Sustainable development is no longer a marginal policy reference in international investment law. It appears in investment policy instruments, model agreements and a growing number of new-generation international investment agreements. Yet this textual and policy movement has not produced an equivalent change in investor-State dispute settlement. This article examines the gap between the normative incorporation of sustainable development and its limited use in arbitral reasoning. The analysis combines doctrinal legal research, comparative examination of treaty practice and selected case studies, including Clayton/Bilcon v. Canada, Urbaser v. Argentina and Eco Oro v. Colombia. It also uses the concepts of ‘wicked problems’ and ‘adversarial legalism’ to explain why arbitral proceedings often narrow complex sustainability disputes into questions of treaty breach and compensation. The article argues that the difficulties are not only the result of vague treaty wording or inconsistent awards. They are also connected with the institutional design of ISDS. A more workable integration of sustainable development therefore requires clearer substantive treaty rules, procedural reform of dispute settlement mechanisms and a more precise understanding of what counts as sustainable investment.
Keywords: sustainable development; international investment law; investor-State dispute settlement (ISDS); sustainable investment; UNCITRAL Working Group III.
Концепция устойчивого развития в международном инвестиционном праве
Аннотация: Устойчивое развитие уже нельзя рассматривать как периферийную политическую категорию в международном инвестиционном праве. Оно закрепляется в документах инвестиционной политики, модельных соглашениях и международных инвестиционных соглашениях нового поколения. Вместе с тем это развитие на уровне договоров и политики пока не привело к сопоставимым изменениям в практике разрешения споров между инвестором и государством. В статье анализируется разрыв между нормативным включением устойчивого развития в международное инвестиционное право и его ограниченным значением в арбитражной аргументации. Методологическая основа исследования включает доктринальный анализ, сравнительно-правовое изучение договорной практики и рассмотрение отдельных арбитражных дел, включая Clayton/Bilcon v. Canada, Urbaser v. Argentina и Eco Oro v. Colombia. Для объяснения институциональных ограничений ISDS используются концепции «злых проблем» и «состязательного легализма» (adversarial legalism) Р. Кагана. Автор приходит к выводу, что трудности связаны не только с неопределенностью договорных формулировок, но и с самой процессуальной логикой инвестиционного арбитража. Более последовательная интеграция устойчивого развития требует уточнения материальных норм договоров, реформирования механизмов разрешения споров и выработки более определенного понимания категории «устойчивые инвестиции».
Ключевые слова: устойчивое развитие; международное инвестиционное право; разрешение споров между инвестором и государством (ISDS); устойчивые инвестиции; Рабочая группа III ЮНСИТРАЛ.
УДК 341.63
I. Introduction
The 2030 Agenda for Sustainable Development has made the connection between foreign investment and public policy more visible than before. The Sustainable Development Goals do not treat private capital merely as an instrument of economic growth. They also link investment with social inclusion, environmental protection and institutional capacity. For developing countries, this issue is especially practical: UNCTAD has repeatedly noted that the sectors most closely connected with the SDGs require levels of investment that public budgets alone cannot provide [7]. The question, therefore, is not whether investment matters, but what kind of investment legal regimes are designed to encourage.
International investment law was not originally built around this question. Its classical function was the protection of foreign investors against arbitrary, discriminatory or uncompensated interference by host States. For a long period, arbitral tribunals tended to read investment treaties mainly through that protective lens. Other branches of international law, including environmental law and human rights law, were not absent, but they usually appeared at the margins of the analysis. Newcombe described this imbalance as a sustainable development deficit within investment treaty law [5].
Recent treaty practice shows a visible attempt to correct this imbalance. New-generation international investment agreements increasingly refer to environmental protection, labour standards, human rights, responsible business conduct and the right of the host State to regulate. UNCTAD policy instruments also present investment regulation as a tool for development rather than as a narrow mechanism for attracting capital [7, 8]. Still, arbitral practice has moved more slowly. Sustainability language may be quoted by parties and mentioned by tribunals, but it rarely becomes the decisive element in treaty interpretation.
This article examines that discrepancy. It asks why sustainable development has become more prominent in investment treaty drafting and policy-making while remaining relatively weak in investor-State dispute settlement. The article argues that the reason lies not only in the wording of treaties. It is also connected with the institutional structure of ISDS, which asks arbitral tribunals to resolve complex policy conflicts through a bilateral and adversarial procedure.
