Part I: Synergising Foreign Investor and State Climate Priorities.

“IIA and ISDS – mis-alignment with Paris Agreement goals, depoliticisation and system transformation?”

List of Speakers:

Toby Landau KC,Barrister, Advocate and Arbitrator, Duxton Hill Chambers (Singapore Group Practice).

Dato’ Mary Lim Thiam Suan, Retired Federal Court Judge of Malaysia, Director, Asian International Arbitration Centre, AIAC(Malaysia)

Kwong Chiew Ee, Co-Deputy Chair of the Environment & Climate Change Committee, Malaysian Bar Council, Partner, Rahmat Lim & Partners

Elizabeth Wu, Lead Advisor, Environmental Justice and Transnational Governance, Climate Governance Malaysia

The webinar, moderated by Elizabeth Wu, Lead Advisor for Environmental Justice and Transnational Governance at Climate Governance Malaysia, convened leading voices from the legal and arbitration fields to examine how international investment agreements (IIAs) and investor–state dispute settlement (ISDS) interact with global climate commitments under the Paris Agreement. The discussion, titled “IIA and ISDS: Mis-alignment with Paris Agreement Goals, Depoliticisation and System Transformation,” marked the first session in a three-part series co-organised by Climate Governance Malaysia, the Malaysian Bar Council, and the Asian International Arbitration Centre (AIAC).

Opening the session, Kwong Chiew Ee, Co-Deputy Chair of the Environment and Climate Change Committee of the Malaysian Bar Council, highlighted the growing tension between deregulatory trends and increasingly ambitious climate measures worldwide. She framed the debate around a fundamental question: whether IIAs and ISDS mechanisms enable or hinder states from pursuing their climate and environmental objectives. Citing Professor Kyla Tienhaara’s seminal work on “Regulatory Chill and the Threat of Arbitration,” Kwong noted that the threat of investment claims can deter states from enacting robust environmental regulations. She urged for a reimagining of the investment regime that empowers rather than constrains climate action. Pointing to the documentary "The Tribunal" by Malcolm Rogge, she underscored the real human consequences of ISDS asymmetry, emphasising the need to recognise the right to a clean and sustainable environment within investment treaties.

Offering opening remarks on behalf of the AIAC, Dato’ Mary Lim Thiam Suan commended the collaboration between legal and climate institutions, noting that arbitral bodies such as the AIAC must no longer separate themselves from global sustainability issues. She emphasised the necessity of collaboration over competition and proposed that insights from this webinar series be channeled into ASEAN-level legal frameworks, referencing the region’s recent joint initiative to develop arbitration and mediation systems under the ASEAN Law Forum. Dato’ Mary Lim called for arbitral institutions to integrate environmental and ethical considerations into their work, noting that neglecting climate implications in dispute resolution threatens not only the legitimacy of Alternative Dispute Resolution (ADR) but also humanity’s collective future.

In the main conversation, Toby Landau KC, of Duxton Hill Chambers, traced the origins of ISDS from the 1959 Germany-Pakistan bilateral investment treaty and argued that the system’s structure-designed in an era before climate issues emerged - has become increasingly unfit for purpose. He described the “mismatch” between investment law and climate governance as both procedural and structural: ISDS employs a commercial arbitration model suited to contractual disputes between equal parties, whereas climate-related investor–state conflicts are inherently public and vertical, affecting entire populations and global policy. This, Toby warned, produces decisions that disregard broader environmental stakes.

He identified three main weaknesses in the ISDS framework: limited stakeholder access, leading to decisions made on incomplete information; “arbitral tunnel vision,” where arbitrators consider only the narrow arguments of disputing parties; and procedural polarisation, which forces black-and-white outcomes where policy nuance is required. Toby stressed that these flaws erode legitimacy.

Turning to new developments, Toby reflected on the International Court of Justice’s recent advisory opinion affirming state obligations to prevent climate harm. He argued that this legal evolution provides tribunals with a stronger basis under the Vienna Convention to interpret investment treaties in harmony with environmental duties, even without changes to existing treaty text. He contended that arbitrators now have both the authority and moral duty to align their rulings with international climate law - a shift that requires mindset change across the profession.

On institutional reform, Toby supported the creation of a standing multilateral investment court, as considered by UNCITRAL Working Group III, to replace fragmented ad hoc tribunals. He acknowledged the political challenges in establishing such a body but maintained that it could enhance consistency, accountability, and climate compatibility in decision-making. However, he cautioned that procedural reform, rather than just treaty rewrite, is crucial—tribunals already possess discretion within current arbitration rules to adopt broader, more participatory approaches.

In an exchange on professional ethics, Toby and Kwong both emphasised that lawyers and arbitrators must consider the climate implications of their work. Landau urged counsel to frame cases with awareness of their global impact, while Kwong stressed that practitioners have a moral responsibility not to enable speculative or abusive claims - referencing the Sulu arbitration as a cautionary example. Both called for integrating sustainability principles into legal practice and training future professionals in international law and environmental governance.

As the discussion closed, Toby advocated for developing soft law instruments or transnational codes of conduct that embed environmental responsibility into arbitration practice, noting that formal rules alone cannot shift entrenched mindsets. Kwong echoed the need to cultivate a new generation of lawyers from the Global South to strengthen regional expertise in ISDS reform.

The session concluded with a shared understanding that advancing climate justice within international investment law requires both systemic redesign and cultural transformation within the legal community.

Click here to watch the recording