International Investment Law and Sustainable Development – Friend or Foe?

Foreign direct investment (FDI) is widely regarded as a critical mechanism for achieving the Sustainable Development Goals (SDGs), yet the legal framework governing such investment often operates in tension with sustainability imperatives. This conference paper examines the complex relationship between international investment agreements (IIAs) and sustainable development and questions whether IIAs serve as instruments that promote or impede states’ pursuit of sustainability objectives. It argues that the structure and interpretation of IIAs, characterized by broad definitions and expansively worded standards of treatment as well as the use of investor–state dispute settlement (ISDS), have frequently constrained states’ regulatory autonomy, particularly in relation to sustainable development aims. Drawing on treaty practice and arbitral jurisprudence, the paper illustrates how these provisions have elevated investor protection over public welfare concerns and, in doing so, risk undermining the very goals that FDI is purported to advance. The analysis then turns to explicit sustainable developed-related provisions in IIAs − including right-to-regulate clauses, exceptions and carve-outs, investor obligations, and investment facilitation provisions − assessing their potential to reconcile investment protection with sustainable development. It concludes that meaningful alignment requires reconceptualizing IIAs as instruments explicitly designed to advance sustainability objectives rather than just vehicles for investor protection. This is the most promising path for transforming International Investment Law from a foe into a genuine friend of sustainable development.