An analysis of the regulatory chill hypothesis: environmental protection in international investment law

The goal of this thesis has been to find out whether ISDS and international investment law exert a chilling effect on more stringent environmental standards at the domestic level. Due to the lack of consistent empirical and statistical evidence uncovered during the analysis, this thesis largely dismisses the regulatory chill hypothesis. However, two exceptions are identified: first, there is evidence of the efforts made by domestic industrial groups and trade unions to prevent the implementation of stricter environmental standards; second, it has become apparent that unfounded beliefs, e.g. about ISDS, held by lawmakers and regulators can play an important role in chilling stricter environmental standards. For these reasons, a new and narrower definition of the regulatory chill phenomenon has been proposed, one that only encompasses those instances in which lawmakers, governments and government agencies refrain from adopting the laws and regulations that they deem the most appropriate because they believe that doing so would lead to adverse consequences at the international trade and investment level, despite a lack of consistent and robust evidence supporting their concerns. The second part of this thesis focusses on what could be done in international economic law to promote environmentally friendly FDI, while preventing the few instances in which regulatory chill may take place due to ill-founded beliefs held by lawmakers and regulators. Following an analysis that highlights the paramount role played by public participation and responsive institutions to achieve an appropriate level of environmental protection, this study ends with a proposal that recommends the adoption of a clause within IIAs that makes pre-investment environmental screening mandatory and free from ISDS oversight.