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Business and Human Rights in InternationalInvestment Law: Empirical Evidence

Isabella Seif

ContentsIntroduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2Business and Human Rights Standards Relevant to International Investment Law . . . . . . . . . . . . 3

State Duty to Protect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3Corporate Responsibility to Respect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Host and Home States’ Duty to Protect Human Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6States Encouraging CSR Practices by Investors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6States’ Acceptance to Increase Human Rights Protection Domestically in IIAs . . . . . . . . . . . . 8Liability Before Home State Courts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Investors’ Responsibility to Respect Human Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12Non-binding Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12Investor Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13Consequences of Non-compliance by the Investor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23Cross-References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

AbstractThis chapter looks at the interaction between human rights and internationalinvestment law, with a particular focus on the extent to which internationallyrecognized principles of business and human rights have been reflected in interna-tional investment law. Namely, the chapter examines how the State duty to protecthuman rights and the corporate responsibility to respect human rights have beenincorporated in recent international investment agreements. The chapter finds thatrecent international investment agreements reflect a growing willingness on the partof States to address human rights protection in the context of foreign investment,primarily through the inclusion of human rights recommendations and/or obliga-tions that apply to States and investors alike. The chapter further considers the

I. Seif (*)Université de Paris 1 (Panthéon-Sorbonne), Hong Kong, Hong Konge-mail: [email protected]

© Springer Nature Singapore Pte Ltd. 2020J. Chaisse et al. (eds.), Handbook of International Investment Law and Policy,https://doi.org/10.1007/978-981-13-5744-2_26-1

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consequences for investors in the event of non-compliance with human rightsrecommendations and/or obligations in international investment agreements.

KeywordsBusiness and human rights · Corporate social responsibility · Human rights ·Counterclaims · Corporate responsibility to respect · State responsibility toprotect · United Nations Guiding Principles on Business and Human Rights ·OECD Guidelines for Multinational Enterprises

Introduction

International investment law, with its origins in diplomatic protection, has tradition-ally been focused on the protection of foreign investors when investing in hostStates. Today, the focus has shifted away from not only considering protection of theinvestor to also considering protection against the investor. That is, there is a greateremphasis on ensuring protection against business-related human rights abuse in thecontext of foreign investment.

This can be attributed to a number of concurrent factors. One of the mostsignificant being that business and human rights standards have gained greaterlegal significance in recent years, primarily through the 2011 UN Guiding Principleson Business and Human Rights (UNGPs). These Principles – while non-binding –have been widely accepted by States and the business community alike and havebeen followed by national and other international standard-setting bodies. As a resultthere is a stronger focus on delineating the responsibilities of international businessoperations and holding transnational corporations accountable in the event of humanrights violations.1 At the same time, efforts to hold corporations accountable forhuman rights violations have proved difficult, especially in the case of foreigninvestors who often incorporate only a small subsidiary in the host State for thepurposes of the investment, but have their main operations elsewhere. This, com-bined with the fact that there is often a lack of capacity in the national courts wherethe wrongdoing occurred, has given rise to an accountability gap. While attemptshave been made to regulate parent companies and their subsidiaries’ extraterritorialoperations, this is largely a developing area of law, with domestic laws varyinggreatly among States. On top of this, there is waning public support for investor-State dispute settlement (ISDS) in general and a willingness on the part of States toengage in reform of the system.2

1See, for example, the United Nations open-ended intergovernmental working group on a legallybinding instrument on transnational corporations and other business enterprises with respect tohuman rights. https://www.ohchr.org/en/hrbodies/hrc/wgtranscorp/pages/igwgontnc.aspx2See, for example, UNCITRAL WG III on Investor-State Dispute Settlement Reform. https://uncitral.un.org/en/working_groups/3/investor-state. See also Chaisse and Donde (2018) The stateof investor-state arbitration – a reality check of the issues, trends, and directions in Asia-Pacific. IntLawyer 51(1):47–67

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https://www.ohchr.org/en/hrbodies/hrc/wgtranscorp/pages/igwgontnc.aspxhttps://uncitral.un.org/en/working_groups/3/investor-statehttps://uncitral.un.org/en/working_groups/3/investor-state

As a result, more recently concluded international investment agreements (IIAs) –including some model IIAs – contain human rights provisions that apply to States, aswell as to investors and their investments. These provisions vary; in some cases theyare binding, and in others they merely indicate expectations. While the human rightsprovisions in these IIAs should not be overstated (the majority of IIAs make noreference to human rights), they indicate a recognition of the growing interactionbetween human rights and foreign investment.

In light of this interaction, this chapter examines how human rights, particularlybusiness and human rights standards, have been incorporated into internationalinvestment law. While this chapter examines some international investment casesinvolving human rights issues, it does not provide a complete analysis of allinternational investment cases involving human rights.3 Instead, the chapter focuseson policy changes in international investment law, evidenced namely through humanrights and corporate social responsibility (CSR) provisions in recent IIAs.

This chapter first provides an outline of the business and human rights principlesthat are relevant to international investment law. It then examines the extent to whichthe State responsibility to protect human rights and the corporate responsibility torespect human rights have been incorporated in recent IIAs, as well as consideringthe consequences for an investor in the case of non-compliance.

Business and Human Rights Standards Relevant to InternationalInvestment Law

Before examining the interaction between human rights and international investmentlaw, it is worth outlining the human rights principles that are relevant for such adiscussion. The applicable human rights principles vary for States and for businessenterprises.

State Duty to Protect

As the primary duty bearers of human rights, States have a positive obligation toboth protect and respect human rights. The obligation to protect has been recognizedas extending to protecting against human rights abuses by private actors, includingbusiness enterprises.4 Part of this obligation includes taking measures to prevent,

3See Chapter [X] by Professor Ernst-Ulrich Petersmann, which provides a comprehensive exami-nation of some important international investment cases involving questions of human rights.4UN Human Rights Committee, General Comment No. 31 “The Nature of the General LegalObligation Imposed on States Parties to the International Covenant on Civil and Political Rights”(2004)

Business and Human Rights in International Investment Law: Empirical. . . 3

punish, investigate, or redress harm caused by private entities.5 These principleshave been recognized by various human rights courts and tribunals6 and are reflectedin the UNGPs.7 Pursuant to the UNGPs, States should “set out clearly the expecta-tion that all business enterprises domiciled in their territory and/or jurisdictionrespect human rights throughout their operation.”8

As part of the State duty to protect against human rights abuse, States must ensure“when such abuses occur within their territory and/or jurisdiction those affected haveaccess to effective remedy.”9 An effective remedy under the UNGPs is not limited tojudicial forms of remedy and may include:

apologies, restitution, rehabilitation, financial or non-financial compensation, and punitivesanctions (whether criminal or administrative, such as fines), as well as the prevention ofharm through, for example, injunctions or guarantees of non-repetition.10

While the UNGPs are not binding, they have been widely accepted andimplemented. The European Commission has asked its Member States to incorpo-rate the UNGPs into their national laws and to submit national action plans for doingso.11 Nearly half the European Union (EU) States have already produced nationalaction plans.12 The European Parliament has also transposed some of the principlesof the UNGPs into their regulations and directives, which in turn are implementedinto Member States’ national laws.13 Additionally, some States have introducedreporting requirements in domestic legislation to ensure that due diligence is beingcarried out in supply chains, such as California’s Dodd Frank Act, the UK Modern

