Federal Republic of Brazil, Article 225.

[24] As of the date of this publication, 24 Latin American countries have signed the Escazú Agreement, of which 13 countries – including Ecuador, Argentina, and Uruguay – have ratified it. These numbers may change in coming years, given the leftist administrations that have recently assumed power in Peru and Colombia, and the October 2022 election in Brazil. Observatory on Principle 10 in Latin America and the Caribbean, United Nations, https://observatoriop10.cepal.org/en/treaties/regional-agreement-access-information-public-participation-and-justice-environmental.

[25] Latin American countries including Peru, Ecuador, Brazil, Argentina, Colombia, Chile, Uruguay, Paraguay, Venezuela, Bolivia, México, Costa Rica, El Salvador, Cuba, Suriname, Guyana and the Dominican Republic have signed the Paris Agreement.

[26] Brazil, Constitutional Action (ADPF) No. 708, Reporting Justice Barroso, Brazilian Supreme Court, 4 July 2022. This case was closed on 19 June 2023.

[27] ‘Global Climate Litigation Report: 2020 Status Review’ 15, United Nations Environment Programme/Sabin Center for Climate Change Law, eds., 2021.

[28] Diego Guzman, ‘In historic ruling Colombian Court protects youth suing the national government for failing to curb deforestation’, Dejusticia, 5 April 2018, https://www.dejusticia.org/en/en-fallo-historico-corte-suprema-concede-tutela-de-cambio-climatico-y-generaciones-futuras/.

[29] The original Spanish language reads as follows: ‘un perjuicio inminente y grave para los niños, adolescentes y adultos que acuden a esta acción, y en general, a todos los habitantes del territorio nacional, tanto para las generaciones presentes como las futuras, pues desboca incontroladamente la emisión de dióxido de carbono (CO2) hacia la atmosfera, produciendo el efecto invernadero, el cual transforma y fragmenta ecosistemas, alterando el recurso hídrico y con ello, el abastecimiento de agua de los centros poblados y degradación del suelo.’ Supreme Court (CSJ), 5 April 2018, Settlement No. 11001-22-03-000-2018-00319-01 (Colombia).

[30] The original Spanish language reads as follows: ‘derecho a vivir en un ambiente sano y ecológicamente equilibrado; desatendiendo con la actividad contaminante, su derecho a la salud al no promover el uso de tecnologías ambientalmente limpias y de energías no contaminantes y de bajo impacto.’ Case No. 0105168892, Multicompetent Chamber of the Provincial Court of Justice of Sucumbios – Ecuador, 29 July 2021.

[31] As the plaintiffs stated in their complaint, ‘in this case, our right to an adequate and balanced environment to live our lives has been violated.’ The Global Climate Change Litigation Database, http://climatecasechart.com/non-us-case/alvarez-et-al-v-peru/.

[32] Case No. 0801427733, Court of first instance – Ecuador, 15 July 2021.

[33] Remarks by Deputy Attorney General Lisa O Monaco, Keynote Address at ABA’s 36th National Institute on White Collar Crime, Department of Justice News, 28 October 2021, https://www.justice.gov/opa/speech/deputy-attorney-general-lisa-o-monaco-gives-keynote-address-abas-36th-national-institute.

[34] Press Release, Justice Department Launches Comprehensive Environmental Justice Strategy, 5 May 2022, https://www.justice.gov/opa/pr/justice-department-launches-comprehensive-environmental-justice-strategy. Commemorating the one-year anniversary of the Justice Department’s Comprehensive Environmental Justice Strategy, on 5 May 2023 the DOJ issued a fact sheet highlighting its its work advancing environmental justice, which can be accessed at https://www.justice.gov/opa/pr/justice-department-looks-back-first-year-comprehensive-environmental-justice-enforcement.

[35] See the Memorandum for Department of Justice Employees on the Comprehensive Environmental Justice Enforcement Strategy at https://www.justice.gov/asg/page/file/1499286/download.

[36] See Press Release, ‘Two Financial Asset Managers Charged in Alleged $1.2 Billion Venezuelan Money Laundering Scheme’, 12 July 2022, https://www.justice.gov/opa/pr/two-financial-asset-managers-charged-alleged-12-billion-venezuelan-money-laundering-scheme.

[37] Press Release, ‘Two Financial Asset Managers Charged in Alleged $1.2 Billion Venezuelan Money Laundering Scheme’, 12 July 2022, https://www.justice.gov/opa/pr/two-financial-asset-managers-charged-alleged-12-billion-venezuelan-money-laundering-scheme.

