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Changes in the Balance of Rights and Obligations: Toward Investor Responsibilization

Published online by Cambridge University Press:  28 March 2018

Laurence Boisson de Chazournes
Laurence Boisson de Chazournes*
Affiliation:
Faculty of Law, University of Geneva.
Rights & Permissions [Opens in a new window]

Extract

The classical approach to investment protection is that states have obligations and investors have rights. However, there are emerging trends in favor of a rebalancing of rights and obligations of states and investors. In the context of this recalibrated approach, more attention is given to the definition of substantive provisions, such as the fair and equitable treatment standard. There is also a move from investor protection to investor responsibilization. This emerging responsibilization trend can be observed, for example, in recent treaties negotiated on the African continent, and it is also making a foray into customary international law.

Information

Type
Balancing Rights and Obligations of States and Investors
Information
Proceedings of the ASIL Annual Meeting , Volume 111 , 2017, pp. 53 - 55
Copyright
Copyright © by The American Society of International Law 2018 

The classical approach to investment protection is that states have obligations and investors have rights. However, there are emerging trends in favor of a rebalancing of rights and obligations of states and investors. In the context of this recalibrated approach, more attention is given to the definition of substantive provisions, such as the fair and equitable treatment standard. There is also a move from investor protection to investor responsibilization. This emerging responsibilization trend can be observed, for example, in recent treaties negotiated on the African continent,Footnote 1 and it is also making a foray into customary international law.

Investor Responsibilization in Investment Treaties

Some treaties provide for specific obligations linked to respect for the domestic order of the host state as well as to the safeguarding of public order and morals. This is the case with Article 9 of the Agreement on Promotion, Protection and Guarantee of Investments among Member States of the Organization of the Islamic Conference, which is an ancestor of sorts to the newly adopted African treaties.Footnote 2 Other treaties require that investors comply with the domestic law of the host state. An issue of differentiation among them is the scope of the domestic law to be respected. The COMESA Investment Agreement adopts a broad scope,Footnote 3 while the Southern African Development Community (SADC) Model Bilateral Investment Treaty (BIT) is narrower in its coverage of domestic law.Footnote 4

Whatever the scope of the provision, it indicates that investors should at a minimum be able to show that they were cognizant of the applicable domestic law when they made their investments and that they have remained aware of its requirements.

Other obligations can demand proactive behavior. They require investors, inter alia, to abide by human rights, to conduct environmental and social impact assessments, or to promote sustainable development. As an example, the SADC Model BIT provides that “[i]nvestors and their investments have a duty to respect human rights in the workplace and in the community and State in which they are located….”Footnote 5 The Draft Pan-African Investment Code, Article 22-3,Footnote 6 requires that “[i]nvestors shall contribute to the economic, social and environmental progress with a view to achieving sustainable development of host States.”

The content of these various requirements is defined in light of existing international law norms and principles whose customary law status is rather widely accepted. Interestingly, these investor obligations are also shaped by references to corporate social responsibility standards. These standards are used as vehicles of socialization for promoting certain values. They also contribute to strengthening the accountability of the actors involved in investment activities. In this context, the growth of eco-friendly and socially responsible standards applicable to investors allows for possible synergies between societal values and investment protection. The Supplementary Act on Common Investment Rules for the Community adopted in 2008 by the Economic Community of Western African States (ECOWAS)Footnote 7 has, for example, a provision dedicated to Corporate Social Responsibility.Footnote 8

It is noteworthy that respect for corporate social standards is to be understood in a progressive manner, such that the standards in question should be those that provide for the highest level of protection. In other words, by referring to these standards, investment agreements make reference to evolving commitments that can only be perfected and refined.

As an example, the Investment Cooperation and Facilitation Agreement Between Brazil and Malawi (2015) provides that “investors and their investment shall strive to achieve the highest possible level of contribution to the sustainable development of the Host Party and the local community, through the adoption of a high degree of socially responsible practices, based on the voluntary principles and standards set out in this Article.”Footnote 9

The inclusion of corporate social responsibility standards bring them into the realm of investment treaty frameworks. These standards do not, however, become binding per se through their incorporation in these treaties. As the contracting states parties themselves have inserted these standards in their agreements, they can act as legitimate benchmarks for assessing the conduct and accountability of investors. They make explicit the obligations resting on investors to behave in accordance with certain standards.

Investors’ Obligations and Customary International Law

Some awards have highlighted that obligations for investors may exist even though there is no explicit reference to these obligations in an investment treaty or in another international treaty that would find application.

