The impact of the COVID-19 pandemic on foreign investment and investment arbitration: from energy transition disrupted to the path forward to a greener future

Abstract

Foreign investment in the energy sector is complex during the best of times. The challenges posed by the COVID-19 pandemic (and its intertwined economic crises) increased competition for foreign investment and strengthened the perennial quest for climate justice. The pandemic added complexity to both domestic and international spheres of governance, which led to calls for a suspension or even a cancellation of arbitration claims involving foreign investments. As developing and developed countries compete for financial resources to transition to a carbon-neutral society, such a suspension or cancellation is of academic and practical interest. Accordingly, this article discusses the impact of the pandemic on foreign investment in the energy sector, focusing on investment claims. It assesses competing views involving the proposed revisions (namely, suspensions and cancellations) and their consequences based on a law and economics perspective. This article also examines how foreign investments that align with the United Nations Sustainable Development Goals may foster the transition to a greener future. Ultimately, this article offers relevant insights that are likely to be applicable to critical future disruptions, whether they occur due to global economic crises or climate-related emergencies.