The Role of National and International Environmental Assessment Laws in Protecting Foreign Investment in Special Economic Zones
Catherine MacKenzie
Faculty of Law - Homerton College - University of Cambridge
Abstract
This paper analyses recent developments in environmental impact assessment (EIA) laws, nationally and internationally, with a particular focus on Special Economic Zones. Special Economic Zones are usually within the territory of one sovereign state so national law generally applies. However, special legal status is typically offered to such zones in order to stimulate investment and trade. Typically that special legal status establishes preferential trade and banking regimes including different systems of transparency and accountability. They may also reduces or eliminate property, sales or other taxes, and establish a planning regime designed solely for that Special Economic Zones, with different guardianship authorities, different building regulations and different environmental obligations. In international law, EIA obligations emerged in the early 1990s. Initially, such obligations were propagated by the World Bank and other multilateral development banks in respect of large infrastructure projects (e.g. large bridges, ports, airports, highways), for the funding of which those multilateral banks were partly responsible. Shortly afterwards, the World Bank Inspection Panel was established. Chaired by a Professor of International Environmental Law, the Panel’s initial role was to investigate and adjudicate on complaints, most of which related to alleged environmental damage, in respect of large infrastructure projects. In the decades that followed, many national governments adopted EIA laws based on the World Bank’s framework. Some nations applied those laws equally to all large development projects but others mandated separate (often lessor) obligations for investments in Special Economic Zones. Arguably, this led to a two-tier approach to development, with a special legal status, including different environmental obligations, applying to Special Economic Zones. While this may suggest that less stringent environmental requirements may be acceptable in Special Environmental Zones in order to encourage investment, in fact evidence from a number of Special Economic Zones suggests that environmental standards are generally similar to those of other areas. This paper explores that apparent contradiction. The paper commences with a review of recent Environmental Impact Assessment legislation in a number of GCC states, including Kuwait. This legislation is considered in the light of the World Bank’s Environmental and Social Framework and the Equator Principles (to which 25+ commercial banks are parties). Next, it reviews the jurisprudence of the International Court of Justice, and in particular Argentina v Uruguay (Pulp Mills) ICJ 2007, in which the Court stated “..environmental impact assessment is deemed to be part of international law” and discusses the weight attached to that obligation in the planning and development of Special Economic Zones. Finally, it considers the nature and scope of activities in special economic zones in order to determine whether different planning/environmental regimes may be appropriate. This paper will address three questions: First, what are the drivers of Special Economic Zones? Although the desire to maximise trade is common to most Zones, the fact that Zones have a long history across the world strongly suggest that systemic factors and forces are at play. So we need to think about how best, analytically, to make sense of the legal status of these Zones. Second, how has the concept of EIA been applied to the planning and development of such Zones? Is a different standard of environmental accountability ever acceptable and if so, in what circumstances? Third, in Zones in which different standards are mandated, what systems are in place to protect foreign investment in the event that liability for environmental damage would otherwise accrue? The paper concludes by offering some thoughts on what Special Economic Zones may suggest about the capacity of different legal systems and forms governance to act quickly and effectively to maximise economic opportunity and so facilitate sustainable development for large populations while, at the same time, protecting the peoples, land and resources that are at the very heart of development.
Keywords
"Special Economic Zone", "Environmental Impact Assessment", "Protection of Foreign Investment"
