Although the Pulp Mills case was heard in 2010, there is a likelihood that a second case will be brought. It strengthens the case for MNCs to assume a role in the advancement of international environmental law and Business and Human Rights

1. The Significance of the ICJ decision
in Pulp Mills on the River Uruguay
for Multinational Corporations
Larissa Prevett LL.B, LL.M
YOUR HEADING
HERE
10.05.2011

2. About the Case:
• “Clearly the most important case on
international environmental law decided by
any international court so far.” (Prof. Alan
Boyle, 2010)
• Strengthens the case for multinational
corporations (“MNCs”) to assume a role in the
advancement of international environmental
law (“IEL”) and Business & Human Rights

3. Background to the Dispute:
• By 2005 - Uruguay set to host two major
investments for commercial eucalyptus
plantations & cellulose production (ENCE &
Botnia)
• Uruguay’s manufacturing sector is
underdeveloped & Botnia’s $1.2bn investment
was the largest FDI in its history
• Paper pulp mills to be built on the River Uruguay
• Cellulose production – water & chemical
intensive process; raises environmental concerns
for those affected

4. River Uruguay: a shared resource

5. The River Uruguay Statute
• International treaty between Uruguay and
Argentina signed in 1975
• Governs use of shared resource
– Procedural & substantive obligations
– Jointly intended to ensure the “optimum and rational
utilization of the River Uruguay” (art 1)
• 3 important points:
– Art. 60 gives the ICJ jurisdiction to resolve disputes
– Art. 7 establishes obligation to notify CARU & other
side of plans for exploitation of the shared resource
– Substantive obligations on environmental protection

6. Relevant substantive obligations:
• Art. 35
– The obligation to ensure that the management of the
soil and woodland does not impair the regime of the
river or the quality of its waters
• Art. 36
– The obligation to co-ordinate measures to avoid
changes in the ecological balance
• Art. 41
– The obligation to prevent pollution and preserve the
aquatic environment

7. The dispute:
• Argentina invoked art 60 and instigated proceedings against
Uruguay
– Procedural breach – failure to notify
– Substantive breach of environmental protection clauses made
construction & production illegal
• “Not simply a case about a river treaty” (Prof. Alan Boyle,
2010)
• Requirement of general international law to carry out
effective environmental impact assessments where there is
potential trans-boundary harm
• The plants, and the decision authorising them, were alleged
not the comply with international standards regarding
effluent emission from pulp mills

8. Timeline
•
•
•
•
•
•
•
•
•
2005 – Construction of Botnia plant began
May 2006: Argentina files an application with the ICJ
May 2006: Argentina Request for Indication of Provisional Measures (rejected)
October 2006: World Bank Study published stating project meets all relevant
IEL standards
November 2006: Uruguay Request for Indication of Provisional Measures
(rejected)
2007 – Production of cellulose at Botnia plant began
2008 – First 1million tonnes of cellulose produced by Botnia
April 2010: Final Judgment
October 2013: Pulp Mills II??
– Botnia seeking to build a second mill; feasibility under consideration
– Argentina threatening retaliation

9. The decision: procedure
• Despite procedural and substantive obligations jointly
required to comply with art. 1 of the 1975 Statute,
each was to be considered separately by the Court
• 13:1 Decided that Uruguay had committed a
procedural breach under art 7
– “the notification to Argentina of the environmental impact
assessments for …mills did not take place through CARU,
and that Uruguay only transmitted those assessments to
Argentina after having issued the initial environmental
authorizations for the two mills in question” (para. 121)
– The failure to notify did not amount to the illegality of the
construction

10. The decision: substantive
• 11:3 Decided that Uruguay had not infringed substantive
obligations relating to environmental protection under the
1975 Statute
– Argentina unable to demonstrate impact of Uruguay’s major
eucalyptus planting operations on the river waters (para 180)
– Argentina unable to demonstrate that Uruguay refused to
engage with CARU on co-ordinating measures (para 189)
– Re art 41, “there is no conclusive evidence in the record to show
that Uruguay has not acted with the requisite degree of due
diligence or that the discharges of effluent from the Orion
(Botnia) mill have had deleterious effects or caused harm to
living resources or to the quality of the water or the ecological
balance of the river since it started its operations in November
2007” (para 265)

11. The court confirmed..
• Decision largely consistent with precedent
– No forum shopping / letting international treaty
obligations in the back door
– The obligation of prevention is about due diligence
not outcome
– Requirements of due diligence:
• “adoption of appropriate rules and measures” (para 197)
• “a certain level of vigilance in their enforcement”
• “the exercise of administrative control applicable to public
and private operators”
• “careful consideration of the technology to be used” (para
223)
• EIA and notification

12. The judgment’s significance:
• reconciles equitable use, protection of the
environment and sustainable development
• treats EIA as a distinct and freestanding trans
boundary obligation in international law
• left open issue of whether ICJ has the
competence to assess the adequacy of a trans
boundary EIA
• controversial question of whether the court
should have appointed third party experts and
whether it is the right forum to resolve this kind
of dispute

13. Above all..
• Decision was significant for investors – any other decision would have sent
the wrong signal
–
–
–
–
Investors had fully collaborated with host’s EIA process
Investors voluntarily adhered to EU “BAT” standards and effluent guidelines
Project was both World Bank and IMF approved
Declaring this investment illegal would have discouraged host countries from
holding MNCs accountable and MNCs from acting responsibly
• Raises the point that:
– FDI magnifies the potential for environmental damage on a global scale; BUT
– corporations are also a source of technical innovation with capacity to:
• provide solutions to environmental challenges; and
• disseminate environmentally friendly technologies and management practices.

14. Interesting observations:
• Botnia’s investment behaviour
– pivotal role in Uruguay’s favourable result
– a template for responsible investment?
• Scope for MNCs to contribute to IEL through
their investments in less developed countries
(“LDCs”)

15. Regulatory gap:
• LDCs compete for FDI and leads to a lowering
of standards on the environment
• Lack of multilateral agreement in area of
international investment
– bilateral investment treaties (“BITs”) are a main
source of regulation and as a rule overlook the
environment
• Sources of international regulation for MNCs
are voluntary

16. Concluding thoughts:
• There is scope for MNCs to advance IEL & host country standards,
but soft law instruments and initiative are usually insufficient
• MNCs are tweaking strategy to maintain competitiveness in a
changing environment but only generally to the minimum level
required
• Increased reference to the environment in BITs is positive
– waiting for customary law to develop is not enough;
– need to cross-reference IEL standards in BITs and prevent investors
from undermining host countries in individual investment contracts
• As with Ruggie’s Guiding Principles on Business & Human Rights,
the role of States in requiring MNCs to adhere to international
standards in their global operations is indispensable and this role
can in part be fulfilled through more effective BIT negotiations.

17. www.clt-envirolaw.com