5UN Human Rights Committee, General Comment No. 31 “The Nature of the General LegalObligation Imposed on States Parties to the International Covenant on Civil and Political Rights”(2004)6See X and Y v. the Netherlands, ECtHR, Judgment, 26 March 1985; SERAC and the CESR v.Nigeria, ACHPR, Decision, 27 May 2002; Velásquez-Rodriguez v. Honduras IACtHR, Judgment,29 July 1988; Ergi v. Turkey, ECtHR, Judgment, 28 July 1998.7UNGPs, Principle 18UNGPs, Principle 29UNGPs, Principle 2510United Nations, Office of the High Commissioner for Human Rights (2012) The corporateresponsibility to respect human rights – an interpretative guide, p 711Recommendation CM/Rec(2016)3 of the Committee of Minister to Member States on humanrights and business. Adopted 2 Mar 201612Office of the High Commissioner of Human Rights, “State national action plans.” http://www.ohchr.org/EN/Issues/Business/Pages/NationalActionPlans.aspx. Accessed 13 Aug 201913For example, the European Parliament passed Regulation (EU) 2017/821 of the EuropeanParliament and of the Council of 17 May 2017 laying down supply chain due diligence obligationsfor Union importers of tin, tantalum and tungsten, their ores, and gold originating from conflict-affected and high-risk areas

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http://www.ohchr.org/EN/Issues/Business/Pages/NationalActionPlans.aspxhttp://www.ohchr.org/EN/Issues/Business/Pages/NationalActionPlans.aspx

Slavery Act, and the French Loi de la Vigilance.14 Sates are also being asked byinternational bodies to implement the UNGPs. The Committee on the Rights of theChild, for example, has declared that the 196 States that have ratified the Conventionon the Rights of the Child should require businesses to undertake child rights duediligence to “identify, prevent and mitigate their impact on children’s rights includ-ing across their business relationships and within global operations.”15

Corporate Responsibility to Respect

The essence of the corporate responsibility to respect human rights, as outlined in theUNGPs, is that business enterprises should take appropriate measures to prevent,mitigate, and, if necessary, remediate human rights abuses.16 In order to do this,companies should carry out human rights due diligence: an assessment of the actualand potential human rights impacts over the entire life cycle of a business activity orproject, with the aim of mitigating those impacts.17 This extends to impacts fromboth the companies own activities, as well as impacts that are “directly linked to theiroperations, products or services by their business relationships, even if they have notcontributed to those impacts.”18 “Business relationships” are understood to includerelationships with business partners, entities in its value chain, and any other entitydirectly linked to its operations, products, or services.19

Businesses are also expected to assist in victims’ access to remedy. Under theUNGPs, there is an expectation that business enterprises will establish or participatein operational-level grievance mechanisms for individuals and communities whomay be adversely impacted.20

While the UNGPs are not directly binding on companies, they have, to varyingdegrees, been adopted by other national and international standard setting bodies thathave greater leverage over businesses, granting them legal significance.21 Forexample, the OECD Guidelines for Multinational Enterprises (OECD Guidelines)have a human rights chapter that, consistent with the UNGPs, requires due diligence

14Dodd-Frank Wall Street Reform and Consumer Protection Act 2010 (California); Modern SlaveryAct 2015 (UK); Loi n� 2017-399 du 27 mars 2017 relative au devoir de vigilance des sociétés mèreset des entreprises donneuses d’ordre (France)15UN Committee on the Rights of the Child (CRC), General comment No. 16 (2013) on Stateobligations regarding the impact of the business sector on children’s rights, 17 April 2013, CRC/C/GC/16, para. 6216UNGPs, Principles 11 and 1717Report of the Special Representative of the Secretary-General on the issue of human rights andtransnational corporations and other business enterprises, A/HRC/11/13, 22 April 200918UNGPs, Principle 1319Commentary to the UNGPs, HR/PUB/11/04, p. 1520UNGPs, Principle 2921See Ford (2015) Business and human rights: bridging the gap. Chatham House research paper, pp5–6 for an analysis of the impact of the UNGPs.


and responsible supply chain management. The OECD Member States are requiredto establish a complaints mechanism under which anyone can bring a claim about theconduct of multinationals that operate in or from those countries.22 Similarly, theInternational Finance Corporation and the International Standards Organization havedeveloped CSR standards drawn from the UNGPs.23

Host and Home States’ Duty to Protect Human Rights

Recent IIAs signal a growing willingness on the part of States, across variousregions, to fulfil their obligation to protect human rights in the context offoreign investment by including provisions that place human rights duties and/or expectations on both States and investors alike. The State duty toprotect human rights has generally been reflected in IIAs in three ways: (1) Statesagreeing to encourage business enterprises to voluntarily adopt internationallyrecognized CSR standards; (2) States agreeing to increase human rights protectiondomestically; and (3) States agreeing to facilitate claims brought against investorsin their home State for acts committed in the host State. These are addressed in turnbelow.

States Encouraging CSR Practices by Investors

An increasing number of States have begun to include CSR language in their IIAs.Not all of these CSR provisions were included after the UNGPs. One of the first IIAsto include CSR language was the 2004 US-Chile Trade Agreement.24 Article 19.10provides as follows:

Recognizing the substantial benefits brought by international trade and investment as well asthe opportunity for enterprises to implement policies for sustainable development that seekto ensure coherence between social, economic and environmental objectives, each Partyshould encourage enterprises operating within its territory or jurisdiction to voluntarilyincorporate sound principles of corporate stewardship in their internal policies, such asthose principles or agreements that have been endorsed by both Parties.

Canada has adopted a somewhat similar provision (although referring to CSRrather than corporate stewardship) in many of its recent IIAs, including withColombia, Serbia, Mongolia, Guinea, Burkina Faso, Cȏte D’Ivoire, Mali, Benin,

22OECD Guidelines for Multinational Enterprises, Chapter on Consumer Interests, para. 323The International Finance Corporation Performance Standards on Environmental and SocialSustainability, 2012; the International Standards Organisations, ISO 26000 – Social Responsibility24US-Chile FTA, signed 6 June 2013, entered into force 1 January 2004. Another early IIA toinclude reference to corporate social responsibility is the 2008 EU-Cariforum Economic PartnershipAgreement, signed 15 October 2008, entered into force 1 January 2009.

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Cameroon, and Senegal.25 Even more recently, the Comprehensive and ProgressiveAgreement for Trans-Pacific Partnership (TPP-11) includes a similar provision,whereby each contracting party is to encourage enterprises within its territory orjurisdiction to “voluntarily incorporate” CSR principles that the contracting partyhas endorsed or supported.26 A similar provision is also found in the Argentina-Japan BIT, which has not yet entered into force.27

Providing further clarity, the 2019 Dutch Model BIT refers specifically to theOECD Guidelines and the UNGPs as examples of internationally recognized stan-dards, guidelines, and principles of CSR.28 Notably, the Dutch Model BIT evenrefers to the due diligence requirements of investors:

The Contracting Parties reaffirm the importance of investors conducting a due diligenceprocess to identify, prevent, mitigate and account for the environmental and social risks andimpacts of its investment.29

Consistent with the UNGPs, this makes clear that the CSR expectations on inves-tors includes carrying out due diligence to evaluate the impacts of their investmentsand operations. The Model BIT has not yet been used as a basis for a concludedtreaty with the Netherlands.

