Isha Khurana
Introduction
The credit for the success we see in international investment has been largely attributed to Bilateral Investment Treaties (hereinafter BITs). BIT’s have been used historically, as a means to promote foreign trade, especially for developing nations that were in dire need of funds after several wars. However, in doing so, they seem to have created an asymmetrywherein only the investor’s interests have been safeguarded. While this does achieve the primary goal of BIT’s i.e., to attract investors, it gives little rights and recourse to the State itself or the “host country”. More concerningly, it does little to protect or prevent any human rights violations caused by the investors. Recent years have led to awareness about the relationship shared between international investment and human rights, and a trend towards placing responsibility on investors. While this is a step forward, it is amply clear that there is still work to be done in terms of placing responsibility on investors, for protecting human rights at a global level.
These issues have been addressed by international courts in a handful of cases such as the Aven and Urbaser cases. This paper thus, aims to analyse the Court’s interpretation of this issue and critique the limitation courts have placed on the recognition of human rights in international investment law. Furthermore, it aims to analyse the dichotomy of positive and negative obligations which are placed (or not placed, in many instances) on investors. Lastly, the paper aims to unpack what possible solutions and frameworks can be adopted for the protection of human rights. Through this, the paper concludes with a way forward and ideas that should influence future BITs, for better recognition of human rights.
Analysis of Cases Commenting on Investor Accountability
In the case of Urbaser v. Argentina, (hereinafter Urbaser case), the court limited the scope of human rights jurisprudence in international investment law, by stating that international law only imposes negative obligations on investors. This implies that investors only have a duty to avoid harming or violating human rights. When compared to the positive obligations imposed upon a State, which requires them to actively work towards the upliftment of human rights, it appears that the imposition of mere negative obligations strongly favors investors and their interests. The Urbaser case was concerned with the human right to clean drinking water. The tribunal initially recognized the importance of this right, but then concerning went on to state that since the BIT does not provide for such an obligation or duty on Urbaser, they are not bound to ‘respect’ such a right. In doing so, it recused investors from performance towards uplifting human rights and placed the onus on States. This was (unfortunately) the approach followed in Burlington Resources v. Ecuador(hereinafter Burlington case). Here too, the courts stated that international law only places negative obligations on investors, not to destroy or interfere with the enjoyment of human rights and the primary duty remains with the State.
A shift in judicial approach occurred in David R. Aven v. Costa Rica (hereinafter the Aven case). Herein, the residents in the host country noticed negative environmental impacts arising due to the investments made and work being done by Aven, the investor. It was alleged that the activities of Aven had violated the host country’s domestic laws and thus, the case was brought before a court. The court affirmed that investors cannot be immune from becoming subjects of international law, which hinted towards the idea that investors, just like States, would be bound by similar rights and obligations. In doing so, it freed itself from the limitations of the Urbaser Case.
The approach adopted by tribunals in the Urbaser and Burlington case is what scholars have termed as missed opportunities in international investment law, to widen the ambit of obligations that must be followed by investors. The Aven case comes in at this point, as a ray of hope. The tribunal adopted a rather creative approach and affirmed that positive obligations may be imposed on investors even when domestic law is quiet on the same. The case pointed towards the obligations that have been violated in customary international law, as looking after the environment and human rights, is a constituent of well-accepted custom. Thus, Aven makes a leap from its precedent, the Urbaser case.
Another interesting case is Phoenix Action v. Czech Republic, where the tribunal noted that investment protection, which is a key feature of BIT’s, should essentially only be provided to those investors who have abided by the fundamental rules of human rights and have worked towards protecting the same. This case thus, addresses the peremptory principle, that the international community must refrain from protecting those investors, who do not protect the rights of members in the community.
Guiding Approaches for Future BIT’s
This paper has pointed out that in the Urbaser case, since the respective BIT did not impose positive investor obligations, the investors were not bound by any duty. Thus, it seems that an approach that would be a way forward toward protecting human rights would be to incorporate an obligation to protect them, into future and existing BIT’s. Recognizing this need, the Morocco-Nigeria Model BIT gives hope for changing the trajectory of investor obligations towards human rights.
It allows States to bring direct actions against investors who are violating obligations to protect and promote human rights. The model BIT also possesses an innovative element, that requires investors (mainly corporations) to carry out social and environmental impact assessment reports. While this is common practice for corporate social responsibility activities, it helps in increasing the level of transparency regarding the work being done by them. Thus, it behaves as a system of checks and balances and ensures accountability.
A primary step that can be taken by States is to incorporate obligations toward protecting human rights, within their domestic laws. The current position in law is that one can only enforce positive obligations on investors if the domestic law provides for it, as international human rights law is silent on the same. If States do adopt a stricter approach to uplifting human rights investors will be left with no option but to oblige. However, an obvious loophole is that increasing regulations by States eventually deters away investment which works against the very primary goal of BIT’s, which is to increase investment. Hence, it is upon each State to find a balance and coherence where investment regulatory bodies and human rights agencies can work together to avoid horizontal incoherence that arises from discrepancies between the two departments.
Conclusion
The Human Rights Council, in 2014, discussed how transnational corporations, forming a large portion of investors, are granted rights through hard law instruments but are faced with no hard law instruments that impose any obligations on them to protect human rights, thereby leading to an asymmetry. This paper has identified the principle discussed by the Council, as one of the primary issues in international investment law today, and has aimed to provide solutions for the same through a call for action from multiple stakeholders, like States, Courts and Tribunals.
The author is a 3rd B.A. LL.B. (Hons)Year student at Jindal Global Law School, Sonipat
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