[38] Press Release, ‘Brazil reinforces public safety and fighting against corruption’, 19 September 2022.

[39] Jonathan S Kolodner, Lisa Vicens and Andres Felipe Saenz, ‘New Anticorruption Decree Modifies Regulation of Brazilian Clean Companies Act’, 22 July 2022.

[40] Press Release, US Securities and Exchange Commission, ‘SEC Charges Brazilian Mining Company with Misleading Investors about Safety Prior to Deadly Dam Collapse’, 28 April 2022, https://www.sec.gov/news/press-release/2022-72. Other Latin American companies may be future targets for action by the SEC under its recently created Climate and ESG Task Force in the Division of Enforcement, which will develop initiatives to proactively identify ESG-related misconduct. Press Release, US Securities and Exchange Commission, ‘SEC Announces Enforcement Task Force Focused on Climate and ESG Issues’, 4 March 2021, https://www.sec.gov/news/press-release/2021-42.

[41] Although not related to a corporation based in a Latin American country, in May 2022 the SEC settled with BNY Mellon Investment Adviser for US$1.5 million in relation to allegations that BNY misstated and omitted relevant facts about ESG considerations in making investment decisions for mutual funds it managed. Press Release, ‘SEC Charges BNY Mellon Investment Adviser for Misstatements and Omissions Concerning ESG Considerations’, 23 May 2022, https://www.sec.gov/news/press-release/2022-86.

[42] ‘Brazilian Mining Company to Pay $55.9 Million to Settle Charges Related to Misleading Disclosures Prior to Deadly Dam Collapse,’ 28 March 2023, https://www.sec.gov/news/press-release/2023-63.

[43] The International Bar Association (IBA) has recommended the Permanent Court of Arbitration (PCA), for instance, ‘as a preferred forum for environmental and climate change-related disputes.’ IBA – Climate Change Justice and Human Rights Task Force Report, ‘Achieving Justice and Human Rights in an Era of Climate Disruption’ 144, July 2014. Furthermore, it has been said that ‘[i]nternational arbitration could potentially make a difference for climate change through procedural innovations, along with development of entirely new instruments for green growth supported by international arbitration’. Annette Magnusson, ‘New Arbitration Frontiers: Climate Change’, in Jean Engelmayer Kalicki & Mohamed Abdel Raouf (eds), Evolution and Adaptation: The Future of International Arbitration 1010, 1029, ICCA Congress Series (2019).

[44] Moritz Keller, Sunny Kapoor, et al., ‘Climate Change Litigation: The Types of Disputes, the Legal Challenges and the Role of Arbitration’, in Jörg Risse, Guenter Pickrahn, et al. (eds), German Arbitration Journal 13, 18 (2022). See Lucy Greenwood, ‘The Canary Is Dead: Arbitration and Climate Change’, in Maxi Scherer (ed), Journal of International Arbitration 309, 325, 2021 (highlighting that ‘[s]uch expertise could include knowledge of emissions trading systems, complex engineering experience in relation to renewables technology, as well as a broad knowledge base of climate change policy and legal frameworks. Looking ahead, it is imperative that arbitrators educate themselves on climate change issues to better serve the wider needs of parties.’).

[45] ICC Commission Report, ‘Resolving Climate Change Related Disputes through Arbitration and ADR’, 17 November 2019.

[46] See Amanda Lees, Wilson Antoon, Erin Eckhoff and Jack McNally, ‘Suitability of ISDS for Societal Challenges’, Global Arbitration Review, 14 January 2022, https://globalarbitrationreview.com/guide/the-guide-investment-treaty-protection-and-enforcement/first-edition/article/suitability-of-isds-societal-challenges.

[47] Catherine Higham and Joana Setzer, ‘“Investor-State Dispute Settlement” as a new avenue for climate change litigation’, The London School of Economics and Political Science – Grantham Research Institute on Climate Change and the Environment, 2 June 2021, https://www.lse.ac.uk/granthaminstitute/news/investor-state-dispute-settlement-as-a-new-avenue-for-climate-change-litigation/.

[48] Agreement Between Japan and the Republic of Peru for the Promotion, Protection and Liberalisation of Investment, 21 November 2008, https://investmentpolicy.unctad.org/international-investment-agreements/treaty-files/1733/download.