The research uses a combination of methods. Doctrinal legal analysis is used to trace the movement of sustainable development from general international law into investment treaty practice. The comparative method is applied to different models of treaty drafting. Selected arbitral awards, including Clayton/Bilcon v. Canada, Urbaser v. Argentina and Eco Oro v. Colombia, are examined to assess how sustainability arguments operate in actual disputes. The article also relies on the concepts of wicked problems and adversarial legalism. These concepts help explain why investment arbitration often simplifies disputes that, in public policy terms, are much more complex.
The scientific novelty of the article lies in combining treaty analysis with an institutional explanation of arbitral limits. Many studies discuss sustainable development clauses or individual arbitral awards. This article instead focuses on the structural gap between these two levels and argues that the incorporation of sustainability language into treaties does not, by itself, transform the reasoning of tribunals.
II. The Normative Embedding of Sustainable Development in International Investment Law
The incorporation of sustainable development into international investment law has been gradual rather than sudden. At first, the concept appeared mainly in policy documents, treaty preambles and soft-law instruments. Over time, it began to enter operative treaty provisions and model agreements. This development reflects a broader change in the understanding of investment law: investor protection is increasingly viewed as only one part of a wider legal framework that must also account for environmental, social and developmental objectives.
A. The Origins of the Concept and its Status in International Law
The contemporary meaning of sustainable development is usually traced to the Brundtland Report of 1987. The Report linked development with the interests of future generations and, more importantly, treated economic and environmental considerations as mutually connected rather than separate [14]. Since then, the concept has become a regular reference point in international legal discourse.
The International Court of Justice gave the concept particular visibility in the Gabčíkovo-Nagymaros Project case. The Court did not present sustainable development as a complete legal rule, but it emphasized the need to reconcile economic development with environmental protection [14]. A similar interpretative movement can be seen in the WTO dispute United States — Shrimp, where sustainable development informed the understanding of treaty terms in a trade context [16].
Russian legal scholarship has also addressed sustainable development as part of international economic law. A.Kh. Abashidze and A.M.Solntsev , for example, underline that sustainable development should not be reduced to environmental protection. It also requires attention to economic stability, social priorities and the regulatory autonomy of States [30, 31]. This approach is useful for investment law because investment disputes often involve precisely these overlapping interests.
B. The Role of UNCTAD’s Investment Policy Framework for Sustainable Development
UNCTAD has played an important role in translating the general language of sustainable development into the vocabulary of investment policy. Its Investment Policy Framework for Sustainable Development treats investment policy as a means of achieving inclusive and sustainable growth, not merely as a technique for increasing foreign capital inflows [7]. This orientation is important because it changes the evaluative standard: the success of investment policy is measured not only by the amount of investment attracted, but also by the contribution that investment makes to development objectives.
The UNCTAD approach also matters for treaty design. It encourages States to preserve regulatory space, clarify the relationship between investment protection and public welfare, and consider the responsibilities of investors. These ideas have influenced later reform debates and are visible in model treaties and new-generation IIAs [8].
C. Sustainable Development Clauses in New-Generation IIAs
Recent investment treaties show a clear tendency to include sustainability-oriented language. Such provisions appear in different forms: preambular references to sustainable development, clauses preserving the right to regulate, non-lowering of standards clauses, provisions on responsible business conduct and, in some agreements, more elaborate chapters dealing with trade, investment and sustainable development.
The Morocco-Nigeria Bilateral Investment Treaty is often mentioned as an advanced example. It links investment promotion with sustainable development and includes provisions concerning environmental protection, human rights and corporate social responsibility [20]. The Netherlands Model Investment Agreement also places responsible business conduct and the host State’s right to regulate within the structure of investment protection [19]. CETA similarly illustrates the tendency to connect investment liberalisation with public policy safeguards [21].
These instruments do not abolish investor protection. Rather, they attempt to place it in a broader normative setting. The underlying idea is that foreign investment should be protected when it contributes to legitimate economic activity, but that protection should not prevent States from pursuing public objectives.
D. Limitations of the Current Normative Framework
The greater visibility of sustainable development in treaty texts should not be overstated. Many provisions remain general and programmatic. They may guide interpretation, but they do not always create directly enforceable obligations. Investor obligations are still less common than investor rights, and some sustainability-related provisions are excluded from investor-State arbitration. This means that the presence of sustainability language in a treaty does not automatically guarantee that it will influence an award.
This limitation is one reason why treaty reform and arbitral practice remain partly disconnected. States may insert sustainable development clauses into agreements, but tribunals will usually apply the specific jurisdictional and substantive rules placed before them. Unless the treaty text provides clearer guidance, sustainability considerations may remain contextual rather than operative [26].