A tribunal has recently considered that obligations incumbent on nonstate actors can derive from the fact that investors are subjects of international law and thus bound by certain principles of international law. Interestingly, some of the vehicles that allow for this approach are corporate social responsibility standards such as the Ruggie principles.Footnote 10

In the Urbaser case,Footnote 11 the Tribunal said the following:

1195. The Tribunal may mention in this respect that international law accepts corporate social responsibility as a standard of crucial importance for companies operating in the field of international commerce. This standard includes commitments to comply with human rights in the framework of those entities’ operations conducted in countries other than the country of their seat or incorporation. In light of this more recent development, it can no longer be admitted that companies operating internationally are immune from becoming subjects of international law. On the other hand, even though several initiatives undertaken at the international scene are seriously targeting corporations human rights conduct, they are not, on their own, sufficient to oblige corporations to put their policies in line with human rights law. The focus must be, therefore, on contextualizing a corporation's specific activities as they relate to the human right at issue in order to determine whether any international law obligations attach to the non-State individual.

And it emphasized that:

1198. The International Labor Office's Tripartite Declaration of Principles concerning Multilateral Enterprises and Social Policy (of 1977, as amended in 2006) states that all parties concerned by this Declaration should respect the Universal Declaration of Human Rights and the corresponding International Covenants adopted by the General Assembly of the United Nations (principle 8).

The Tribunal went on to say that both public and private actors are bound by these commitments. Although it did not take a specific stance with respect to the content of the obligations at stake, be they positive or negative, the language used suggests that these obligations are “do-not-harm” type obligations.Footnote 12 The Tribunal alluded to the fact that these obligations may be different depending on whether they are incumbent on states or on private parties.

Issues of Implementation and Beyond

The conclusion that investors have obligations raises the issue of their implementation. One way is through the use of counterclaims by respondent states. Another way is before the domestic courts of the host state or the home state of the investor.

Counterclaims are a means for challenging an investor's implementation of their obligations. All recent African investment treaties contain provisions dealing with counterclaims.Footnote 13 The inclusion of these provisions is another indication of the recalibrated approach between rights and obligations of states and investors. They allow for claims to be brought against investors when the necessary jurisdictional conditions are met.

Besides the possibility of bringing counterclaims against investors before an investment tribunal, domestic courts may also play a role. In this context, some treaties foresee the possibility of civil liability claims in the home states of investors for damage caused to third parties in the host state through the conduct of the investment.Footnote 14

Footnotes

1 This presentation draws on the research project on “Foreign Investment in Africa: Gaining Development Momentum,” funded by the Swiss National Science Foundation (SNSF) and described at www.investmentafrica.ch.

2 Agreement for Promotion, Protection and Guarantee of Investments Among Member States of the Organisation of the Islamic Conference, June 5, 1981, General Secretariat of the Organisation of the Islamic Conference, available at http://ww1.oic-oci.org/english/convenion/Agreement%20for%20Invest%20in%20OIC%20%20En.pdf.

3 Treaty Establishing the Common Market for Eastern and Southern Africa (COMESA), Art. 13, Nov. 5, 1993, 2314 UNTS 265 [hereinafter COMESA Investment Agreement].

4 South African Development Community (SADC), Model Bilateral Investment Treaty Template (July 2012), available at http://www.iisd.org/itn/wp-content/uploads/2012/10/sadc-model-bit-template-final.pdf [hereinafter SADC Model BIT].

5 Id.

6 Economic Commission for Africa, Draft Pan-African Investment Code, Art. 22-3, UN Doc. E/ECA/COE/35/18 (Mar. 26, 2016), available at http://repository.uneca.org/handle/10855/23009 [hereinafter Draft Pan-African Investment Code].

7 Supplementary Act A/SA.3/12/08 Adopting Community Rules on Investment and the Modalities for their Implementation with ECOWAS, Dec. 19, 2008.

8 Id. Art. 16.

9 Investment Cooperation and Facilitation Agreement Between the Federative Republic of Brazil and the Republic of Malawi, Art. 9, June 25, 2015, available at http://investmentpolicyhub.unctad.org/Download/TreatyFile/4715.

10 United Nations Human Rights Office of the High Commissioner, Guiding Principles on Business and Human Rights: Implementing the United Nations “Protect, Respect and Remedy” Framework (Mar. 21, 2011), available at https://business-humanrights.org/en/un-guiding-principles-on-business-and-human-rights-1.

11 Urbaser S.A., Consorcio de Aguas Bilbao Bizkaia, Bilbao Biskaia Ur Partzuergoa v. The Argentine Republic, ICSID Case No. ARB/07/26, Award (Dec. 8, 2016).

12 Id., para. 1210.

13 COMESA Investment Agreement, Art. 28-9; SADC Model BIT, Art. 19-2; Draft Pan-African Investment Code, Art. 43-1.

14 SADC Model BIT, Art. 17-2.