This paper aims to look at the intricate link between foreign investment and sustainable development stressing upon its importance for all, the home and host states, the foreign investors as well as all other stakeholders in the ecological paradigm including the human beings, animals, flora and fauna. In particular, the paper will focus on the position of Pakistan as regards the international developments in this arena and the trend towards gradual convergence of the two disciplines which is seriously missing from the overall policy objectives of Pakistan when devising foreign investment policies or while drafting their investment treaties. It will end by discussing why now is the ideal time and opportunity for Pakistan to adopt and embrace this growing international trend of convergence of International Environment with International Investment Law.

1. Pakistan’s Opportunity to Strike the Balance
Ms. Nida Mahmood
Investment Law Consultant
LL.B (Hons), LL.M in Law & Development (London)

2. Tracing the Link
 There is an inextricable link between International
Environment and International Investment Law
Agenda 21 (United Nations)
‘Investment is critical to the ability of developing
countries to achieve needed economic growth to improve
the welfare of their populations and to meet their basic
needs in a sustainable manner… sustainable
development requires increased investment for which
domestic and external financial resources are needed’.

3.  G20 Heads of State (Pittsburgh 2009)
‘We share the overarching goal to promote a
broader prosperity for our people through
balanced growth within and across nations,
through coherent economic, social and
environmental strategies…’
‘We will work together to ensure that our fiscal,
monetary, trade and structural policies are
collectively consistent with more sustainable and
balanced trajectories of growth’.

4.  Gradual Convergence of the two fields i.e. sustainable
development provisions increasingly making in-roads
into IIA Regime
 Modern BITs, Model Treaties and FTAs endeavour to
incorporate more balanced provisions.
 E.g. Spain-Libya BIT 2009, Australia-Korea FTA 2014
2014 Canadian BITs etc
 Some even require the host States to not lower their
environmental, health and safety standards to attract
investment etc.
 Preserve genuine and non-discriminatory regulatory
powers of host States.

5.  UNCTAD Issues Note on Recent Trends in IIAs and
ISDS (Feb 2015) stated that,
11 out of 13 agreements concluded in 2014
alone contained the general exceptions on
protection of human, animal or plant life or
health or the conservation of exhaustible
natural resources.

6. SADC Model BIT – A Landmark
Development
 Makes it a positive requirement upon investors and
their investments to comply with environmental and
social assessment screening criteria and processes
applicable to them.
 Requires the investors & host State to adopt
precautionary approach.
 Lays down requirement of maintaining environmental
management and improvement systems as per nature
and size of the investment.

7. Judicial Recognition of Convergence
 Approach of Foreign Arbitral forums softening
1. Methanex Corporation v USA
Rejected some of the findings in the earlier infamous case of
Metalclad v United Mexican States in which regulatory
measures for environment were held to be exproriation and
hence compensable.
2. Feldman v Mexico
‘Govts must be free to act in broader public interest through
protection of environment,…’

8. The Benefits of Convergence
 More potent impetus to environment and sustainable
development concerns
 IIA developed much earlier than nascent IEL
 Scores of investment and finance involved has led to
faster development of norms and laws as well as
dispute resolution principles that are binding

9. Pakistan & Environmental Laws – A
Brief Overview
 Approx 90 International Agreements (ETRI website)
 Constitution of Pakistan and supporting Case Law
(See Art 9, 14, 38 and 184(3) of Const. See also Shehla Zia v Wapda,
PLD, 1994, SC, 693; see also the PIL especially recent examples
including canal widening case and signal free corridor case and the
like)
 Pakistan Environment Protection Act (PEPA) 1997
 Environmental Protection Agencies (EPAs)

10. Pakistan – Efforts and Responses
 Expressed commitment to MDG Goal 7 (ensuring
environmental sustainability)
 Believes in Sustainable Development (Pak Eco Survey
2013-14)
 Implemented various policies which are by product of
National Environment Action Programme (NEAP)
 National Environment Policy, Air & Water Quality Monitoring,
Clean Drinking Water for all etc…
 Important Programmes at Federal Level (2013-14)
 Est of National Multilateral Secretariat, the Clean Development
Mechanism Cell, the Centre for Sustainable Organization etc

11. Pakistan - Apparent Focus
 Air and Water Quality, Sanitation,
 Solid Waste Management,
 Promotion of Green Businesses, (clean/alternative energy production
etc)
 Protection of Ecosystems,
 Disaster Management and the like.
In short, focus is very environment law centric and in
that, it is very narrow, non-comprehensive and non
coherent!
Does not take a holistic approach or an inter-
disciplinary approach!