In a similar vein, the EU’s recently signed IIAs indicate its willingness to engagewith CSR practices in the foreign investment context. For example, the EU-JapanEconomic Partnership Agreement (EU-Japan FTA) provides that the parties “shallencourage corporate social responsibility,” elevating this to a legal obligation on theState parties.30 The FTA also establishes a Committee on Trade and SustainableDevelopment through which the parties are to exchange views and informationregarding their mutual encouragement of CSR.31 Similarly, the ComprehensiveTrade and Economic Agreement between Canada and the European Union(CETA) –which has been signed but not yet entered into force – includes a provision

25Canada-Colombia FTA, signed 21 November 2008, entered into force 15 August 2011); Canada-Serbia BIT, signed 1 September 2014, entered into force 27 April 2015; Canada-Mongolia BIT,signed 8 September 2016, entered into force 24 February 2017; Canada-Guinea BIT, signed 27 May2015, entered into force 27 March 2017; Canada-Burkina Faso BIT, signed 20 April 2015, enteredinto force 11 October 2017; Canada-Cȏte D’Ivoire BIT, signed 30 November 2014, entered intoforce 14 December 2015; Canada-Mali BIT, signed 28 November 2014, entered into force 8 June2016; Canada-Benin BIT, signed 9 January 2013, entered into force 12 May 2014; Canada-Cameroon BIT, signed 3 March 2014, entered into force 16 December 2016; Canada-SenegalBIT, signed 27 November 2014, entered into force 5 August 2016.26TPP-11, opened for signature 8 March 2018, entered into force for the initial six ratifying Stateson 31 October 2018. The initial six ratifying States are Mexico, Japan, Singapore, New Zealand,Canada, Australia, and Vietnam.27Argentina-Japan BIT, signed 1 December 2018, Article 1728Dutch Model BIT, Article 7(2)29Dutch Model BIT, Article 7(3)30EU-Japan FTA, signed 17 July 2018, entered into force 1 February 2019, Article 16.531EU-Japan FTA, Article 16.3(4)


whereby the parties are to encourage CSR by enterprises and refers directly to theOECD Guidelines as an example of best practices.32, 33

The Singapore-Nigeria BIT – also signed, but not yet in force – includes aprovision whereby States are to encourage CSR practices. However, the level ofobligation on each State is different. Nigeria “is to encourage” enterprises to adoptCSR practices (which compromises a legal obligation on the State), whereas Singa-pore merely “reaffirms the importance” of encouraging CSR practices (which doesnot create a legal obligation for the State).

While the above provisions are, for the most part, not binding on the State parties,their inclusion indicates some recognition of the importance of responsible businessconduct in the context of foreign investment, as well as a recognition of the role ofStates in protecting against business-related human rights abuse. The aim of suchprovisions is to encourage CSR practices by investors through a “top-down logic.”34

That is, the provisions are directed at States, which in turn are to encourage CSRpractices by investors making an investment in their territory.

Nevertheless, the provisions are non-binding vis-à-vis investors. While Statesparties “reaffirm the importance” or agree to “encourage” investors to “voluntarily”adopt CSR practices, absent binding domestic legislation, investors are free tochoose whether to implement these practices.

States’ Acceptance to Increase Human Rights ProtectionDomestically in IIAs

In recognition that an effective means to protect human rights is through domesticlaw, some States have agreed in recent IIAs to ensure that their domestic lawsprovide for high levels of human rights protection. In some cases this does not relateto the protection of human rights per se, but of labor rights and the environment,which arguably have considerable overlap with human rights generally. For exam-ple, the EU-Japan FTA provides that:

each Party shall strive to ensure that its laws, regulations and related policies provide highlevels of environmental and labour protection and shall strive to continue to improve thoselaws and regulations and their underlying levels of protection.35

Similar obligations in relation to ensuring certain levels of environmental andlabor protection are found in CETA, the Dutch Model BIT, the Southern AfricanDevelopment Community’s Model BIT (SADC Model BIT), and the Brazil Model

32CETA, Article 22.3(2)(b). A similar provision is found in Article 17 of the Argentina-UAE BIT,signed 6 November 2018, not yet entered into force33Argentina-UAE BIT, signed 6 November 2018, Article 1734See Monebhurrun (2017) Mapping the duties of private companies in international investmentlaw. Braz J Int Law 14:50–71, pp 55–5735EU-Japan FTA, Article 16.2(1)

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Cooperation and Facilitation Investment Agreement (Brazil Model BIT).36 All ofthese agreements also contain provisions whereby the State parties recognize theinappropriateness of lowering such levels of protection to encourage foreign invest-ment.37 Similarly, Canada has introduced a provision in some of its IIAs againstrelaxing laws on domestic health, safety, and environmental measures in order toencourage investment.38

Even stronger is the Economic Community of West African States Supplemen-tary Act on Investments (ECOWAS Investment Act) and the Morocco-Nigeria BIT(which has been signed, but not yet entered into force). The Morocco-Nigeria BITwas largely modelled on the ECOWAS Investment Act; hence there are strongsimilarities between the two instruments. The ECOWAS Investment Act requiresthe ECOWAS Member States to have domestic laws for environmental, labor, andhuman rights protection, with the labor laws being in accordance with the 1998 ILODeclaration on Fundamental Principles and Rights of Work.39

Under the Morocco-Nigeria BIT, the State parties are to ensure that their lawsprovide high levels of labor protection, as well as human rights protection, althoughit does not cover environmental protection.40 The relevant provision on this isinteresting in that it makes reference to the appropriate level of protection that thecontracting party is realistically able to provide:

Each Party shall ensure that its laws and regulations provide for high levels of labour andhuman rights protection appropriate to its economic and social situation, and shall strive tocontinue to improve these law [sic] and regulations.41

Similar to the above IIAs, both instruments recognize that it is inappropriate forthe Contracting Parties to lower their domestic labor, public health, and safetyprotections to encourage foreign investment.42 Notably, the ECOWAS InvestmentAct also requires the Member States to implement domestic laws on impactassessments:

All Member States shall have a domestic social, health and environmental impact assessmentlaws [sic] that meet the minimum standards adopted by the Community on these matters.43

36CETA, Articles 23.2 and 24.3; SADCModel BIT, Article 22; 2015 Brazil Model Cooperation andFacilitation Investment Agreement Brazil Model BIT, Article 16(2)37EU-Japan FTA Article 16.2(2); CETA, Articles 23.4 and 24.5; Dutch Model BIT, Article 6(2) and6(4)38See, for example, Canada-SlovakRepublic BIT, signed 20 July 2010, entered into force 14March 201239ECOWAS Supplementary Act A/SA.3/12/08 Adopting Community Rules on Investment and theModalities for their Implementation (ECOWAS Investment Act), signed 19 December 2008,entered into force 19 January 2009. ECOWAS Act on Investments, Articles 21(1), 21(2) 21(4)40Morocco-Nigeria BIT, Article 15(6)41Morocco-Nigeria BIT, Article 15(5) (emphasis added)42ECOWAS Investment Act, Article 20; Morocco-Nigeria BIT, Article 15(3)43ECOWAS Investment Act, Article 21(3)


Coupled with this is the requirement under the ECOWAS Investment Act forinvestors to carry out impact assessments both prior to and following the estab-lishment of their investment, which is discussed in more detail in the followingsection.

Finally, both instruments require the State parties to ensure that their “laws,policies, and actions” are consistent with the human rights treaties to which theyare a party.44 In practice this places a high burden on the State parties. In relation tolaws and policies, assessing compliance with this would prove problematic. It isunlikely that any State will have all their laws and policies in line with their humanrights treaty obligations at any one time. Periodic reviews of State laws andpolicies by human rights treaty committees usually result in numerous recommen-dations being made to States as to how they can better bring their laws and policiesin line with their treaty obligations. This is also due to the fact that the interpre-tation of such treaties, and thereby the obligations contained therein, can evolveover time.

