Introduction

Although investment law and environmental law differ widely in aim and scope, the likelihood of their overlapping has considerably increased in recent times. The protection of the environment, particularly in the field of climate change prevention, has evolved into one of the most important issues on the agenda of many states and environmental mechanisms have begun to influence international investment flows in an unprecedented way. This article focuses on one such mechanism, the Clean Development Mechanism (CDM), and its possible conflicts with the WTO Agreement on Trade Related Investment Measures (TRIMS).

This paper also refers to an article on possible conflicts between international investment law and climate protection policies by Werksman, Baumert and Dubash. The authors of this article pointed out areas in which conflicts between the CDM and international investment law might occur. Some of their findings will be revisited and tested against the latest developments in international environmental law.

Following a general introduction of the CDM and the TRIMS as the two main points of focus of this paper, some general reflections on the relationship between international environmental law and international trade and investment law will be presented. An analysis of the notion of conflict in WTO law in particular and in international law in general leads the way to the identification of possible areas of conflict between the CDM and the TRIMS. First, some characteristics of the CDM which might be considered to discriminate against certain types of investors will be examined as to their compatibility with the TRIMS. Second, the local content requirements which national regulations might stipulate for CDM projects will be tested against the TRIMS, and third, the special case of unilateral CDM projects will be scrutinised as to its likelihood of leading to violations of the TRIMS.