Abstract
In recent years, there has been mounting interest in the possibility of the Paris Agreement 2015 featuring in investor-State arbitration.2 This applies particularly to investments connected to greenhouse gas emissions mitigation, insured emissions and other financial investments to be made under the internationally supervised emission-offsetting mechanism to be activated in accordance with the Glasgow Climate Pact 2021.3 While modernisation reforms to the Energy Charter Treaty (ECT) are anticipated to include direct reference to the Paris Agreement, their effect has been thrown into doubt by recent withdrawals of EU Member States. Although the past two years have seen increasingly successful efforts to enforce the Paris Agreement before national courts, a disputing party has yet to invoke it in an investor-State arbitration. Whereas environmental exception clauses, direct references to the Paris Agreement and substantive obligations on environmental protection remain rare in international investment agreements, this situation is likely to change as ‘green investment’ expands and high-emission investors react to intensification of host State efforts to mitigate emissions. In analysing recent arbitral jurisprudence on the right of regulation, it is suggested that the most significant effect of the Paris Agreement on international investment law may be in defining the investment relationship of the disputing parties with respect to the liability of the host State for alleged breaches of the substantive protections for the investment under investment treaties, contracts and laws.