Nevertheless, it is conceivable that an investor could rely on such a provision inthe context of ISDS. The ECOWAS Investment Act does not allow for ISDS;however the Morocco-Nigeria BIT allows for “any dispute” between the parties tobe submitted to ISDS. In the event that a foreign investor finds a law or policy to beinconsistent with the host State’s human rights treaty obligations, or finds that thehost State has acted in a manner contrary to its human rights treaty obligations, theremay be scope to bring a claim against the State under the Morocco-Nigeria BIT. Thefact that the BIT refers specifically to the host State’s human rights treaty obligationscould arguably mean that such treaty would be applicable under the BIT. Neverthe-less, such a dispute would have to fulfil the normal jurisdictional requirements. Forexample, if submitted to ICSID, it must be demonstrated as a “legal dispute arisingdirectly out of an investment.”45

Liability Before Home State Courts

In line with States’ international law obligation to ensure access to remedyfor victims of human rights abuses, some of the abovementioned IIAsinclude a provision, submitting investors to the civil jurisdiction of their homeState courts, for damages arising in the host State. For example, ECOWAS Article17 provides as follows:

Investors shall be subject to civil actions for liability in the judicial process of their homeState for acts or decisions made in relation to the investment where such acts or decisionslead to significant damage, personal injuries or loss of life in the host State.

44ECOWAS Investment Act, Article 21(5); Morocco-Nigeria BIT, Article 15(6)45ICSID Convention, Article 25

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Similar provisions are found in the Morocco-Nigeria BIT,46 as well as the DutchModel BIT47 and the SADC Model BIT.48

The purpose of such a provision is to ensure that foreign investors who abusehuman rights do not enjoy impunity. The gap in accountability for business-relatedhuman rights abuse can arise where there is a lack of capacity in the national courtswhere the conduct occurred. Due to this, redress is often sought before the domesticcourts of the parent company, rather than those where the subsidiary is incorporated.Jurisdiction over such claims involves questions of private international law andultimately depends on the national jurisdictional laws in place where the claim isbrought. However, jurisdictional laws vary among States, with national courtscontinuing to debate the extent of their extraterritorial jurisdiction in relation totransnational corporations. The UN Working Group mandated to develop a bindingtreaty covering the activities of transnational corporations is considering this issueand may serve to harmonize jurisdictional laws for business and human rightsactivities in the future. The current draft allows jurisdiction before courts wherethe corporation is domiciled, which includes (among other things) where a corpora-tion has its central administration or has substantial business interests.49

While there may be harmonization of jurisdictional laws in the future, thepractical effect of provisions such as Article 17 of ECOWAS remains limited.While domestic courts faced with a claim may give weight to relevant provisionsin an IIA that the State has entered into, it is unlikely that this will automaticallyresult in a finding of jurisdiction in the absence of domestic laws to this effect.There also remains the question of applicable law, whether it should be the lawwhere the acts occurred or the law where the claim is brought. Thus, muchwill depend on the jurisdiction and choice of laws in place in the State in whicha claim is brought.

Arguably, it is implied from these provisions that the State parties to the IIAswill amend their domestic laws accordingly. In some cases, there are even explicitprovisions to this effect. For example, the ECOWAS Investment Act requiresStates to ensure that their domestic laws allow the bringing of civil claims againstinvestors for damages resulting from acts or decisions made by investors inrelation to their investments in the territory of another State party.50 The SADCModel BIT contains a similar provision, but no such provision is in the Morocco-Nigeria BIT.51

46Morocco-Nigeria BIT, Article 2047Dutch Model BIT, Article 7(4)48SADC Model BIT, Article 17.149UNWorking Group, Revised Draft of Legally Binding Instrument, in International Human RightsLaw, the Activities of Transnational Corporations and other Business Enterprises, 16 July 2019,Article 750ECOWAS, Investment Act, Article 2951SADC Model BIT, Article 17.2


Investors’ Responsibility to Respect Human Rights

In line with the corporate responsibility to protect, States have begun to include IIAprovisions that are addressed directly to investors, embracing the “bottom-uplogic.”52 These provisions are either (1) non-binding recommendations or (2) man-datory requirements. These are addressed in turn below.

Non-binding Recommendations

Some IIAs contain non-binding recommendations to investors in relation to CSRpractices and human rights. The Qatar-Argentina BIT – which has been signed, butnot yet entered into force – provides that investors “should make efforts” toincorporate internationally recognized standards of CSR into their practices andpolicies.53 Similar to this, the India Model BIT provides that investors and theirinvestments “shall endeavor to voluntarily incorporate” international CSR stan-dards. The term “shall endeavor,” while mandatory in the sense that endeavorsmust be taken, in practice merely requires the investor to make best efforts,especially as the CSR standards are to be voluntarily incorporated. This provisionhas been included in India’s only concluded BIT since the adoption of the ModelBIT: the India-Belarus BIT.54

Other IIAs contain more detailed recommendations. For example, theMorocco-Nigeria BIT provides that investors “should strive to make the maximumfeasible contributions to the sustainable development of the Host State and localcommunity through high levels of socially responsible practices.”55 In addition,investors should apply the ILO Tripartite Declaration on Multinational Invest-ments and Social Policy “as well as specific or sectorial standards of responsiblepractice.”56 Where CSR standards increase, investors should apply the higherstandards.57

Under Brazil’s Model BIT investors “shall strive to achieve” to contribute to thesustainable development of the host State and local community through high levelsof socially responsible practices.58 The Model BIT further provides that investorsand their investments “shall endeavour to comply” with a list of voluntary principlesand standards for responsible business conduct, which includes (among other things)respecting the human rights of those involved in the business and encouraging

52See Monebhurrun (2017) Mapping the duties of private companies in international investmentlaw. Braz J Int Law 14:50–71, pp 57–5953Qatar-Argentina BIT, Article 1254India-Belarus BIT, signed 24 September 2018, Article 1255Morocco-Nigeria BIT, Article 24(1)56Morocco-Nigeria BIT, Article 24(2)57Morocco-Nigeria BIT, Article 24(3)58Brazil Model BIT, Article 14(1)

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capacity building within the local community.59 These provisions have beenincluded in Brazil’s two most recently concluded BITs – with the UAE and Guyana,respectively – neither of which have entered into force.60 Similarly to the IndiaModel BIT, the use of the term “shall” indicates binding language; however inpractice “shall strive to achieve” and “shall endeavour to comply” are likely tomerely require best efforts from the investor.

While the above provisions are not particularly onerous for investors, theyprovide clearer guidance to investors as to the expectations on them when investingin the host State. They also signal a recognition – albeit by a limited number of States –of the relationship between business and human rights practices and responsibleinvestment conduct.

Investor Obligations

While there are a select number of IIAs that impose binding obligations on investors,before outlining these, it is worth noting that the issue of imposing what areessentially treaty obligations on private actors, such as investors, is complex. Thechallenge being that for some time, only States were seen as subjects of internationallaw because only States had both rights and obligations under international law andstanding to enforce their rights before international courts and tribunals. Individualsand corporations, on the other hand, were seen as objects of international law,capable of benefiting from rights under international law, but not subject to directobligations and unable to enforce their rights on the international plane without theinvolvement of a State. As mere objects of international law, corporations theoret-ically cannot have direct obligations imposed on them by international law, such asobligations contained in an IIA.

