Abstract
On December 2, 2014, the National Assembly of the Republic of Korea passed the two ratification bills for Korea-Australia and Korea-Canada free trade agreements (FTAs) containing investor-State dispute settlement (ISDS) provisions soon after the end of trade negotiations with the two Pacific Rim partners, regardless of an on-going multi-billion dollar ISDS claim initiated by the Lone Star Funds—an American private equity firm—against the Korean government (LSF-KEB Holdings SCA and others 2012), invoking similar ISDS provisions provided in another investment treaty with the Belgium-Luxembourg Economic Union (Korea-Belgium/Luxembourg BIT 2006). In fact, this claim placed Korea for the first time as a respondent State in known ISDS cases (UNCTAD 2013). Such a bipartisan support to the proposed bills resembles that of the National Assembly in May 2012 when its members passed the Emissions Trading Scheme (ETS) bill almost unanimously with only 3 abstentions and placed Korea as the first Asian country to initiate an ETS (International Emissions Trading Association 2013), despite the fact that the ETS of the European Union (EU), the largest carbon trading market, revealed its serious loopholes in its trial period. Interestingly enough, the two FTAs and the Korean Emissions Trading Scheme (KETS) came into effect concurrently from January 2015.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Notes
- 1.
Prior to this claim, however, there was one reported case under ICSID, although it was settled and discontinued with no record of proceedings. See Colt Industries Corporation v. Republic of Korea (1984).
- 2.
- 3.
Lee (2009) considered carbon emission allowances as securities such as stocks and bonds which are tradable in a stock exchange.
- 4.
Its full text in English is available online at the Korea Legislation Research Institute (KLRI) Legislative Translation Center website, http://elaw.klri.re.kr/eng_service/lawView.do?hseq=24561&lang=ENG. This is not an official translation, and thus it is not equally authentic to its original text in Korean.
- 5.
See, for instance, Bayindir Insaat Turizm Ticaret Ve Sanayi A.S. v. Islamic Republic of Pakistan (2009).
- 6.
See, for instance, Romak Switzerland v. the Republic of Uzbekistan (2009).
- 7.
An early draft provision of the ICSID Convention considered a threshold of US $100,000, which was eventually rejected. See 2 ICSID, History of the ICSID Convention 34 (1968).
- 8.
KORUS FTA Art. 11.10 titled “Investment and Environment” also provides that investment activity to be undertaken “in a manner sensitive to environmental concerns.”
- 9.
This secondary law refers to the Regulation (EU) No. 1219/2012 of the European Parliament and of the Council of establishing transitional arrangements for bilateral investment agreements between Member States and third countries.
- 10.
- 11.
This BIT refers to the Agreement Between the Government of Hong Kong and the Government of Australia for the Promotion and Protection of Investments on September 15, 1993.
- 12.
For more details, see Philip Morris Asia Limited v. The Commonwealth of Australia (2011).
- 13.
See KAFTA Art. 11.7(1); KCFTA Art. 8.11(1); KORUS FTA Art. 11.6(1); CETA Art. X.11(1); Korea-Belgium/Luxembourg BIT Art. 5.
- 14.
For a general discussion on the requirements of expropriation, see Dolzer and Schreuer (2008).
- 15.
For MFN treatment clauses, see KAFTA Art. 11.4; KCFTA Art. 8.4; KORUS FTA Art. 11.4; CETA Art. X.7; Korea-Belgium/Luxembourg BIT Art. 3.
- 16.
For minimum standard of treatment, see KAFTA Art. 11.5; KCFTA Art. 8.5; KORUS FTA Art. 11.5; CETA Art. X.9; Korea-Belgium/Luxembourg BIT Art. 2.
- 17.
This is the case in Pac Rim Cayman LLC v. Republic of El Salvador (2009).
- 18.
This case is known as Ansung Housing Co., Ltd. v. People’s Republic of China (2014). It is reported unofficially that the first investment treaty arbitration ever brought by a Korean investor against a foreign state is actually a Korean construction company’s claim against a state in North Africa.
