Skip to main content

Making Allowances for Carbon Emission Allowances in Investor-State Disputes: A Case Study of the Republic of Korea


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.


  • European Union
  • Emission Trading Scheme
  • Investment Treaty
  • Bilateral Investment Treaty
  • European Union Emission Trading Scheme

These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

This is a preview of subscription content, access via your institution.

Buying options

USD   29.95
Price excludes VAT (USA)
  • DOI: 10.1007/978-3-319-29322-6_6
  • Chapter length: 19 pages
  • Instant PDF download
  • Readable on all devices
  • Own it forever
  • Exclusive offer for individuals only
  • Tax calculation will be finalised during checkout
USD   139.00
Price excludes VAT (USA)
  • ISBN: 978-3-319-29322-6
  • Instant PDF download
  • Readable on all devices
  • Own it forever
  • Exclusive offer for individuals only
  • Tax calculation will be finalised during checkout
Softcover Book
USD   179.99
Price excludes VAT (USA)
Hardcover Book
USD   179.99
Price excludes VAT (USA)


  1. 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. 2.

    See, for instance, Metalclad Corp. v. United Mexican States (2001); Methanex Corp. v. United States (2005); Pac Rim Cayman LLC v. Republic of El Salvador (2009).

  3. 3.

    Lee (2009) considered carbon emission allowances as securities such as stocks and bonds which are tradable in a stock exchange.

  4. 4.

    Its full text in English is available online at the Korea Legislation Research Institute (KLRI) Legislative Translation Center website, This is not an official translation, and thus it is not equally authentic to its original text in Korean.

  5. 5.

    See, for instance, Bayindir Insaat Turizm Ticaret Ve Sanayi A.S. v. Islamic Republic of Pakistan (2009).

  6. 6.

    See, for instance, Romak Switzerland v. the Republic of Uzbekistan (2009).

  7. 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. 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. 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. 10.

    See US Steel Kosice v. Commission (2007a) and US Steel Kosice v. Commission (2007b) for more details.

  11. 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. 12.

    For more details, see Philip Morris Asia Limited v. The Commonwealth of Australia (2011).

  13. 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. 14.

    For a general discussion on the requirements of expropriation, see Dolzer and Schreuer (2008).

  15. 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. 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. 17.

    This is the case in Pac Rim Cayman LLC v. Republic of El Salvador (2009).

  18. 18.

    This case is known as Ansung Housing Co., Ltd. v. Peoples 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.


Download references

Author information

Authors and Affiliations


Corresponding author

Correspondence to Deok-Young Park .

Editor information

Editors and Affiliations

Rights and permissions

Reprints 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.

Download citation

  • DOI:

  • 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)