Originally from the ICDR Handbook on International Arbitration & ADR - Third Edition

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I.    Introduction

Multinational corporations are increasingly flocking toward developing countries to expand their bases of operations.  There are many reasons for this trend. Developing countries offer natural resources, tax advantages, and cheap labor. Their governments welcome this foreign investment because it boosts their economies.  However, these investments often come at a cost: damage to the local environment.  For example, such damage has been alleged as the result of Texaco’s oil exploration and waste disposal practices in Ecuador  and British and Australian mining activities in New Guinea. 

A substantial disparity exists between Western countries and developing countries in the legal protection of the environment.  Many reasons account for the lack of environmental concern developing countries exhibit. These include undemocratic governments, a cavalier attitude toward justice, substandard environmental legislation, an underdeveloped tort law, absence of class action remedies, and garden-variety corruption.  Moreover, most environmental regulation occurs at the national level and it fails to address cross-border environmental issues.