III. Examination of Arbitral Practice: The Limited Role of Sustainable Development in ISDS
Arbitral practice has not developed at the same pace as treaty drafting. Sustainable development is now more frequently visible in pleadings, preambles and background materials, yet it seldom determines the outcome of a dispute. Tribunals often acknowledge public interests but then return to the traditional standards of investment protection, such as fair and equitable treatment, expropriation or full protection and security.
A. Frequency of References to Sustainable Development
Empirical research confirms this limited role. Marcoux examined arbitral awards containing the phrase sustainable development and found that, in most of them, the concept appeared in party submissions, treaty quotations or factual background rather than in the tribunal’s own substantive reasoning [1]. This finding is significant. It shows that the vocabulary of sustainable development has entered arbitration, but that its legal effect remains uncertain.
The same point can be put more generally: sustainable development often functions as context. It helps describe the policy environment of the dispute, but it rarely operates as an independent interpretative principle or as a decisive reason for accepting or rejecting a claim.
B. The Example of Clayton/Bilcon v. Canada
Clayton/Bilcon v. Canada illustrates the difficulty. The dispute arose after Canada refused to approve a quarry and marine terminal project following an environmental assessment. The majority accepted that the case involved a balance between economic development and environmental protection. However, its reasoning did not fully engage with the social dimension of the dispute, including the concerns of local communities and Indigenous peoples [9, 31].
Professor Donald McRae’s dissent criticised the majority for insufficient deference to domestic environmental review processes [10]. This dissent is important because it highlights a broader concern: investment arbitration may place domestic authorities under pressure when they apply rigorous environmental assessment standards. The controversy surrounding the award therefore extends beyond the particular project. It raises the question of how far tribunals should review national decisions that involve scientific uncertainty, local participation and environmental risk.
C. Other Relevant Cases
Other awards reveal similar tensions. In Urbaser v. Argentina, the tribunal accepted in principle that corporations may bear certain obligations under international law, although Argentina’s counterclaim was ultimately unsuccessful [11]. The case is frequently discussed because it suggests a possible route for integrating corporate responsibility into investment arbitration. At the same time, the result shows that this route remains narrow.
In Eco Oro v. Colombia, the tribunal acknowledged the ecological importance of the Santurbán páramo and the relevance of Colombia’s constitutional framework, but still found a breach of treaty obligations [12]. The case is especially important because it involved a fragile ecosystem and evolving environmental regulation. Even where the legitimacy of the State’s environmental objective is accepted, a tribunal may still conclude that investor expectations were affected in a way that gives rise to liability.
Bear Creek Mining v. Peru adds a social dimension to the discussion. The dispute involved community opposition and Indigenous concerns connected with a mining project [13]. The award shows that investment disputes in extractive sectors cannot be understood only as conflicts between an investor and a State. Local communities, consultation processes and social legitimacy may be decisive for the practical viability of the investment. Nevertheless, these factors are still often treated indirectly rather than as legal considerations of equal weight.
Taken together, these cases show that sustainable development is present in investment arbitration, but not yet central to it. Tribunals have become more attentive to environmental and social context, but the structure of their reasoning remains largely shaped by conventional standards of investor protection.
IV. Structural Limitations of ISDS: The Perspective of “Wicked Problems”
The limited role of sustainable development in arbitral practice cannot be explained only by the wording of treaties. It is also linked to the structure of ISDS itself. Investment arbitration is designed to decide a legal dispute between defined parties. Sustainable development, by contrast, usually involves multiple interests, long time horizons and uncertain consequences.
A. Sustainable Development as a “Wicked Problem”
Rittel and Webber used the concept of wicked problems to describe issues that are difficult to define, difficult to solve conclusively and open to competing interpretations [24]. Sustainable development has many of these features. It requires simultaneous attention to economic growth, environmental protection and social welfare. These objectives may support one another in some situations, but they may also conflict.
This makes sustainability disputes different from ordinary private law disagreements. The problem is not simply that the parties disagree about facts or legal interpretation. They may also disagree about what the relevant public interest requires, what risks should be tolerated and how present economic benefits should be weighed against long-term environmental or social costs.
B. Implications for Investment Arbitration
When such disputes are brought before arbitral tribunals, the tribunal must work within the legal framework of the applicable treaty. Broad standards such as fair and equitable treatment provide some flexibility, but they often give little concrete guidance on how to balance investor expectations against environmental protection, public health or Indigenous rights.
