Beyond Profit: A Critical Analysis of Issues of Human Rights in Customary International Investment Law”
FEATUREDLAW
INTRODUCTION
- Throughout the historical development of Customary International Investment Law (CIIL), Human Rights Law are not considered as a part of the latter, in fact, both the branches of law are commonly separated from each other. Scholars around the world believe Human Rights Law to be at the individualist level, moreover natural person, whereas CIIL focuses more on the right of legal persons. However, the core of CIIL is based on the economic rights in property of people, which was a basic human right established in the French Declaration of Human Rights.[1]
- The major issue faced is not the happening of these events, but instead, how the international community fails to takes efforts for curtailing them and implementing efficient method for human rights protection[2].
- This critical article focuses on analysing the gaps in the implementation of International Law, especially human rights law, in the practise of international investment and the grave need for development of International Investment Corporation Liabilities.
Prioritization of International Investor’s Interest over Human Rights
- The principal objective of customary international investment law is to safeguard foreign investors, but it also values upholding environmental and human rights standards. However, as it turns out in application, one of the main concerns raised is that customary international investment law prioritizes the protection of investors over human rights[3]. Several investment treaties and agreements include clauses that give investors' rights the priority, which is a clear indication of the same. Such clauses frequently offer investors important legal protections, yet they may also restrict states' capacity to regulate matters of human rights[4].
- In the Aguas del Tunari case[5] in Bolivia is a prime example. To run the water supply system in the city of Cochabamba, the Bolivian government signed a contract with Aguas del Tunari, a group of foreign corporations, in 1999. Due to the contract, water prices significantly increased, resulting in profound protests across the country and civil upheaval. The Bolivian government eventually terminated the contract, and Aguas del Tunari submitted an application before the ICSID. The tribunal ruled for the company and mandated that Bolivia pay the company $25 million in damages. The decision drew criticism for giving foreign investors' rights precedence over peoples' right to access clean water. The case brought attention to a potential incongruence between foreign investment and human rights.
Faulty System of the ICSID
- The ICSID Convention restricts the ICSID tribunals' authority to arbitrate investment conflicts involving investors and states. The Convention does not specifically state that issues of human rights needs to be considered when resolving international disputes of investment. As a result, ICSID tribunals lack the authority to address potential human rights issues that may arise in connection with investment disputes[6].
- The case of Urbaser v. Argentina[7] serves as an illustration of the ICSID tribunals' limitations in dealing with potential human rights issues related to investment conflicts. In spite of Argentina's proof of environmental and human rights infringements, the tribunal's authority was restricted to deciding as to if Argentina had violated the Bilateral Investment Treaty. It was unable to take into account the dispute's wider impact on human rights.
- Santa Elena v. Costa Rica[8] is an example of how ICSID is unable to provide adequate remedies concerning human rights violations during investment disputes. Because the tribunal's jurisdiction was restricted to determining if Costa Rica had violated DR-CAFTA and awarding remuneration to the investor, the case serves as a cautionary tale of the shortcomings of the current mechanisms for addressing human rights concerns in the setting of investment disputes. The award failed to address the wider human rights ramifications of the mining project, and neither did it offer any concrete relief for the harm done to nearby communities and the environment.
Lack of Transparency
- Human rights advocates may find it challenging to assess and hold investors responsible for their deeds due to the ICSID arbitration proceedings' opaque nature. This is important because, more often than not, issues arising from investment disputes have a consequential effect on human rights. The case of OceanaGold vs. El Salvador[9] bears witness to the same. In this case El Salvador had denied permit due to its impact on human rights and environment as OceanaGold claimed that their investment had been expropriated.
- The trial for this case was confidential which led to a campaign demanding for transparent trials as it was extremely hard for the human rights advocates to keep up with the proceedings to ensure the communities involved were protected. Although OceanaGold’s claim for compensation were rejected, the need for transparency was yet again emphasized[10].
- After the government of Peru instructed the shutdown of its smelter because of concerns about the environment, a US mining company brought an action against the country in the case of Renco Group Inc. v. Peru[11]. Affected communities and human rights organisations were unable to follow the case and make sure that their interests were represented due to the lack of transparency in the trial. There should be more chances for public consultation, more transparency in the decision-making process, and a necessity that tribunals take the consequences of their choices on human rights into account[12].
Lack of Regulatory Space
- The regulatory space available to states to address issues with the environment, society, and human rights may be constrained by investment treaty mechanisms.
- One way for this to occur is through the use of ICSID mechanisms, which enable investors to file lawsuits against states for damages if they feel that a government action has compromised their investments. These safeguards are frequently incorporated into investment treaties to defend foreign investors from political risk and expropriation.
- However, the ICSID mechanisms can negatively impact state regulation because states might be reluctant to take action that might trigger expensive arbitration proceedings. This may restrict states' ability to enact laws that serve the public interest.
- The Vattenfall v. Germany[13] case exemplifies how investment treaties can cause restriction on state's ability to enact legislation that serves the public interest, especially when it comes to issues affecting the environment and human rights. The tribunal's ruling compromised Germany's ability to safeguard the health and welfare of its citizens as the coal-fired power plant could have had substantial detrimental effects on air quality and public health.
