Abstract:
States have the sovereign right to regulate investment activities within their territories to cope up
with various policy objectives. One of such areas where regulation is necessitated is the
protection of the host State’s society and the environment. Bilateral Investment Treaties (BITs)
are being used not only as instruments which protect foreign investors and their investments but
also as a means of eroding the policy space of the States which host the investment. Against this
backdrop, this study aims at elucidating how to strike a balance between the protection of the
foreign investment and the protection of the environment under Ethiopia’s BITs. Accordingly, it
finds that the BITs of Ethiopia accord various protections to investments of foreign investors but
they do not impose enforceable obligations on the investors concerning environmental
protection. The BITs are also strict when it comes to the obligations of host State but they are
mute concerning the rights of same. The absence of environment-friendly provisions and the
recognition of unqualified Fair and Equitable Treatment (FET) and indirect expropriation
provisions in the BITs deteriorate the right to regulate Foreign Direct Investment (FDI) towards
environmental protection. This study introduces a model BIT in light of which the country can
improve the existing BITs so as to encourage only responsible investments. It finds the need to
adopt a holistic approach of reforming the BITs from the preambles to the substantive contents.
In order to safeguard Ethiopia’s right to regulate, the preambles, the FET and indirect
expropriation provisions of the BITs should be reconsidered. For this to happen, a resort to
amendment, termination and renegotiation of the agreements would be a way-out. Thus, new
generation of BITs is needed to introduce a bottom-up approach and ensure sustainable
development.
