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Ms Camilla Gambarini

Senior Associate - Withers LLP

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Due Diligence

I. Due diligence in international law

1.

Due diligence is commonly defined as the "degree of care that is to be reasonably expected or that is legally required."1

2.

In international law, it is a concept that emerged in the 17th century to "mediate inter-State relations"2 and continued developing throughout the 19th-20th centuries3 in the context of State's neutrality4 and the protection of aliens.5

3.

Although due diligence is not a term used in the International Law Commission's Articles on State Responsibility, it is considered a legal standard of conduct whose content and extent varies according to the applicable primary rule of international law.6

4.

There is not a uniform standard of conduct of due diligence,7 but it is determined "on a case-by-case basis"8 and is at the centre of many areas of international law,9 such as the obligation of a State not to "allow knowingly its territory to be used for acts contrary to the rights of other States",10 international environmental law,11 law of the sea,12 international humanitarian law,13 human rights law,14 and business and human rights.15

5.

The International Court of Justice in the Corfu Channel case recognised that it is a "general and well-recognised"16 principle and, similarly to other international tribunals, has clarified that it is an obligation of conduct "not one of result."17

II. Due diligence in international investment law

6.

Due diligence has emerged in international investment law with regard to different standards of treatment and involving both (a) investors; and (b) States.

A. Investors' due diligence

7.

Investment treaty jurisprudence has recognised that investors have an obligation of due diligence. In particular, in the context of legitimate expectations of investors, "it is generally considered that investors should themselves act with due diligence."18

8.

Some tribunals have also considered that investors should exercise due diligence with regard to the laws of the host State19 as well as on third parties' activities related to the investment.20

9.

Investors' due diligence in making an investment (or lack thereof) is therefore relevant to a tribunal's findings on the merits of a claimant-investors' claims.21 However, there have been dissenting opinions noting that due diligence is not a condition to the protection of an investment.22 See also Investor conduct.

B. States' due diligence

10.

Arbitral tribunals have considered whether a respondent-State exercised due diligence with regard to substantive standards of protections,23 particularly the standard of full protection and security.24

11.

Indeed the standard of full protection and security does not impose strict liability, but an obligation of "vigilance."25

III. Standard of review

12.

Arbitral tribunals determine whether an investor has exercised due diligence in light of the circumstances26 and with "reference to the knowledge that a hypothetical prudent investor is deemed to have had as of the date of the investment."27

13.

As to full protection and security, the host State's obligation to exercise due diligence is assessed against the host State's general political situation.28

Bibliography

Barnidge, R.P.Jr., The Due Diligence Principle Under International Law, International Community Law Review, Vol. 8, No. 1, 2006, pp. 81-122.

Bonnitcha, J. and McCorquodale, R., The Concept of ‘‘Due Diligence’’ in the UN Guiding Principles on Business and Human Rights, 2017, The European Journal of International Law Vol. 28, No. 3, pp. 899-919.

Campbell, E., Dominic, E., Stadnik, S. and Wu, Y., Due Diligence Obligations Of International Organizations Under International Law, International Law and Politics, 2018, Vol. 50, pp. 541-604.

Collins Dictionary.

Corino, C., Environmental Due Diligence, 9 European Environmental Law Review, 2000, p. 120.

Davitti, D., On the Meanings of International Investment Law and International Human Rights Law: The Alternative Narrative of Due Diligence, Human Rights Law Review, Volume 12, Issue 3, September 2012, p. 445.

Dörmann, K. and Serralvo, J., Common Article 1 to the Geneva Conventions and the obligation to prevent international humanitarian law violations, International Review of the Red Cross, 2015.

Hessbruegge, J., The Historical Development of the Doctrines of Attribution and Due Diligence in International Law, New York University Journal of International Law and Politics, Vol. 36, No. 4, 2004, p. 268.

Levashova, Y., The Role of Investor’s Due Diligence in International Investment Law: Legitimate Expectations of Investors, Kluwer Arbitration Blog, 22 April 2020.

Mcdonald, N., The Role of Due Diligence In International Law, Cambridge University Press for the British Institute of International and Comparative Law, 2019, pp. 1041-1054.

Rajput, A., Due Diligence in International Investment Law – from the law of aliens to responsible investment, in Krieger, H. and Peters, A. (eds.), Due Diligence in the International Legal Order, Oxford University Press, 2020.

Stephens, T. and French, D., ILA Study Group on Due Diligence in International Law, First Report, March 2014.

Stephens, T. and French, D., ILA Study Group on Due Diligence in International Law, Second Report, July 2016.

De Schutter, O., Ramasastry, A., Taylor, M.B. and Thompson, R.C., Human Rights Due Diligence: The Role of States, 2012.

UN Human Rights Council, Guiding Principles on Business and Human Rights: Implementing the United Nations “Protect, Respect and Remedy” Framework, UN Doc. A/HRC/17/31, 21 March 2011.

UN Human Rights Office of the High Commissioner, The Corporate Responsibility to Respect Human Rights: An Interpretive Guide, 2012, p. 4.

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