As lawyers we are trained to spot issues with our clients' interests in mind. When I teamed up with Baumert and Dubash to assess the relationship between the Kyoto Protocol's Clean Development Mechanism (CDM) and international investment rules, I was working with the Alliance of Small Island States (AOSIS), and my colleagues at the World Resources Institute were keeping an eye out for the interests of the climate system. We were concerned to alert policy-makers that, if they were not careful, putting in place rules that stepped up levels of protection for foreign investors without including environmentally based exceptions to these rules could threaten the effective operation of the CDM.

Our paper was written in the context of wider concerns about the environmental and social impact of international investment agreements (IIAs) in the form of a rapidly growing number of bilateral investment treaties and of bilateral and regional free trade agreements. Capital exporters, particularly the United States (US) and the European Union, were keen on maintaining the momentum and the stability of increasing levels of foreign direct investment (FDI) by using IIAs as a means of strengthening the rights of their investors and providing them with access to compulsory and binding international arbitration.

The Kyoto Protocol was an even more fragile instrument in 2001 than it is now; it had not yet entered into force and the CDM's detailed rules had not yet been agreed on.