Nevertheless, it has since been recognized that States are not exclusively subjectsof international law61 and that the subject-object division may not reflect the realityof international law today. There is growing acceptance that viewing corporations as

59Brazil Model BIT, Article 14(2)60Brazil-UAE BIT, signed 15 March 2019; Brazil-Guyana BIT, signed 13 December 201861The ICJ has recognized that the United Nations is a subject of international law that is “capable ofpossessing international rights and duties, and that it has capacity to maintain its rights by bringinginternational claims.” Reparation for Injuries Suffered in the Service of the United Nations,Advisory Opinion: I.C.J Reports 1949, p. 179. See also Interpretation of the Agreement of 25March 1951 between the WHO and Egypt, Advisory Opinion of 20 December 1980, I.C.J. Reports1980, p. 73, in which the ICJ recognized that international organizations were subject to interna-tional law obligations; see also Article 5 of the Rome Statute of the International Criminal Court1998, which grants jurisdiction in certain circumstances over individuals for genocide, crimesagainst humanity, war crimes, and the crime of aggression.


participants in international law more accurately reflects their role.62 As internationaleconomic law has developed and grown, so too has the participation of corporationsin international law. The rise of multinational corporations has seen a fundamentalshift in power, with companies often able to exert a high level of influence overStates and international organizations. Corporations, for example, are instigating orbeing directly involved in the drafting of treaties in international economic lawand have, to a certain extent, been given at voice at the United Nations,following the granting of observer status to the International Chamber ofCommerce.63 While States remain the key players in international law, corporationsare clearly not passive actors, lacking any substantive role in the law-makingprocess.

International human rights law arguably envisages obligations on corporations.The preamble to the Universal Declaration of Human Rights calls on “everyindividual and every organ of society” to promote and respect human rights.64

International law scholar Louis Henkin noted in 1999 that “every individual andevery organ of society excludes no one, no company, no market, no cyberspace. TheUniversal Declaration applies to them all.”65 However, previous attempts to createbinding international human rights obligations on corporations have failed.66 On theother hand, the UNGPs create only “soft law” obligations vis-à-vis corporations,merely indicating that corporations “should” adopt certain practices. In addition, theUN Working Group mandated with developing a binding treaty for transnationalcorporations has not included direct obligations in the working drafts of the treaty,instead imposing obligations on States who then, in turn, regulate corporations byimplementing domestic legislation.

This issue of investors’ international human rights obligations in relation tointernational investment law arose in Urbaser v. Argentina.67 In this case a conces-sion for water and sewerage services in the Province of Buenos Aires had beenawarded to a concessionaire. The claimants in the dispute were shareholders of theconcessionaire and claimed that it had suffered financial loss, and ultimately

62See Higgins (1994) Problems and process: international law and how we use it. Clarendon Press,New York, p 50; Zerk (2006) Multinationals and corporate social responsibility: limitations andopportunities in international law. CUP, Cambridge, p 74; McCorquodale (2006) Beyond statesovereignty: the international legal system and non-state participants. Rev Colomb Derecho Int8:103–159, p 124; Alvarez (2011) Are corporations ‘subjects’ of international law. Santa Clara J IntLaw 9:1–35, pp 8–9; see also Clapham (2006) Human rights obligations of non-state actors. OUP,Oxford, p 82 in which he considers that corporations have limited legal personality.63The International Chamber of Commerce was granted observer status by the General Assemblyon 13 December 2016.641948 Universal Declaration of Human Rights, Preamble65Henkin (1999) The Universal Declaration at 50 and the challenge of global markets. Brooklyn JInt Law 25:17–26, p 2566See, for example, the 2003 UN Norms on the Responsibilities of Transnational Corporations andOther Business Enterprises with Regard to Human Rights.67Urbaser S.A. and Consorcio de Aguas Bilbao Bizkaia, Bilbao Biskaia Ur Partzuergoa v. TheArgentine Republic (Urbaser v. Argentina), ICSID Case No. ARB/07/26

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insolvency, as a result of Argentina’s emergency measures implemented followingits financial crisis. Argentina filed a counterclaim, alleging that the concessionairehad failed to fulfil its investment obligations under the concession contract, whichhad the effect of violating the local population’s right to water.68

In considering the counterclaim, the tribunal held that “it can no longer beadmitted that companies operating internationally are immune from becoming sub-jects of international law.”69 Nevertheless, the tribunal held that that the right towater under international law imposes an obligation on States to provide access towater, but held that there was no such obligation on the investor and its shareholdersunder international law:

the mere relevance of this human right under international law does not imply that [theinvestor and its shareholders] were holding corresponding obligations equally based oninternational law. No human rights obligation to provide access to water existed on the partof the claimants before they entered into the concession.70

Ultimately, the tribunal assumed jurisdiction over Argentina’s claim, finding thatit related to the failure of the concessionaire to fulfil its obligations under theconcession contract and was therefore grounded in contract, rather than internationallaw.71 As an aside, the tribunal explained that an obligation to abstain from violatinghuman rights may be applicable to both States and private actors, but that this wasnot the case in the present dispute, and thus it failed to elaborate further.72

In terms of actual international law obligations on investors under IIAs, they arelimited. It has been common practice for some time for IIAs to require investors toestablish their investment in accordance with the host State’s domestic law. Failure todo so may result in the investment being considered “illegal” and not benefiting fromthe protection of the relevant IIA. Extending beyond this, several IIAs requireinvestors to comply with host State laws, either generally or in a particular sector.The ECOWAS Investment Act, for example, provides that investors and theirinvestments are subject to the laws and regulations of the host State.73 Similarly,the SADC Model BIT provides that investors and their investments shall complywith all domestic laws throughout the duration of the investment.74 The DutchModel BIT, on the other hand, requires investors and their investments to complywith domestic laws relating to human rights, environmental protection, and labor

68Urbaser v. Argentina, Award, para. 1156. For a detailed analysis of this award, see Qian (2018)Challenges of water governance (and privatization) in China-Traps, Gaps, and Law. Georgia J IntComp Law 47(1):49–9169Urbaser v. Argentina, Award, para. 120670Urbaser v. Argentina, Award, para. 121271Urbaser v. Argentina, Award, para. 120672Urbaser v. Argentina, Award, para. 121073ECOWAS Investment Act, Article 11(1)74SADC Model BIT, Article 11


protection.75 In a similar vein, the Intra-Mercosur Investment Cooperation andFacilitation Investment Protocol requires investors to comply with local laws relat-ing to investment and taxation.76 The Pan-African Investment Code – a non-bindinginvestment instrument drafted by the African Union – requires investors to complywith the domestic laws of the host State, as well as ensuring that their investments donot conflict with the host State’s social and economic development objectives.77

Additionally, investors shall not exploit or use local natural resources to the detri-ment of the rights of the host State and shall respect the rights of the localpopulations, avoiding land grabbing practices.78

The ECOWAS Investment Act contains stronger obligations and is probably themost onerous IIA currently in force in terms of investor duties. Prior to establishingtheir investments, investors must conduct an environmental and social impactassessment and, in doing so, must comply with the domestic screening criteria andassessment processes that are required under domestic law.79 The environmental andsocial impact assessments must be made accessible to the local community and toother affected interests prior to the investment being made.80 Further, the investors,their investments, and the host State authorities must apply the precautionaryprinciple to the impact assessments.