As a result, tribunals may prefer a narrow approach. They may examine whether a specific treaty standard has been breached without attempting to define the broader content of sustainable development. This caution is understandable, but it also explains why sustainability arguments may remain secondary even in disputes where they are factually central.
C. Adversarial Legalism and Procedural Constraints
Kagan’s concept of adversarial legalism also helps explain the limits of ISDS [25]. In an adversarial procedure, parties select the issues, present competing arguments and ask the decision-maker to allocate legal responsibility. The process is not designed to develop a comprehensive public policy solution.
This procedural logic has consequences. Host State counterclaims remain relatively uncommon. Third-party interests, including those of communities affected by investment projects, may enter the record only indirectly. Environmental and social concerns are often translated into the language of treaty defences rather than treated as autonomous normative considerations.
The problem is therefore not merely procedural. It reflects a deeper mismatch between the binary logic of adjudication and the plural character of sustainable development. Arbitration asks whether a treaty was breached and whether compensation is due. Sustainable development asks how economic, environmental and social interests should be balanced over time. These are related questions, but they are not the same.
V. Reform Perspectives
Current discussions on ISDS reform provide an opportunity to reconsider the place of sustainable development in investment law. Procedural reform alone will not solve all problems, but it may create conditions for more consistent and publicly legitimate reasoning.
A. The Work of UNCITRAL Working Group III
The most important multilateral forum is UNCITRAL Working Group III. Its agenda has included adjudicator independence, consistency of decisions, third-party funding, appellate mechanisms and the possible establishment of a standing dispute settlement body. Several States have linked these issues with the broader need to align investment dispute settlement with sustainable development [18].
At the same time, the mandate of Working Group III is mainly procedural. It does not directly rewrite the substantive obligations contained in existing treaties. For that reason, the reform process can improve the institutional environment of ISDS, but it cannot by itself determine how concepts such as sustainable development, regulatory autonomy or responsible investment should be applied in individual cases.
B. Directions for Further Reform
A more consistent integration of sustainable development requires action on at least three levels.
First, treaty provisions should be drafted more precisely. General preambular language is useful, but it is often insufficient. Treaties can provide clearer right-to-regulate clauses, environmental exceptions, provisions on responsible business conduct and more detailed guidance on the relationship between investor protection and legitimate public policy objectives [19, 20, 21]. Such drafting would give tribunals a firmer textual basis for considering sustainability concerns.
Second, institutional reform remains important. A more permanent dispute settlement structure, an appellate mechanism or clearer rules on third-party participation could contribute to greater consistency. It could also make it easier for tribunals to address public interest issues without treating them as peripheral to the dispute.
Third, States and international organisations need a more precise understanding of sustainable investment. Not every cross-border investment contributes to sustainable development. Some investments may generate short-term economic gains while creating environmental damage or social conflict. If investment law is to support sustainable development, it must be able to distinguish between investment as capital movement and investment as a contribution to long-term public welfare.
These reforms are relevant for the Russian Federation and the Eurasian Economic Union as well. Russia has an interest in protecting outward investors, but also in preserving regulatory autonomy at the domestic and regional levels. For EAEU partners, the challenge is similar: investment protection should remain compatible with environmental, social and developmental priorities. This regional perspective shows that the debate is not limited to Latin American or Western treaty practice. It also matters for Eurasian approaches to international economic law.
VI. Conclusion
Sustainable development has changed the language and ambitions of international investment law. Modern investment agreements increasingly acknowledge that investor protection must be balanced with environmental, social and developmental objectives. However, arbitral practice has not yet made sustainable development a central interpretative principle in investor-State dispute settlement.
This article has argued that the limited role of sustainable development is caused by both normative and institutional factors. Treaty language is often too general to guide arbitral reasoning in a decisive way. At the same time, ISDS is structurally designed as an adversarial process for deciding legal responsibility, not as a forum for managing complex development choices.
A more balanced approach therefore requires clearer treaty drafting, institutional reform and a more developed understanding of sustainable investment. These changes would not eliminate investor protection. Rather, they would place it in a legal framework better suited to contemporary public interests.
For Russia and its Eurasian partners, the issue has practical significance. Investment law must protect legitimate economic cooperation while allowing States to respond to environmental, social and developmental challenges. The future of international investment law will depend on whether this balance can be translated from treaty language into arbitral practice.
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Information about the author:
Jiang Jiaqi, Postgraduate Student, Peoples’ Friendship University of Russia (RUDN University), Moscow, Russia
Информация об авторе:
Цзян Цзяци, аспирант, Российский университет дружбы народов (РУДН), Москва, Россия
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