[49] Agreement for the Reciprocal Promotion and Protection of Investments Between the Argentine Republic and the United Arab Emirates, 16 April 2018, https://investmentpolicy.unctad.org/international-investment-agreements/treaty-files/5761/download. Similar language is included in Article 14.16 of the United States–Mexico–Canada Agreement (USMCA), which provides that ‘[n]othing in this Chapter shall be construed to prevent a Party from adopting, maintaining, or enforcing any measure otherwise consistent with this Chapter that it considers appropriate to ensure that investment activity in its territory is undertaken in a manner sensitive to environmental, health, safety, or other regulatory objectives.’

[50] Moritz Keller, Sunny Kapoor, et al., ‘Climate Change Litigation: The Types of Disputes, the Legal Challenges and the Role of Arbitration’, in Jörg Risse, Guenter Pickrahn, et al. (eds), German Arbitration Journal 13, 19 (2022).

[51] Perenco Ecuador Ltd. v. Republic of Ecuador and Empresa Estatal Petróleos del Ecuador (Petroecuador), ICSID Case No. ARB/08/6, Decision on Jurisdiction, at 3, Section 15.

[52] Petroecuador, ICSID Case No. ARB/08/6, Interim Decision on the Environmental Counterclaim, at 7, Section 34.

[53] Petroecuador, ICSID Case No. ARB/08/6, Interim Decision on the Environmental Counterclaim, at 7, Section 34. See also Daniela Paez-Salgado and Natalia Zuleta, ‘Perenco v Ecuador: An Example of a “Lengthy, Complex, Multi-faceted, Hard Fought and Very Expensive” Investment Arbitration?’ Kluwer Arbitration Blog, 14 November 2019, http://arbitrationblog.kluwerarbitration.com/2019/11/14/perenco-v-ecuador-an-example-of-a-lengthy-complex-multi-faceted-hard-fought-and-very-expensive-investment-arbitration/.

[54] Petroecuador, ICSID Case No. ARB/08/6, Interim Decision on the Environmental Counterclaim, at 112, Section 353.

[55] Ecuador Constitution of 2008, Article 11(3) (stating that the ‘rights and guarantees set forth in the Constitution and in international human rights instruments shall be directly and immediately enforced by and before any civil, administrative or judicial servant, either by virtue of their office or at the request of the party’).

[56] Burlington Resources Inc. v. Republic of Ecuador, ICSID Case No. ARB/08/5 (formerly Burlington Resources Inc. and others v. Republic of Ecuador and Empresa Estatal Petróleos del Ecuador (PetroEcuador)).

[57] Urbaser S.A. and Consorcio de Aguas Bilbao Bizkaia, Bilbao Biskaia Ur Partzuergoa v. The Argentine Republic, ICSID Case No. ARB/07/26.

[58] Patrick Abel, ‘Counterclaims Based on International Human Rights Obligations of Investors in International Investment Arbitration’ 61, 62, Brill Open Law (2018).

[59] Urbaser S.A. and Consorcio de Aguas Bilbao Bizkaia, Bilbao Biskaia Ur Partzuergoa v. The Argentine Republic, ICSID Case No. ARB/07/26, Award, at 314, Section 1181.

[60] David R. Aven and Others v. Republic of Costa Rica, ICSID Case No. UNCT/15/3.

[61] David R. Aven and Others v. Republic of Costa Rica, ICSID Case No. UNCT/15/3, Award at 219, Section 698.

[62] David R. Aven and Others v. Republic of Costa Rica, ICSID Case No. UNCT/15/3, Award at 232, Section 745.

[63] Spyridon Roussalis v. Romania, ICSID Case No. ARB/06/1.

[65] Spyridon Roussalis v. Romania, ICSID Case No. ARB/06/1, Award, at 122, Section 747.

[66] Spyridon Roussalis v. Romania, ICSID Case No. ARB/06/1, Award, at 142, Section 871.

[67] Spyridon Roussalis v. Romania, ICSID Case No. ARB/06/1, Declaration.

[68] Peter A Allard v. The Government of Barbados, PCA Case No. 2012-06, Award, at 1, Section 3.

[69] Peter A Allard v. The Government of Barbados, PCA Case No. 2012-06, Award, at 36, Section 139 (concluding that ‘the Tribunal finds that the Claimant has failed to establish that his decision to cease operating the Sanctuary as an ecotourism attraction arose out of any relevant degradation of the environment at the Sanctuary.’), 46, Section 166 (concluding that, ‘even if it [the tribunal] had found that there was a degradation of the environment at the Sanctuary during the Relevant Period (which it did not), it would not have been persuaded that such degradation was caused by any actions or inactions of Barbados.’).

