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Environmental Disputes and the BRI


White & Case LLP

In 2013, China launched the Belt and Road Initiative ("BRI"), a mass-scale infrastructure program involving over 140 countries across all continents, and encompassing hundreds of projects, such as highways, power plants, and ports. A few years later, in April 2016, some 196 States, including China, adopted the UN Paris Agreement, which is a legally binding international treaty on climate change aiming to create a climate-neutral world by curbing greenhouse-gas emissions to well below 2 degrees Celsius.1 Though climate change negotiations stalled in 2020 due to the ongoing COVID-19 crisis, President Xi Jinping recently affirmed China's commitment to reducing carbon emissions by announcing that China will aim to hit peak emissions before 2030 and carbon neutrality by 2060.2 While overseas investments are excluded from the goals set for mainland China under the Paris Agreement, it appears that China has taken steps to green BRI.

Compliance of the BRI with environmental sustainability standards

Recently, a number of BRI projects have been halted or cancelled by governments on the grounds that Chinese investments cause local environmental distress.3 In response, China has taken steps to reaffirm its commitment to the Paris Agreement and demonstrate how BRI projects can be sustainable. 

  • In December 2016, China's Ministry of Environmental Protection ("MEP") signed a memorandum of understanding ("MoU") with UN Environment on jointly promoting a sustainable BRI.4
  • In May 2017, the MEP enacted its own BRI green policy, the Guidance on Promoting Green Belt and Road Initiative, encouraging investors and stakeholders to support green and low-carbon infrastructure and environmental conservation through five goals.5 At the same time, the MEP issued the Guiding Principles on Financing the Development of the Belt and Road to bolster sustainable financial arrangements.6
  • In March 2019, China and Italy entered into the first MoU expressly addressing green development cooperation.7
  • In April 2019, the Belt and Road Initiative International Green Development Coalition (BRIGC) was established under the supervision of the MEP.The BRIGC has issued a set of principles, the Green Investment Principle, encouraging its 37 signatories, comprising Chinese and foreign trade and financial entities, to incorporate sustainability and environmental, social, and corporate governance factors into their investment strategies.9

These measures are supplemented by China's efforts to maintain its leadership in the field of renewables at both the production and investment levels.10 While the move towards greening BRI could change the environmental impacts of China's investments abroad, the fate of earlier BRI projects remains uncertain. Indeed, BRI projects continue to face scrutiny to this day.11

Dispute Resolution

Even with China's efforts to enact prescriptive environmental safeguards along the project's corridors, there is always the risk of BRI-related environmental disputes, which could be brought under the numerous investment instruments entered into by China. This includes some of the 145 memoranda of understanding entered into by China, international organizations, and States involved in the BRI which contain a dispute settlement clause referring to dispute resolution rules, including UNCLOS and the UNCITRAL Arbitration Rules.12 China also has the second largest network of bilateral investment treaties (BITs) with 126 treaties in force, as well as 13 free trade agreements, and a trilateral investment agreement with Japan and South Korea, all containing investor-State dispute settlement provisions.13

Moreover, specialized bodies and initiatives have been put in place to attract BRI-related disputes. In June 2018, China inaugurated two international commercial courts to provide judicial support for disputes between BRI participants.14 In March 2018, the ICC International Court of Arbitration announced the establishment of a commission to address dispute resolution potentials in relation to the BRI.15 Following suit, the HKIAC created its own Belt and Road Program in April 2018.16

International arbitration is a particularly appropriate avenue for resolving climate change disputes in view of the international dimension of climate change, often requiring the application of international environmental law or principles, and a certain degree of expertise in interrelated sectors, such as transportation, construction, and energy, from adjudicators. Arbitration is also particularly well-suited for resolving BRI-related disputes, offering a more neutral and confidential forum than national courts for complex cases involving multiple private, State entities, and State parties. In addition, arbitral awards are more readily enforceable than court judgements, with many of the BRI countries, including China, having enacted arbitration legislations modelled after the UNCITRAL Model Arbitration Law, and signed the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. With climate change litigation generally on the rise, BRI environmental disputes are likely to continue with international arbitration offering a suitable means for resolving such disputes.

https://www.jdsupra.com/legalnews/environmental-disputes-and-the-bri-8407944/


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