Conflict and Coordination Pathways Between International Investors' Legitimate Expectations and Host State Regulatory Authority Amid Climate Change Controversy

Abstract

Climate change stands as a critical issue for global sustainable development, prompting nations worldwide to enact climate governance policies in response to this challenge. However, the ambiguous delineation of host countries' regulatory authority under International Investment Agreements (IIAs), coupled with arbitration tribunals' tendency to prioritize protecting investors' legitimate expectations, creates practical dilemmas. This, combined with the sudden and differentiated nature of host country’s regulatory measures, frequently leads to frequent climate-related investment disputes. The conflict between host states and investors over the duty of reasonable expectations arising from the fair and equitable treatment standard under IIAs is increasingly prominent. Harmonizing investor rights protection with climate objectives has become a critical issue requiring urgent resolution. This study finds that to advance global climate governance objectives, IIA reform must establish a multi-stakeholder responsibility framework balancing public and private interests of host countries and investors. Arbitration practice should incorporate review mechanisms and clarify reasonable expectations standards to promote equitable adjudication. Host countries must maintain stability in domestic investment policy and safeguard international investors' legitimate rights to ensure sustainable development. Ultimately, efforts should strive to achieve a balance between investors' reasonable expectations and host countries' climate regulatory authority.