Once an investment has been made, investors have post-establishment obliga-tions to fulfil, such as acting in accordance the ILO Declaration on FundamentalPrinciples and Right of Work and complying with the Millennium DevelopmentGoals.81 In addition, there are strict human rights obligations placed on investors,such as upholding human rights in the workplace and the community, not undertak-ing acts that breach human rights and not violating human rights in times of peace orduring sociopolitical upheavals.82

The SADC Model BIT and the Morocco-Nigeria BIT contain many similarprovisions to the ECOWAS Investment Act, including requiring environmentaland/or social impact assessments prior to making the investment. In addition, bothinstruments require investors to carry out environmental management systems afterinvestments have been established.83

All three instruments contain provisions relating to the environmental, labor, andhuman rights treaties to which the host or home State are parties. The wording ofthese provisions differs slightly across all three instruments. The ECOWAS Invest-ment Act, as an example, provides as follows:

75Dutch Model BIT, Article 7(1)76Intra-MERCOSUR Cooperation and Facilitation Investment Protocol, signed 7 April 201777PAIC, Article 22(2) and 22(3)78PAIC, Article 23(1) and 23(2)79ECOWAS Investment Act, Article 12(1)80ECOWAS Investment Act, Article 12(2)81ECOWAS Investment Act, Article 14(4) and 16(1)82ECOWAS Investment Act, Article 1483SADC Model BIT, Articles 14 and 15

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Investors shall not manage or operate the investments in a manner that circumvents humanrights obligations, labour standards as well as regional environmental and social obligations,to which the host State and/or home State are Parties84

It is not immediately clear what is required under this provision. The Commen-tary to the SADC Model BIT explains that its comparable provision imposes a“duty on investors and investments to respect the international human rights,environmental and labor standards adopted by the host State through participationin international agreements.”85 Such a provision could therefore require investorsnot to manage or operate their investments in a manner that prevents the host orhome State from fulfilling its obligations under the international environmental,labor, or human rights instruments to which it is a party. In this way, such aprovision may aim to prevent a scenario somewhat similar to that of Urbaser v.Argentina, i.e., an investor preventing the State from fulfilling its human rightsobligations vis-a-vis its citizens. Alternatively, the provision may require investorsto follow the standards contained in international instruments to which the hostState or home State are party. However, the obligations in these instruments areaddressed to States and an understanding of what would be required of an investorin practice may prove problematic.

Consequences of Non-compliance by the Investor

While it is significant that a growing number of IIAs are including recommendationsand even binding obligations on investors, it is important to consider what theconsequences of non-compliance would be for an investor. The greater the conse-quence, the more legal significance such provisions will have in practice.

The judicial processes are likely to be either before domestic courts or before aninternational investment tribunal. This chapter will not address the consequences forliability before domestic courts, but will instead focus on the consequences for aninvestor in the context of international investment arbitration.

Effects on the Jurisdiction, Admissibility, Merits, or Quantum of anInvestor’s Claim in ISDSThe behavior of an investor and/or how an investment is carried out in the host Stateis likely to have consequences on any eventual claims brought before an interna-tional investment tribunal.

First, there may be consequences to the merits and/or quantum of the investor’sclaim. Tribunals have often taken into consideration the behavior of the investorwhere the State has argued that the investor contributed to the breach86 or failed to

84ECOWAS, Article 14(2).85SADC Model BIT Commentary, p. 3686See, for example, Copper Mesa Mining Corporation v. Republic of Ecuador, PCA No. 2012-2,Award, 15 March 2016, para. 5.65.


mitigate losses incurred.87 Some of the IIAs discussed in this chapter even containexplicit provisions whereby the investor’s behavior is to be taken into considerationin the merits and/or damages phase. The Dutch Model BIT, for example, indicatesthat the investor’s non-compliance with its business and human rights requirementsshould be taken into account in assessing the investor’s claim. Article 23 provides asfollows:

Without prejudice to national administrative or criminal law procedures, a Tribunal, indeciding on the amount of compensation, is expected to take into account noncomplianceby the investor with its commitments under the UN Guiding Principles on Business andHuman Rights, and the OECD Guidelines for Multinational Enterprises.

The inclusion of such a provision gives greater legal significance to the largelysoft law business and human rights and CSR requirements. Failure to comply withthese requirements could have adverse effects to the amount of compensationawarded to an investor, which results in tangible consequences and thereby warrantsconsiderable attention from investors.

The ECOWAS Investment Act contains a similar provision that focuses on thepre-investment phase. Article 18 provides that if it is materially relevant to a disputethat an investor has not conducted its pre-establishment impact assessment, this willbe taken into account when considering the merits or damages of a claim. Thisequally gives greater legal significance to the pre-impact assessments by indicatingreal consequences to the investor should it fail to conduct such assessment.88

The SADC Model BIT and the Pan-African Investment Code includesimilar provisions that relate to the general obligations of the investor. Theyprovide that where an investor has failed to comply “with its obligations”under the BIT or Code and such “breach” is material to the dispute, thetribunal will take this into consideration in assessing the merits or damages ofthe claim.89

Even absent an explicit provision, tribunals will no doubt consider whether aninvestor and their investments have complied with local laws where the IIA requiresthat they do so. As discussed above, several IIAs require investors and theirinvestments to comply with local laws in general, while some require investorsand their investments to comply with specific laws, such as those relating to theenvironment or human rights.90 Reference to local laws in the IIA will ensure that

87See, for example,Middle East Cement Shipping and Handling Co. S.A. v. Arab Republic of Egypt,ICSID Case No. ARB/99/6, Award, 12 August 2002, para. 167.88The ECOWAS Investment Act, however, does not provide for ISDS – see Article 8(6).89Pan-African Investment Code, Article 43(1) (in the context of a counter-claim); SADC ModelBIT, Article 19.1.90For example, the ECOWAS Investment Act, Article 11(1); SADC Model BIT, Article 11; DutchModel BIT, Article 7(1); Intra-MERCOSUR Cooperation and Facilitation Investment Protocol;PAIC, Article 22(2)

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tribunals can consider these laws as part of the applicable law.91 This is also inaccordance with Article 42(1) of the ICSID Convention which provides that unlessthe parties have otherwise agreed, the tribunal may apply domestic law (amongothers).

Second – while not specifically provided for by the abovementioned IIAs – theremay be consequences to the jurisdiction or the admissibility of an investment claim.Tribunals often considered the conduct of the investor in determining whether theinvestment falls within the scope and protection of the applicable IIA. As the tribunalin Hamester v. Ghana stated:

An investment will not be protected if it has been created in violation of national orinternational principles of good faith; by way of corruption, fraud, or deceitful conduct; ofit its creation itself constitutes a misuse of the system of international investment protectionunder the ICSID Convention. It will also not be protected if it is made in violation of the hostState’s law[.]

Tribunals have also considered a claim of unclean hands in the context ofjurisdiction and/or admissibility of a claim,92 as well as whether the claim shouldnot be afforded IIA protection as a matter of international public policy. In PhoenixAction v. Czech Republic, while not involving human rights issues, the tribunalrecognized that “investments made in violation of the most fundamental rules ofprotection of human rights, like investments in pursuance of torture or genocide or insupport of slavery or trafficking of human organs” cannot benefit from investmenttreaty protection.93 This is because, as a matter of public policy, investors are notmeant to benefit from treaty protection when their investments have been obtainedthrough improper conduct.94

Generally, however, tribunals have interpreted these factors as relating only to theestablishment phase of the investment, rather than applying throughout the duration

