There has been much debate about the relationship between international trade, the environment, biodiversity protection, and climate change.

The Obama Administration has pushed such issues into sharp relief, with its advocacy for sweeping international trade agreements, such as the Trans-Pacific Partnership and the Trans-Atlantic Trade and Investment Partnership. There has been much public concern about the impact of the mega-trade deals upon the protection of the environment. In particular, there has been a debate about whether the Trans-Pacific Partnership will promote dirty fracking. Will the Trans-Pacific Partnership transform the Pacific Rim into a Gasland?

There has been a particular focus upon investor-state dispute settlement being used by unconventional mining companies. Investor-state dispute settlement is a mechanism which enables foreign investors to seek compensation from national governments at international arbitration tribunals. In her prescient 2009 book, The Expropriation of Environmental Governance, Kyla Tienhaara foresaw the rise of investor-state dispute resolution of environmental matters. She observed:

'Over the last decade there has been an explosive increase of cases of investment arbitration. This is significant in terms of not only the number of disputes that have arisen and the number of states that have been involved, but also the novel types of dispute that have emerged. Rather than solely involving straightforward incidences of nationalization or breach of contract, modern disputes often revolve around public policy measures and implicate sensitive issues such as access to drinking water, development on sacred indigenous sites and the protection of biodiversity.'

In her study, Kyla Tienhaara observed that investment agreements, foreign investment contracts and investment arbitration had significant implications for the protection of the environment. She concluded that ‘arbitrators have made it clear that they can, and will, award compensation to investors that claim to have been harmed by environmental regulation.’ She also found that ‘some of the cases suggest that the mere threat of arbitration is sufficient to chill environmental policy development.’ Tienhaara was equally concerned by the ‘possibility that a government may use the threat of arbitration as an excuse or cover for its failure to improve environmental regulation.’ In her view, ‘it is evident that arbitrators have expropriated certain fundamental aspects of environmental governance from states.’ Tienhaara held: ‘As a result, environmental regulation has become riskier, more expensive, and less democratic, especially in developing countries.’

This article provides a comparative analysis of the battles over fracking, investment, trade, and the environment in a number of key jurisdictions – including the United States, Canada, Australia, and New Zealand. Part 1 focuses upon the United States. Part 2 examines the dispute between the Lone Pine Resources Inc. and the Government of Canada over a fracking moratorium in Quebec. Part 3 charts the rise of the Lock the Gate Alliance in Australia, and its demands for a moratorium in respect of coal seam gas and unconventional mining. Part 4 focuses upon parallel developments in New Zealand. This article concludes that Pacific Rim countries should withdraw from investor-state dispute settlement procedures, because of the threat posed to environmental regulation in respect of air, land, and water.

[This is a working paper presented at the Victoria University of Wellington in February 2014].