References
Agreement between the Government of the Republic of Korea and the Belgium-Luxembourg Economic Union for the Reciprocal Promotion and Protection of Investments (12 Dec 2006)
Akbar S et al (2014) Climate-Smart Development: Adding up the Benefits of Actions that Help Build Prosperity, End Poverty and Combat Climate Change: xix. http://www-wds.worldbank.org/external/default/WDSContent Server/WDSP/IB/2014/06/20/000456286_20140620100846/Rendered/PDF/889080WP0v10RE0Smart0Development0Ma.pdf
Ansung Housing Co., Ltd. v. People’s Republic of China (2014) International Centre for Settlement of Investment Disputes, Case No. ARB/14/25
Arcelor SA v. European Parliament and Council (2010) General Court (Third Chamber), Case T-16/04
Bayindir Insaat Turizm Ticaret Ve Sanayi A.S. v. Islamic Republic of Pakistan (2009) International Centre for Settlement of Investment Disputes, Case No. ARB/03/29. http://www.italaw.com/documents/Bayandiraward.pdf. Accessed 20 July 2015
Bennett L (2010) Are tradable carbon emissions credits investments? Characterization and ramifications under international investment law. N Y Univ Law Rev 85(5):1593–1599
Bunyan J (2014) Environmental Regulation and Investor State Dispute Settlement Clauses – OceanaGold and El Salvador. Greenberg Traurig. http://www.gtlaw-environmentalandenergy.com/2014/11/articles/environment/environmental-regulation-and-investor-state-dispute-settlement-clauses
Cho HJ (2012) A Legal Study on Emissions Trading Scheme. Dissertation, Graduate School of Law, Yonsei University (in Korean)
Colt Industries Corporation v. Republic of Korea (1984) International Centre for Settlement of Investment Disputes, Case No. ARB/84/2
Delaume GR (1986) ICSID and the transnational financial community. ICSID Rev 1(2):237–256
Dolzer R, Schreuer C (2008) Principles of international investment law. Oxford University Press, Oxford
Embassy of the Republic of Korea to the Kingdom of Belgium and the European Union (2014) Korea-EU Economic Relations. http://bel.mofa.go.kr/english/eu/bel/bilateral/eu/index.jsp
Environment Canada (2012) A Climate Change Plan for the Purposes of the Kyoto Protocol Implementation Act 2012. http://www.ec.gc.ca/Publications/default.asp?lang=En&n=EE4F06AE-1&xml=EE4F06AE-13EF-453B-B633-FCB3BAECEB4F& offset=3&toc=show
European Union (2003) Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003: Establishing a Scheme for Greenhouse Gas Emission Allowance Trading within the Community and Amending Council Directive 96/61/EC. Official Journal of the European Union, L 275/32
European Commission (2014) Consolidated CETA Text. http://trade.ec.europa.eu/doclib/docs/2014/september/tradoc_152806.pdf
Fedax NV v. Republic of Venezuela (1998) International Centre for Settlement of Investment Disputes, Case No. ARB/96/3. http://www.italaw.com/sites/default/files/case-documents/ita0316_0.pdf
Free Trade Agreement between the Government of the Republic of Korea and the Government of Australia (8 Apr 2014)
Free Trade Agreement between the Republic of Korea and Canada (22 Sep 2014)
Free Trade Agreement between the United States of America and the Republic of Korea (30 Jun 2007)
Hoffmeister F, Alexandru G (2014) A first glimpse of light on the emerging invisible EU model BIT. J World Invest Trade 15(3–4):379–401
International Emissions Trading Association (2013) The World’s Carbon Markets: A Case Study Guide to Emissions Trading – South Korea. http://www.ieta.org/assets/Reports/EmissionsTradingAroundTheWorld/edf_ieta_korea_case_study_may_2013.pdf
Kang HH (2010) A legal study on the carbon emission right trading system. Environ Law Rev 32(2):99–131 (in Korean)
Lee JH (2009) Economic Effects of the Emissions Trading Scheme. SERI Economic Focus, 266. http://www.seri.org/db/dbReptV.html?menu=db03&pubkey=db20091103001 (in Korean)
Lee J (2013) Back on the Negotiating Table Again? – Recalibrating Provisions of the Korea-U.S. FTA ISDS Proceedings through a Prospective ‘Amendment’ – Korean Forum on International Trade and Business Law 23(1):173 (in Korean)
LSF-KEB Holdings SCA and others v. Republic of Korea (2012) International Centre for Settlement of Investment Disputes, Case No. ARB/12/37
Malaysian Historical Salvors Sdn Bhd v. the Government of Malaysia (2001) International Centre for Settlement of Investment Disputes, Case No. ARB/05/10 http://www.italaw.com/sites/default/files/case-documents/ita0074.pdf