91See de Brabandere (2018) Human rights and international investment law. Grotius Centreworking paper series, vol 75, pp 1–23 who considers that reference to domestic law in the IIAincorporates that law into the treaty and thereby makes it applicable in an investment dispute, p.12.92See, for example, Hesham Talaat M. Al-Warraq v. Indonesia, UNCITRAL, Final Award, 15December 2014, paras 645–646: Niko Resources (Bangladesh) Ltd. v. People’s Republic of Ban-gladesh et al., ICSID Case No. ARB/10/11 and ICSID Case No. ARB/10/18, Decision onJurisdiction, 19 August 2013, para. 477; Glencore Finance (Bermuda) Limited v. PlurinationalState of Bolivia, PCA Case No. 2016-39, Procedural Order No. 2.93Phoenix Action, Ltd. v. Czech Republic, ICSID Case No. ARB/06/5, Award, 15 April 2009, para.78. For a detailed commentary on this award, see Chaisse (2015) The issue of treaty shopping ininternational law of foreign investment – structuring (and restructuring) of investments to gainaccess to investment agreements. Hast Bus Law Rev 11(2):225–30694Less extreme cases of improper conduct, such as obtaining investments through fraud, have alsobeen considered inadmissible as a matter of public policy. See Churchill Mining PLC and PlanetMining Pty Ltd v. Republic of Indonesia, ICSID Case No. ARB/12/14 and 12/40, Award, 6December 2016, para. 528.


of the investment.95 This is especially the case for the legality requirement (thatinvestments be made in accordance with local laws), given that many IIAs containexplicit provisions whereby investments are to be “made in accordance” with locallaws.96 Where this is not the case, the investment is considered to be outside thescope of the protection of the IIA and therefore outside the scope of the adjudicationsystem contained therein. Nevertheless, in practice it is difficult to conceive howhuman rights might be violated in the making of the investment. Rather, humanrights issues are more likely to arise during the course of the investment. Illegality orother improper conduct involving human rights issues during the course of theinvestment may be taken into consideration in the merits phase,97 but it is less likelythat it would affect the jurisdiction or admissibility of an investment claim.

Therefore, the legal consequences of improper or illegal conduct is likely tolargely depend on the circumstances of each case. Factors to be considered are theapplicable IIA; the seriousness of the improper or illegal conduct; the role of theparties in relation to the conduct; the nexus between the conduct and the investmentclaims; and the time when the conduct was carried out (during the course of theinvestment or when establishing the investment).98 Ultimately, improper or illegalconduct may affect the jurisdiction of a tribunal, the admissibility of some or all ofthe claims, the merits of the dispute, or the amount of quantum awarded, ifsuccessful.

Exposure to CounterclaimsFailure on the part of an investor or its investment to comply with the human rightsrequirements outlined in the preceding sections may expose an investor to a coun-terclaim by the host State. That is not to say an investor is likely to face acounterclaim for failing to implement voluntary CSR practices. Of course, a coun-terclaim is possible only in the case of more serious misconduct and will dependheavily on the facts of the case. In any event, before a host State could bring a

95See, for example, Bernhard von Pezold and others v. Republic of Zimbabwe, ICSID Case No.ARB/10/15, Award, 28 July 2015, para. 420; Gustav F W Hamester GmbH & Co KG v. Republic ofGhana, ICSID Case No. ARB/07/24, Award, 18 June 2010, para. 127; Vladislav Kim and others v.Republic of Uzbekistan, ICSID Case No. ARB/13/6, Decision on Jurisdiction, 8 March 2017, paras374-377.96Tribunals have also considered the legality of an investment in the absence of an explicitprovision. See Plama Consortium Ltd. v. Republic of Bulgaria., ICSID Case No. ARB/03/24,Award, 27 August 2008, para. 138; Phoenix Action, Ltd. v. Czech Republic, ICSID Case No. ARB/06/5, Award, 15 April 2009, para. 101; Gustav F W Hamester GmbH & Co KG v. Republic ofGhana, ICSID Case No. ARB/07/24, Award, 18 June 2010, para. 124.97See Gustav F W Hamester GmbH & Co KG v. Republic of Ghana, ICSID Case No. ARB/07/24,Award, 18 June 2010, para. 124.98This conclusion is largely based on the tribunal’s reasoning in Churchill Mining PLC and PlanetMining Pty Ltd v. Republic of Indonesia, ICSID Case No. ARB/12/14 and 12/40, Award, 6December 2016, para. 494.

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counterclaim relating to human rights issues, there are some significant hurdles thatthe State would have to overcome.99

First, the tribunal must have jurisdiction to hear the counterclaim. This must bereflected in the consent of the contracting parties to the IIA, either explicitly orimplicitly. Several of the abovementioned IIAs explicitly indicate that counterclaimsby the host State are allowed, including the ECOWAS Investment Act, TPP-11, theSADC Model BIT, and the Pan African Investment Code.100 Other IIAs containsufficiently broad dispute resolution provisions which a tribunal may interpret asgiving implicit consent to counterclaims. This was the case in Urbaser v. Argentina,in which the tribunal held that the dispute resolution provision in the Spain-Argen-tina BIT was neutral as to the identity of the claimant or the respondent, referringonly to a dispute “between the parties.”101 On the other hand, the tribunal inRoussalis v. Romania held that there was no consent to counterclaims in theGreece-Romania BIT, which provided that “disputes between an investor of aContracting Party and the other Contracting Party concerning an obligation of thelatter”may be submitted to arbitration.102 Thus, much will depend on the wording ofthe consent to arbitrate.

Similarly, the counterclaim must have some connection to the investment and/or dispute. Very often IIAs require disputes to be in relation to or in connectionwith an investment. For example, in Biloune v. Ghana, the claimant sought toinclude a claim relating to human rights violations by the Government ofGhana. The contract under which the dispute was brought provided for ISDSfor claims “in respect of an approved enterprise,” which the tribunal held to belimited to commercial disputes and therefore declined jurisdiction over thehuman rights claim.103 On the other hand, in Urbaser v. Argentina, the tribunalallowed the human rights counterclaim finding that it met the BIT’s requirementof being “in connection with investments.”104 Additionally, if the counterclaimwill be submitted to ICSID, the dispute must arise “directly out of an investment,”and the counterclaim must arise “directly out of the subject-matter of the

99See Baltag (2018) Human rights and environmental disputes in international arbitration. KluwerArbitration Blog. http://arbitrationblog.kluwerarbitration.com/2018/07/24/human-rights-and-environmental-disputes-in-international-arbitration; Kriebaum (2018) Human rights and internationalinvestment law. In: Radi Y (ed) Research handbook on human rights and investment. Edward Elgar,Cheltenham, pp 13–40; de Brabandere (2018) Human rights counterclaims in investment treatyarbitration. Grotius Centre working paper series, vol 78, pp 1–16100ECOWAS Investment Act, Article 18(5); TPP-11, Article 9.19(2); SADC Model BIT, Article19.2; PAIC, Article 43101Urbaser v. Argentina, Award, para. 1143 (emphasis added)102Spyridon Roussalis v. Romania, ICSID Case No. ARB/06/1, ICSID Case No ARB/06/1, Award,7 December 2011, para. 869103Biloune and Marine Drive Complex Ltd. v. Ghana Investments Centre and the Government ofGhana, UNCITRAL, Award on Jurisdiction and Liability, 27 October 1989, p. 202104Urbaser v. Argentina, Award, para. 1143


http://arbitrationblog.kluwerarbitration.com/2018/07/24/human-rights-and-environmental-disputes-in-international-arbitrationhttp://arbitrationblog.kluwerarbitration.com/2018/07/24/human-rights-and-environmental-disputes-in-international-arbitration

dispute.”105 UNCITRAL allows counterclaims, as long as the tribunal has juris-diction to hear them.106

The second hurdle is establishing a cause of action under the applicable law.Tribunals generally have a broad discretion in determining the applicable law. Asprovided in Article 42(1) of the ICSID Convention, in the absence of agreementbetween the parties, the tribunal shall apply the law of the State party to the disputeand such rules of international law as may be applicable. Many IIAs also provide thattribunals may apply the IIA, the domestic laws of the host State, and principles ofinternational law.