12. Q. Why is this narrow approach not
sufficient?
 Environment really is at the base of all development and all
our actions have a direct bearing/impact on it.
 Till such time it is given a separatist treatment and not
entwined in our web of life, due response will not be
coming from our end!
 2014 Yale University’s EPI ranks Pakistan at 148th place out
of 178 countries in its environmental performance.
 Developing countries like Pakistan are especially
vulnerable to environmental disasters and climate change

13.  Back to back floods of 2010, 11 and 13
 Droughts
 2008 cyclones in Karachi/Gawader coasts
 Melting glaciers
 Landslides
 Health impacts especially on children
 Reduced agricultural productivity
 Loss of biodiversity, infertility of livestock due to heat
stress etc
 ‘Poverty-Environmental Degradation-Poverty’ nexus
 Rising Population
 Impact of FDI and large scale investment on
environment + Regulatory Powers of host State

14. Estimated Costs
 Pak Eco Survey 2013-14
Rs 365 Billion every year of which:
 Rs 112 Billion = inadequate water supple, sanitation &
hygiene
 Rs 70 Billion = agricultural soil degradation
 Rs 67 Billion = indoor pollution
 Rs 65 Billion = urban air pollution
 Rs 45 Billion = lead exposure
 Rs 6 Billion = land degradation & deforestation
 Some experts suggest costs may have increased
beyond Rs 450 Billion per year!

15.  Scale of damage/costs vis a vis IEL and IIA nexus.
 Where investment can play a role in positive
sustainable development of economies, it can also
have a flip side and leave a negative impact on the
environment:
 Large scale investment, concessions and exploration
projects known to have adverse impacts on environment
 Shrimp turtle case, metalclad case under NAFTA
 Big scale companies have the power to cause a big scale
damage and affect in areas where they operate
 Problem: expansive rights under IIA regime!

16. Traditional IIA Regime
 Most Favoured Nation Rights
 National Treatment
 Fair and Equitable Treatment
 Full Protection & Security
 Indirect Expropriation
 Umbrella Clauses
 Stabilization Clauses
Blanket Protections + Investor-State Dispute Resolution
actually made it more favourable to do business as a
foreign investor in one’s own country as opposed to as
its citizen (reverse discrimination)

17. (Alvaro J de Regil quoting John Ruggie)
‘Companies can take States hostage and force them
to binding international arbitration, including for alleged
damages resulting from implementation of legislation to improve
domestic social and environmental standards’.
 There is an ever growing number of cases where companies
forced States to compensate them for trying to carry out their
duty to protect society.
 John Ruggie (UN Special Representative on Business and Human
Rights) mentions the case of a European mining company
challenging South Africa’s black economic empowerment laws.
 Metalclad case:
A U.S. waste management company successfully forced Mexico’s
federal government to compensate it –because a municipality
denied Metalclad the license to open a toxic waste management
site

18.  Hence, no longer advisable to take a monistic
approach and deal with environmental challenges in
isolation.
 An overall paradigm shift is required in the overall
legal structure and policies of the country wherein
environment is set as the new ‘grundnorm’ upon
which all institutions are built and development is
carried out.
 If BITs and investment agreements are devoid of
environmental considerations and margins, then a
clash and conflict is likely to result which will
undermine the environmental regime.

19. Pakistan – Current BIT Regime
 Signatory to some 48 BITs almost all of which comply
with the traditional model and structure of BITs.
 Exceptions:
 Pakistan-Turkey BIT 2012
 Revised BIT with Germany 2009
 Pakistan-China FTA 2006.

20. Pakistan - Impending Developments
 Reviewing and Revising its existing BITs
 Working on its own template of BIT (Model BIT)
However:
Focus of these upcoming developments also seem to
be very narrow and non-holistic.
The main concern of authorities appears to be the
reform of the Investor-State Dispute Resolution
provisions.

21. Pakistan’s Opportunity
 Mere focus on reform of ISDS only half the battle won!
 To maintain regulatory powers of host State what is
needed is to make the BITs overall less lopsided and
more balanced.
 Efforts are needed to be made in a more inter-
disciplinary and inter-dependent way.
 What better time than now when Pakistan is already in
process of renegotiating, reviewing and developing its
own Model BIT!

22. Thank you!
 School of Law, Punjab Bar Council and fellow
colleagues.
For feedback and comments:
nidamahmood@yahoo.com