[70] Eco Oro Minerals Corp. v. Republic of Colombia, ICSID Case No. ARB/16/41.

[71] The environmental carve-out in Article 2201(3) contains the following language: ‘3. For the purposes of Chapter Eight (Investment), subject to the requirement that such measures are not applied in a manner that constitute arbitrary or unjustifiable discrimination between investment or between investors, or a disguised restriction on international trade or investment, nothing in this Agreement shall be construed to prevent a Party from adopting or enforcing measures necessary: a. To protect human, animal or plant life or health, which the Parties understand to include environmental measures necessary to protect human, animal or plant life and health; b. To ensure compliance with laws and regulations that are not inconsistent with this Agreement; or c. For the conservation of living or non-living exhaustible natural resources.’ Eco Oro Minerals Corp. v. Republic of Colombia, ICSID Case No. ARB/16/41.

[72] Infinito Gold Ltd. v. Costa Rica, ICSID Case No. ARB/14/5.

[73] Annex I, Section III(1), contains the following language: ‘Nothing in this Agreement shall be construed to prevent a Contracting Party from adopting, maintaining or enforcing any measure otherwise consistent with this Agreement that it considers appropriate to ensure that investment activity in its territory is undertaken in a manner sensitive to environmental concerns.’ Infinito Gold Ltd. v. Costa Rica, ICSID Case No. ARB/14/5.

[74] Infinito Gold Ltd. v. Costa Rica, ICSID Case No. ARB/14/5, Award at 222, Section 762.

[75] Infinito Gold Ltd. v. Costa Rica, ICSID Case No. ARB/14/5, Award at 227, Section 781.

[76] Daniela Páez-Salgado and Emily Westphalen, Climate Change and International Arbitration in Latin America, in Gloria Maria Alvarez et al. (eds), International Arbitration in Latin America: Energy and Natural Resources Disputes 447, 489 (2021).

[77] This has most recently already occurred in the Netherlands, which is currently facing two ICSID arbitrations under the Energy Charter Treaty (ECT) following the country’s adoption of a law that prohibits the use of coal in the production of electricity. See Uniper SE, Uniper Benelux Holding B.V. and Uniper Benelux N.V. v. Kingdom of the Netherlands (ICSID Case No. ARB/21/22); RWE AG and RWE Eemshaven Holding II BV v. Kingdom of the Netherlands (ICSID Case No. ARB/21/4). Investor-state cases relating to the energy transition and other ESG-related disputes may be particularly ripe for interest by third parties, including NGOs and other environmental groups and associations, who attempt to participate in the proceedings through the amicus curiae brief process. For example, the International Institute for Sustainable Development of Fundación Pachamama submitted an amicus brief in Chevron Corporation and Texaco Petroleum Corporation v. Ecuador (II), stating that the tribunal should dismiss this investment arbitration on the basis of lack of jurisdiction and lack of justiciability. PCA Case No. 2009-23, Submission of Amici, 5 November 2010, at 38, Section 7.2.

[78] Latam Hydro LLC and CH Mamacocha S.R.L. v. Republic of Peru, ICSID Case No. ARB/19/28, Claimants’ Memorial, at 1, Section 1.

[79] Latam Hydro LLC and CH Mamacocha S.R.L. v. Republic of Peru, ICSID Case No. ARB/19/28, Claimants’ Memorial, at 124, Section 266.

[80] Daniela Páez-Salgado & Emily Westphalen, Climate Change and International Arbitration in Latin America, in Gloria Maria Alvarez et al. (eds), International Arbitration in Latin America: Energy and Natural Resources Disputes 447, 488 (2021).

[81] See, for example, BP Wind Energy’s HSSE Plan for the Mohave County Wind Farm Project, https://www.usbr.gov/lc/region/g2000/envdocs/MohaveCountyWindFarm/Plan_of_Development/Attachment%204%20-%20HSSE%20Plan_508.pdf at Clause 2.1 (stating that ‘Health and Safety Statement. All Project employees, Contractors and visitors are essential to this team effort and must be committed to conduct themselves in a safe and responsible manner. Every employee and Contractor has the responsibility to follow established safety, health and environmental requirements as well as enforcing accident prevention procedures within their function of responsibility. If you should determine that a situation will cause harm to personnel, loss of property or damage to the environment you are authorised and required to stop the work until the safety concerns have been adequately addressed.’).

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