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Anuradha R. V.
CEC and the FTC have been reported to have little contact (Hufbauer and Schott 2005, 158). The result has been the treatment of environmental issues as subsidiary to investor-related concerns. The prospect of investor-state arbitration regarding environmental measures (often referred to as “regulatory takings” in investment literature) could be a potential hurdle in the implementation of environmental provisions under a PTA. A study by the United Nations Commission on Trade and Development (UNCTAD) finds that it could result in a “regulatory chill” because concern about liability exposure might lead host countries to restrict the ambit of or soften a necessary regulation (UNCTAD 2005; see also Cosbey et al. 2004). Some recent PTAs, such as the U.S.–Singapore agreement, have attempted to address this concern through side letters dealing with the interpretation of “expropriation” and specifying that, except in “rare” circumstances, nondiscriminatory regulatory measures undertaken for “public welfare benefits,” including “environment,” will not constitute expropriation. How such “rare” circumstances would be interpreted in an actual dispute has yet to be tested. Hard- and Soft-Law Approaches to Environmental Provisions Although it is perhaps too early to assess the implementation of environmental provisions and their effect on multilateral relations, it is useful to examine in greater detail the nature of environmental provisions in PTAs and the basis for their enforcement. In this section, we examine both legally binding (“hard-law”) and nonbinding (“soft-law”) provisions in PTAs; various approaches to resolution of disputes concerning environmental provisions; and the effect of the chosen approach on environmental policy in members of the PTA. Theoretically, legally binding provisions could be expected to be more effective than provisions that are expressed in nonbinding language. In the context of international relations, legally binding language in an agreement also provides insights into the political will and intent of parties to be bound by such obligations. At the same time, nonbinding provisions do not necessarily indicate a lack of legal intent to implement the provisions, and they often create significant pathways for dialogue and assessment to enable implementation. Moreover, the implementation and impact of such provisions do not solely depend on the legally binding or nonbinding language in which the provisions are formulated; preexisting conditions and the availability of adequate financial and technical assistance are also important factors.
The Dynamics of Binding and Nonbinding Provisions on Environment The U.S., Canadian, and EU approaches to environmental provisions in PTAs represent a blend of binding obligations and nonbinding principles of intent and cooperation. A key area covered by these provisions is domestic environmental policy in the trading partners. This is a sensitive subject for most countries because international agreements rarely make incursions into domestic policy space. U.S. and EU PTAs refer to the obligation of a party to ensure adherence to “high levels of environment protection” in its domestic law and policy, but this obligation is often accompanied by an explicit recognition of the right of parties to establish their “own levels of environmental protection and environment development policies.”24 This language seems to create a tenuous balance between “high standards” and sovereign rights. The approach using binding legal obligations appears to create some flexibility for parties while holding them to “high” standards, by allowing them to determine their “own level of protection.” Because the environmental obligations are broadly worded, scrutiny of specific environmental measures in a country under these provisions would have to be very case specific. None of the provisions has as yet led to any dispute resolution situation. Hence, to date, there is no jurisprudence on, for instance, the exact nature of standards that would be identified as “high,” or on whether a particular environmental measure seeks to encourage trade by “lowering levels” of environmental protection, or on whether the resulting trade in goods and services is supportive of the environment. U.S. PTAs contain provisions referring to the “right of each party to retain discretion with respect to investigatory, prosecutorial, regulatory, and compliance matters and to make decisions regarding the allocation of resources to enforcement with respect to other environmental matters determined to have higher priorities.”25 How this provision is interpreted will need to be examined through the development of case law. It is significant that this discretion is not unfettered; it is circumscribed by statements that the exercise of discretion is to be “reasonable” or that the exercise of discretion is to be based on “a bona fide decision regarding allocation of resources.” The standards for determining “reasonable,” and the factors in considering whether a decision is “bona fide,” have yet to evolve through jurisprudence. U.S. PTAs also typically oblige a party to ensure the availability of judicial, quasi-judicial, or administrative proceedings that are fair, equitable, and transparent and to provide for appropriate administrative and procedural