Once again a haze of smoke has descended on Singapore, Malaysia, and other parts of South East Asia. The smoke originates in Indonesia where provincial governments have reportedly condoned (or turned a blind eye to) those deliberately lighting fires in order to clear vast amounts of land. This has happened nearly every year since 1997. It begs the question whether international law can be used to put a stop to it.

In this briefing, we explain how:

  • states have an obligation under international law to take necessary steps to prevent the spread of pollution to neighbouring countries;
  • neighbouring states, as well as private persons and entities, can pursue a claim under international law against a state for excessive pollution; and
  • international legal actions of the type considered in this note can be a positive force for change by encouraging a state to modify its behavior to comply with international norms.

International law obligations of states to prevent the spread of pollution

The practice of slashing and burning forested land for the planting of crops in various parts of Indonesia, including Sumatra and Kalimantan, has, according to some reports, been condoned by provincial governments and regulatory authorities in Indonesia. If that were true, it would constitute a clear breach of international law. Further, a failure by the government to exercise due diligence to prevent transboundary pollution may also amount to a breach of international law.

States are under an obligation not to conduct or permit activities within their territory that result in harm to the environment of other states. Thus, the United States in 1935 successfully pursued a claim against Canada in the Trail Smelter arbitration for pollution from a Canadian smelter which damaged vegetation in the State of Washington (3 R.I.A.A. 1905-82 (1941)).

Similarly, Australia and New Zealand pursued claims (which were left unresolved) in 1973 against France before the International Court of Justice (ICJ) for radioactive pollution detected in Australian and New Zealand territories caused by France’s testing of nuclear weapons in the South Pacific (Nuclear Tests (Australia v. France), I.C.J. Rep 1974, p 253; Nuclear Tests (New Zealand v. France), I.C.J. Rep 1974, p 457).

Two decades later the ICJ confirmed, in an advisory opinion, that states have an obligation ‘to ensure that activities within their jurisdiction and control respect the environment of other States’ (Legality of the Threat or Use of Nuclear Weapons, I.C.J. Rep 1996, p 226).

In 2010, in the so-called Pulp Mills case between Argentina and Uruguay, the ICJ held that ‘[a] State is … obliged to use all means at its disposal in order to avoid activities which take place in its territory, or any area under its jurisdiction, causing significant damage to the environment of another State’ (Case Concerning Pulp Mills on the River Uruguay (Argentina v. Uruguay), I.C.J. Rep 2010, p 14).

Closer to home, all ten members of the Association of Southeast Asian Nations (ASEAN), including Indonesia in January 2015, have signed up to the 2003 ASEAN Transboundary Haze Pollution Agreement. The parties to the agreement expressly acknowledge in Article 3 that they are responsible under international law ‘to ensure that activities within their jurisdiction or control do not cause damage to the environment and harm to human health of other states’. Article 4 of the treaty obliges each state to:

  • co-operate in developing and implementing measures to prevent, monitor, and mitigate transboundary haze pollution;
  • respond promptly to a request for relevant information sought by states affected by transboundary haze pollution originating in its territory; and
  • take legal, administrative and/or other measures to implement their obligations under the agreement.

Neighbouring states, however, are unlikely to pursue an international law claim against Indonesia even if there is evidence to support such a claim. The aforementioned ASEAN treaty merely requires that any dispute as to the interpretation or application of the agreement ‘shall be settled amicably by consultation or negotiation’. Moreover, Indonesia cannot be compelled by another state to have an international law dispute adjudicated by an independent tribunal. The arbitrators and judges in the Trailer Smelter arbitration and the ICJ cases mentioned above all had jurisdiction based on the consent of the disputing states. That is unlikely to happen in this instance.

Nonetheless, even if a state cannot press a claim against a neighbouring state for transboundary pollution, there are means by which individuals can do so, as explained below.

Investment treaty protection against pollution

Indonesia has agreed scores of investment treaties with fellow ASEAN states and other countries. As explained in our last briefing, How to protect investments in Indonesia despite the termination of its Bilateral Investment Treaties, investment treaties generally allow qualifying investors to bring claims in their own right against a state which breaches its treaty obligations.

Most of Indonesia’s investment treaties include a guarantee to provide ‘full protection and security’ to investments in Indonesia. Arbitral tribunals have interpreted this standard as obliging a host state to exercise sufficient ‘due diligence’ to protect an investor’s physical assets and persons from harm. This arguably includes an obligation on the part of states to take all necessary steps to prevent damage caused by egregious pollution.

Indeed, the Canadian owner of an eco-tourist facility in Barbados is currently suing the Government of Barbados for an alleged breach of the full protection and security provision (among other provisions) in the Canada- Barbados bilateral investment treaty. Peter Allard argues in his claim that Barbados breached its treaty obligations by failing to enforce its domestic environmental laws, which he alleges led to the environment being spoilt and a loss of tourist revenues at his eco-resort (Peter A. Allard (Canada) v. The Government of Barbados (PCA Case No. 2012-06)).

Quite apart from the ‘full protection and security standard’ found in most investment treaties, investment treaties arguably incorporate the whole panoply of obligations imposed upon states by customary international law (including those described in above). One commentator has suggested that where the relevant investment treaty expresses the host-state’s consent to arbitration in broad terms (e.g. ‘any dispute…concerning an investment’, as stated in the Singapore-Indonesia Bilateral Investment Treaty) an investor may bring a claim for the host state’s breach of customary international law without any reference to the substantive protections provided by the relevant investment treaty.1

The remedies available to an investor for a successful claim under an investment treaty potentially include:

� declaratory relief requiring the offending state to take all necessary steps to prevent the pollution; and

� monetary damages for any resulting harm.

Moral damages could also be awarded. Moral damages are available ‘in extreme cases of egregious behavior’, including where a state’s actions cause a grave or substantial deterioration of a person’s physical or mental health.2 There may be an argument that haze which requires almost all activity outside to cease and schools closed given the risk of serious illness, as is the situation presently in much of Indonesia, Singapore and Malaysia, satisfies this criteria.

While not the subject of this briefing, it is noted that Singapore has enacted the Transboundary Haze Pollution Act, which may provide an additional means by which Singaporeans can pursue civil claims for damages for  harm suffered as a result of the haze. A key difference, however, is that whereas a state’s domestic law may allow a party to pursue a claim against individual companies found to have contributed to the haze, a claim under an investment treaty can hold the government of a country to account for damage caused by the fires it had the ability to prevent.

Conclusion

An investment treaty claim can be an effective means of shining an international spotlight on a regional problem. A notable recent example is the case of White Industries Australia Limited v. India (UNCITRAL, 3 November 2011). The Indian courts failed to enforce for over nine years an ICC arbitration award obtained by White Industries against Coal India. Frustrated with the delays, White Industries reacted by commencing a new action, this time an investment treaty claim against the Government of India for its failure to adopt and implement an effective judicial system. The Australian claimant succeeded in its treaty claim, thereby turning a private dispute into a public one, and in the process securing an enforceable award for A$4.5 million against the Government of India (which it then promptly paid).

The arbitral tribunal’s 2011 decision was immediately met with criticism and disdain within India. Nonetheless, there are indications that the decision has had a positive impact. Enforcement applications are reportedly now being considered by Indian courts much more efficiently than they once were, and the Indian government has proposed new arbitration legislation which provides for faster enforcement of arbitral awards.3

Thus, investment treaty claims can in the right circumstances help motivate a state (and its organs) to modify its behavior to comply with international norms. For the haze it may just help lift the mask on an acute and worsening problem.