European investment projects in third countries: LEGALLY GREEN?

Abstract

This article provides an overview of the corporate self-regulation by five European-based multilateral financial institutions where European environmental acquis is applied in investment projects in the third countries. Academic research on environmental standards suffers from a certain imbalance. While scientific studies of European ambient standards and standards regulating environmental performance and its consequences are ample, little has been written so far about their application by the European players outside the European Union. This gap in the literature is, however, critical, considering the leading role the Union seeks to play in the proliferation of high environmental standards worldwide. To provide background, existing international incentives to stimulate the ‘greening’ of investment are described, in particular focusing on the launch of European Principles for Environment by some investment banks, which has led to their voluntary application of legal European environmental standards outside of the EU. The article elaborates on the nature and character of standards being applied in the framework of the investment projects. It considers the possibility of a certain mutual influence between the ‘exported’ European and national environmental standards of host countries, leading to an approximation effect. Furthermore, attention is paid to the driving forces behind the voluntary environmental self-regulation. It is argued that homogenous introduction of high legal standards causes a positive effect on general FDI patterns, with investment becoming a stimulus of proper environmental regulation in the host countries. The article also addresses the academic debate around the role of European Union as a normative (green) power, extending its ‘legal space’ beyond its geographical borders. It stands still by the Common Investment Policy that currently takes shape at the Union level. Finally, concluding remarks are presented on the positive role of investment banks in promoting European environmental standards worldwide. It also calls for the comprehensive EU investment regime to stay ahead of international developments.