Metalclad Corp. v. United Mexican States (2001) International Centre for Settlement of Investment Disputes, Case No. ARB (AF)/97/1; 40 I.L.M. 36
Methanex Corp. v. United States (2005) United Nations Commission on International Trade Law, 44 I.L.M. 1345
Ministry of Environment of the Republic of Korea (2014) Designate Korea Exchange Inc. as Emission Permits Exchange. http://eng.me.go.kr/eng/web/board/read.do?menuId=21&boardMasterId=522&boardId=338102&searchKey=titleOrContent&searchValue=KRX
Pac Rim Cayman LLC v. Republic of El Salvador (2009) International Centre for Settlement of Investment Disputes, Case No. ARB/09/12. http://www.italaw.com/sites/default/files/case-documents/ita0591_0.pdf
Park DY (2014a) The investment chapter of the Korea-US FTA and its implications for environmental matters. J Arbitr Stud 24(1):25–44 (in Korean)
Park JH (2014b) Korea, US Evaluate Current State of FTA. Business Korea. http://www.businesskorea.co.kr/article/7490/korus-fta-korea-us-evaluate-current-state-fta
Philip Morris Asia Limited v. The Commonwealth of Australia (2011) United Nations Commission on International Trade Law, PCA Case No. 2012-12. http://www.italaw.com/sites/default/files/case-documents/ita0665.pdf
Reinisch A (2014) Putting pieces together … an EU model BIT? J World Invest Trade 15(3–4):679–704
Romak Switzerland v. the Republic of Uzbekistan (2009) United Nations Commission on International Trade Law, PCA Case No. AA280. http://www.italaw.com/sites/default/files/case-documents/ita0716.pdf
Salini Construttori SPA and Italstrade SPA v. the Kingdom of Morocco (2001) International Centre for Settlement of Investment Disputes, Case No. ARB/00/4; 42 I.L.M. 609
Schefer KN (2013) International investment law: text, cases and materials. Edward Elgar, Cheltenham, UK & Northampton, MA, USA
SD Myers v. Canada (2001) United Nations Commission on International Trade Law, 40 ILM
Shin HT (2013) 10. Republic of Korea. In: Brown C, Krishan D (eds) Commentaries on selected model investment treaties. Oxford University Press, Oxford, pp 393–424
Smith P (2009) Canberra Faces Legal Challenges Over Carbon Scheme. Financial Times. http://www.ft.com/intl/cms/s/0/68c16c9a-d898-11de-b63a-00144feabdc0.html#axzz3M5cjEEge
Song SH (2014) BOK report raises red flag over FDI imbalance. Korea Joongang Daily. http://koreajoongangdaily.joins.com/news/article/article.aspx?aid=2995352&cloc=rss%7Cnews%7Cjoongangdaily
United Nations Conference on Trade and Development (2013) Recent Developments in Investor-State Dispute Settlement. http://unctad.org/en/PublicationsLibrary/webdiaepcb2013d3_en.pdf
United Nations Conference on Trade and Development (2014) Recent Developments in Investor-State Dispute Settlement. http://unctad.org/en/PublicationsLibrary/webdiaepcb2014d3_en.pdf
United Nations Framework Convention on Climate Change (2014) Status of Ratification of the Kyoto Protocol. http://unfccc.int/kyoto_protocol/status_of_ratification/items/2613.php
US Steel Kosice v. Commission (2007a) Court of First Instance (Third Chamber), Case T-489/04
US Steel Kosice v. Commission (2007b) Court of First Instance (Third Chamber), Case T-27/07
Viñuales J (2012) Foreign investment and the environment in international law. Cambridge University Press, Cambridge
Vranes E (2009) Climate change and the WTO: EU emission trading and the WTO disciplines on trade in goods, services and investment protection. J World Trade 43:716–718
Werksman J (1999) Greenhouse gas emissions trading and the WTO. Rev Eur Commun Int Environ Law 8:252
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2016 Springer International Publishing Switzerland
About this chapter
Cite this chapter
Park, DY., Yoon, Y. (2016). Making Allowances for Carbon Emission Allowances in Investor-State Disputes: A Case Study of the Republic of Korea. In: Park, DY. (eds) Legal Issues on Climate Change and International Trade Law. Springer, Cham. https://doi.org/10.1007/978-3-319-29322-6_6
Download citation
DOI: https://doi.org/10.1007/978-3-319-29322-6_6
Published:
Publisher Name: Springer, Cham
Print ISBN: 978-3-319-29320-2
Online ISBN: 978-3-319-29322-6
eBook Packages: Law and CriminologyLaw and Criminology (R0)