Where the IIA contains human rights obligations and the counterclaim arisesfrom these obligations, there may be a cause of action arising out of the IIA, althoughthis raises questions of whether an investor can be subject to international lawobligations.107 Alternatively – and perhaps in addition – the counterclaim mayarise out of domestic law. This was the case in Burlington v. Ecuador, in whichthe tribunal upheld Ecuador’s counterclaims, one of which was for environmentalharm arising from Ecuadorian tort law. The tribunal held that it could apply Ecua-dorian domestic law in accordance with Article 42(1).108 As discussed, several IIAsrequire investors to comply with their domestic laws, either generally or in somecases relating specifically to human rights, such as the Dutch Model BIT. Where anIIA refers specifically to domestic laws, this will make their applicability in aninvestment dispute even more relevant.109

The issue is more problematic where the cause of action does not arise from theIIA or from domestic law, but from other sources of international law. While thetribunal held it had jurisdiction in Urbaser v. Argentina in relation to Argentina’shuman rights counterclaim, this was essentially because the counterclaim arose fromthe concession contract between the parties, rather than being based on internationalhuman rights law generally. In Von Pezold v. Zimbabwe, amicus curiae submissionswere made relating to indigenous rights on the basis that Article 42(1) and theGermany-Zimbabwe BIT refer to “rules of general international law.” The tribunaldismissed this, holding that reference to international law does not incorporate “theuniverse of international law into the BITs or into disputes arising under the BITs,”but rather only international law relevant to investment protection.110

105ICSID Convention, Articles 25 and 46106UNCITRAL Rules, Article 21(3)107See section above ▶ “Investor Obligations”.108Burlington Resources Inc. v. Republic of Ecuador, ICSID Case No. ARB/08/5 (formerlyBurlington Resources Inc. and others v. Republic of Ecuador and Empresa Estatal Petróleos delEcuador (PetroEcuador), Decision on Counterclaims, 7 February 2017, para. 74109See de Brabandere (2018) Human rights and international investment law. Grotius Centreworking paper series, vol 75, pp 1–23 who considers that reference to domestic law in the IIAincorporates that law into the treaty and thereby makes it applicable in an investment dispute, p. 12.110Bernhard von Pezold and Others v. Republic of Zimbabwe, ICSID Case No. ARB/10/15,Procedural Order No. 2, 26 June 2012, para. 57

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http://link.springer.com/search?facet-eisbn=978-981-13-5744-2&facet-content-type=ReferenceWorkEntry&query=``Investor Obligations��

At this stage, successful counterclaims for human rights-related matters remainlimited in investment arbitration. The inclusion of provisions explicitly allowingcounterclaims in IIAs may pave the way for further counterclaims in the future.Continued inclusion of investor duties in IIAs, whether by reference to domestic lawor simply contained in the IIA, will equally facilitate human rights-related counter-claims. Investors therefore need to be mindful of the existence of such provisions inrecent IIAs.

Conclusions

A broad range of States have included provisions reflecting the State duty to protecthuman rights by (1) accepting to encourage investors to incorporate CSR practicesinto their internal policies; (2) strengthening human rights law domestically; and/or(3) ensuring liability for investors in their home State for actions that were taken inthe host State. States that have engaged with this duty to protect are from Europe,North America, Asia, South America, and Africa. The willingness to engage with theState duty to protect in relation to international investment law is therefore notlimited to only one geographic region and has been relatively widely adopted inmore recent IIAs.

Some States – albeit a lesser number – have chosen to reflect the corporateresponsibility to protect in their recent IIAs. This has been done through (1) non-binding recommendations to investors; (2) binding obligations placed on investors;and/or (3) creating adverse consequences for investors before international invest-ment tribunals in the case of non-compliance. The consequences of non-compliancewith human rights principles includes (1) counterclaims on the part of host Statesinvolving human rights issues and/or (2) adverse impacts on the jurisdiction, admis-sibility, merits, and/or quantum of an investor’s international arbitration claim.

States that have included non-binding recommendations or adverse consequencesfor investors are from a range of regions including South America, Europe, theMiddle East, and Africa. States that have included binding obligations on investorsin relation to human rights are exclusively African, and only one of the instrumentsin which such binding obligations are found is currently in force: the ECOWASInvestment Act. The other instruments are either not yet in force or are modeltreaties.111 Thus, while the inclusion of human rights issues in recent IIAs isconsiderable and significant, it should be kept in mind that some regions havedemonstrated a stronger willingness to engage with business and human rights issuesin relation to foreign investment than others.

While business and human rights principles are largely voluntary under interna-tional law, the inclusion of specific requirements in IIAs (as well as potentialconsequences in the event of non-compliance) will give these principles greater

111The Morocco-Nigeria BIT (which has been signed, but is not yet in force) and the SADC ModelBIT


legal significance for investors. The incorporation of business and human rightsprinciples in international investment law, specifically through the inclusion ofhuman rights provisions in IIAs, is therefore something that could have significantimplications for investors and States alike.

Cross-References

▶Business and Human Rights: The Law and Economics of International Investment▶Human Rights in International Investment Law and Adjudication: Legal Method-ology Questions

▶ IIAs and Human Rights: UN and Treaty Drafting▶ ISDS Reform▶Reforming the ISDS at the United Nations Commission on International TradeLaw (UNCITRAL): Issues, Challenges and Directions

24 I. Seif

http://link.springer.com/search?facet-eisbn=978-981-13-5744-2&facet-content-type=ReferenceWorkEntry&query=Business and Human Rights: The Law and Economics of International Investmenthttp://link.springer.com/search?facet-eisbn=978-981-13-5744-2&facet-content-type=ReferenceWorkEntry&query=Human Rights in International Investment Law and Adjudication: Legal Methodology Questionshttp://link.springer.com/search?facet-eisbn=978-981-13-5744-2&facet-content-type=ReferenceWorkEntry&query=Human Rights in International Investment Law and Adjudication: Legal Methodology Questionshttp://link.springer.com/search?facet-eisbn=978-981-13-5744-2&facet-content-type=ReferenceWorkEntry&query=IIAs and Human Rights: UN and Treaty Draftinghttp://link.springer.com/search?facet-eisbn=978-981-13-5744-2&facet-content-type=ReferenceWorkEntry&query=ISDS Reformhttp://link.springer.com/search?facet-eisbn=978-981-13-5744-2&facet-content-type=ReferenceWorkEntry&query=Reforming the ISDS at the United Nations Commission on International Trade Law (UNCITRAL): Issues, Challenges and Directionshttp://link.springer.com/search?facet-eisbn=978-981-13-5744-2&facet-content-type=ReferenceWorkEntry&query=Reforming the ISDS at the United Nations Commission on International Trade Law (UNCITRAL): Issues, Challenges and Directions

Business and Human Rights in International Investment Law: Empirical EvidenceIntroductionBusiness and Human Rights Standards Relevant to International Investment LawState Duty to ProtectCorporate Responsibility to Respect

Host and Home States´ Duty to Protect Human RightsStates Encouraging CSR Practices by InvestorsStates´ Acceptance to Increase Human Rights Protection Domestically in IIAsLiability Before Home State Courts

Investors´ Responsibility to Respect Human RightsNon-binding RecommendationsInvestor ObligationsConsequences of Non-compliance by the InvestorEffects on the Jurisdiction, Admissibility, Merits, or Quantum of an Investor´s Claim in ISDSExposure to Counterclaims

ConclusionsCross-References

businessandhumanrightsininternational investment law ... … · international investment law, with...

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