I. Definition and origins
There is no universal definition of Corporate Social Responsibility (CSR) 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 CSR is a management concept characterized by the following aspects:
Whether its historical foundations may be drawn from philanthropy, it is only in the first decade of the 21st century that CSR 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
II. Treaty practice
A. Indirect CSR clauses
Unless they are incorporated into host states’ domestic law and made applicable through an actual or presumed legality requirement12, 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
Trans-Pacific Partnership Agreement, 4 February 2016, Article 9.17; Comprehensive Economic and Trade Agreement between Canada and the European Union, 30 October 2016, Article 22.3. 2(b); Agreement between the Argentine Republic and Japan for the promotion and protection of investment, 1 December 2018, Article 17; Investment Agreement between the Government of Australia and the Government of the Hong Kong Special Administrative Region of the People's Republic of China (2019), 26 March 2019 , Article 16.
B. Direct CSR clauses
Direct CSR clauses differ from indirect clauses, being addressed directly to investors and thus suggesting the idea of investors as duty-bearers of CSR 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
Brazil - Malawi BIT (2015), 25 June 2015, Article 9; Agreement between the Federative Republic of Brazil and the Federal Democratic Republic of Ethiopia on Investment Cooperation and Facilitation, 11 April 2018, Article 14; Brazil-India Investment Cooperation and Facilitation Agreement, 25 January 2020, Article 12.
III. Enforcement of CSR in investment disputes
There is little jurisprudence on the enforcement of CSR clauses in investment disputes. However, some arbitral tribunals have implicitly recognized certain CSR 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
Perenco Ecuador Limited v. Republic of Ecuador (Petroecuador), ICSID Case No. ARB/08/6, Interim Decision on the Environmental Counterclaim, 11 August 2015 , paras. 34-35; David R. Aven, Samuel D. Aven, Carolyn J. Park, Eric A. Park, Jeffrey S. Shioleno, Giacomo A. Buscemi, David A. Janney and Roger Raguso v. The Republic of Costa Rica, ICSID Case No. UNCT/15/3, Final Award, 18 September 2018, paras. 699-702.
A. At jurisdiction and admissibility stage
Arbitral tribunals could enforce CSR 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.
B. At the merit stage
CSR 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 CSR does not entail binding obligations for corporate actors unless it is incorporated into the investment agreement (or part of domestic law).23
C. At the quantum stage
Lastly, a failure to comply with CSR could be taken into account in reducing the compensation amount which investors are entitled to for losses caused to the investment.24
Bear Creek Mining Corporation v Republic of Perú, ICSID Case No. ARB/14/21, Award, 30 November 2017, Separate Opinion of Philippe Sands, para 4; Krajewski, M., A Nightmare or a Noble Dream? Establishing Investor Obligations Through Treaty-Making and Treaty-Application, Business and Human Rights Journal, 2020.
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.
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.