Corporate Social Responsibility (CSR)

There is no universal definition of Corporate Social Responsibility but authoritative institutions, such as European Commission (EC),¹ the International Labour Organization (ILO),² United Nations Industrial Development Organization (UNIDO),³ and the International Employer Organization (IEO)⁴ agree that corporate social responsibility is a management concept characterized by the following aspects:

• Integration of economic, governance, social and environmental concerns;
• Strong stakeholder engagement;
• Voluntary nature;
• Exceeding law’s requirements.

Whether its historical foundations may be drawn from philanthropy, it is only in the first decade of the 21^st century that corporate social responsibility has started being debated in the international community as we know it today. The primary source has gradually moved from domestic law standards of corporate behaviour to internationally recognized soft law principles,⁵ which international organizations have endorsed and codified in multiple instruments.⁶

Corporate social responsibility is gaining momentum in international investment agreements,⁷ although as of May 2020, corporate social responsibility-related clauses appear in less than 2% of existing International Investment Agreements (IIAs).⁸ See further Human Right in Investment Claims.

Indirect corporate social responsibility clauses refer to it as voluntary standards that treaty parties should encourage within their jurisdiction (“encourage to voluntarily incorporate,”⁹ “should encourage to voluntarily incorporate,”¹⁰ “agree to promote”).¹¹

Unless they are incorporated into host States’ domestic law and made applicable through an actual or presumed legality requirement,¹² these clauses work as an “intermediate instruments” that neither lay down obligations for investors nor are enforceable as such in disputes. Yet, these clauses can be useful to define the scope of investors’ legitimate expectations, as they provide clarity on the host State’s international commitments and guidance on possible regulatory and policy changes.¹³ 

Direct corporate social responsibility clauses differ from indirect clauses, being addressed directly to investors and thus suggesting the idea of investors as duty-bearers of corporate social responsibility principles under international investment law. This interpretation is far from being generally accepted, which explains why direct clauses are not very common and often use a weak language (“should”¹⁴, “shall”).¹⁵ In some cases, they may be reinforced by an obligation to comply with domestic law.¹⁶

There is little jurisprudence on the enforcement of corporate social responsibility clauses in investment disputes. However, some arbitral tribunals have implicitly recognized certain corporate social responsibility principles as entrenched in the host State’s domestic law,¹⁷ widely recognized in international law¹⁸ or part of the overriding ordre public international.¹⁹

Arbitral tribunals could enforce corporate social responsibility to dismiss investor claims on either jurisdictional or admissibility grounds, stating that investor’s socially irresponsible conducts place the investment outside the legality requirements.²⁰ Tribunals could also dismiss investor claims on the basis that an investor’s conduct falls outside the definition of investment for which the parties have given their consent to arbitration. However, there is no relevant practice endorsing this latter interpretation.

Corporate social responsibility could be used to justify counterclaims whereby host States ask a tribunal to consider investor’s socially irresponsible conducts as to condition the investment protection²¹ or constrain their legitimate expectations.²² So far, it has been difficult for tribunals to uphold such counterclaims, given that corporate social responsibility does not entail binding obligations for corporate actors unless it is incorporated into the investment agreement (or part of domestic law).²³ See further Human Rights Counterclaims.

Lastly, a failure to comply with corporate social responsibility could be taken into account in reducing the compensation amount which investors are entitled to for losses caused to the investment.²⁴ See further Investor's Conduct.

Dubin, L., Corporate Social Responsibility Clauses in Investment Treaties, RSE et droit des investissements, les prémisses d’une rencontre, Revue Générale de Droit International Public, 2018, Vol. 4.

Krajewski, M., A Nightmare or a Noble Dream? Establishing Investor Obligations Through Treaty-Making and Treaty-Application, Business and Human Rights Journal, 2020. 

Lalive, P., Transnational (or Truly International) Public Policy and International Arbitration, Kluwer Arbitration Blog, 2014.

Levashova, Y., Imposing Conditions on Investor Protection: A Role of Investor’s Due Diligence, Kluwer Arbitration Blog, 2019.

Muchlinski, P., Federico Ortino, F. and Schreuer, C., The Oxford Handbook of International Investment Law, 2008, Chapter 17.

Vinuales, J., Investor Diligence in Investment Proceedings: Sources and Arguments, ICSID Review-Foreign Investment Law Journal, 2017, pp. 10-12.