- Another example of the aforementioned is Methanex v. United States[14]. The case curtailed the government's capacity to regulate in the public interest and safeguard right to clean water, which was challenged by MTBE contamination. The case serves as a reminder of how investment treaties may restrict a state's ability to regulate in situations involving environmental and human rights issues[15].
Conclusion
- Highlighting the very crossover of human rights law and international investment law by analysing various cases of corporation related human rights violation such as labour rights abuses, environmental pollution, land right issues, discrimination and corruption, I would like to conclude that for holistic development, international investors need to prioritise beyond just profits. Keeping in mind that sole capitalistic approach to international investment would have a negative effect to the international economy. Violation of human rights for economic development has never truly resulted in growth rather promotes depressing gaps between various communities and countries.
- Furthermore, access to justice and achieving redressals are frequently hampered by both legal as well as practical constraints for victims of corporation-related human rights violations.
- But the silver lining would be the various number that have tried to seek to identify and remove these obstacles in recent times[16].
- The implementation of Article 31(3)(c) of treaty on treaties is an effort to involve investor human rights duties into international investment law. The effort talks about how human rights “should be considered"[17]. Again, the efforts are simply restricted to ‘consideration’ rather than a duty or an obligation with consequences with is predicted to be ineffective[18].
- The Accountability and Remedy Project was launched by the OHCHR to resolve the issue of judicial mechanism inefficiencies in cases of holding international investors accountable and providing justice to the victims of corporation-related human rights violation.
- Although the efforts are on the right direction, it is predicted that impact of the same will be a slow growth and the only way to bring effective and impactful change will require a fundamental change in approaches of international investments.
[1] Errera, R., & Das, K. (1976). The French Declaration of the Rights of Man and of Citizens of 1789. Proceedings of the Annual Meeting (American Society of International Law), 70, 91–97. http://www.jstor.org/stable/25657900
[2] Simma, B. (2011). Foreign Investment Arbitration: A Place For Human Rights? International & Comparative Law Quarterly, 60(3), 573-596. doi:10.1017/S0020589311000224
[3] Simma, B. (2011). Foreign Investment Arbitration: A Place For Human Rights? International and Comparative Law Quarterly, 60(3), 573–596. https://doi.org/10.1017/s0020589311000224
[4] Moyn, S. (2019, September 17). Not Enough — Samuel Moyn. https://www.hup.harvard.edu/catalog.php?isbn=9780674241398
[5] Aguas del Tunari S.A. v. Republic of Bolivia, ICSID Case No. ARB/02/3
[6] Fauchald, O. K. (2008). The Legal Reasoning of ICSID Tribunals - An Empirical Analysis. European Journal of International Law, 19(2), 301–364. https://doi.org/10.1093/ejil/chn011
[7] Ursaber v. Argentina, 60 I.L.M. 139 (I.C.J. 2021).
[8] Santa Elena v. Costa Rica, ICSID Case No. ARB/96/1, Award (Feb. 17, 2012).
[9] OceanaGold v. El Salvador, ICSID Case No. ARB/09/17 (ICSID 2016).
[10] Shirlow, E. (2017). Three Manifestations of Transparency in International Investment Law: A Story of Sources, Stakeholders and Structures*. Three Manifestations of Transparancy in International Investment Law Goettingen Journal of International Law, 8(1), 73–99. https://doi.org/10.3249/1868-1581-8-1-shirlow
[11] The Renco Group, Inc. v. Republic of Peru [I], ICSID Case No. UNCT/13/1
[12] Van Harten, G. (2015). ICSID and Human Rights: A Case for Reform. Journal of International Dispute Settlement, 6(3), 613-637. https://doi.org/10.1093/jnlids/idv024
[13] Vattenfall AB and others v. Federal Republic of Germany, ICSID Case No. ARB/12/12 (2018).
[14] Methanex Corporation v. United States of America, UNCITRAL, Award on Jurisdiction (2005).
[15] Brendstrup, B. (2007). The Methanex arbitration and regulatory freedom under NAFTA chapter eleven. Journal of World Investment & Trade, 8(4), 569-591.
[16] Columbia Center on Sustainable Investment (CCSI), & UN Working Group on the issue of human rights and transnational corporations and other business enterprises. (2018). Impacts of the International Investment Regime on Access to Justice Roundtable Outcome Document. https://www.ohchr.org/Documents/Issues/Business/CCSI_UNWGBHR_InternationalInvestmentRegime.pdf
[17] Abel, P. (2018). Counterclaims based on international human rights obligations of investors in international investment arbitration: Fallacies and potentials of the 2016 ICSID Urbaser v. Argentina Award. 1 Brill Open Law 61–90, 64. https://brill.com/view/journals/bol/1/1/article-p61_61.xml?language=en
[18] Arcuri, A. (2018). The great asymmetry and the rule of law in international investment arbitration. SSRN. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3152808