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Mme Iryna Glushchenko

Associate - Aequo

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Human Rights in Investment Claims

I. Introduction

1.

Human rights can boast universal acceptance and a well-developed system of specialized courts and tribunals. Although there does not seem to be objections to human rights being relevant to all spheres of life and deserving of consideration, there is criticism regarding their effectiveness.1 The system of investment protection has, in recent years, become increasingly intertwined with other areas of international law – mostly with human rights and environmental law.

2.

As issues related to protection of human rights arise in investment arbitration, it is undoubtedly important to have them considered within the disputes they arise in. However, their role, function and means in investment arbitration remain unclear.

II. Legal framework of human rights in investment arbitration

A. Treaties

3.

Most bilateral and multilateral investment treaties do not contain provisions on human rights,2 making it complicated to bring claims related to human rights under such instruments.

4.

Lately, with the rise of a new generation of model BITs, the investors’ community seem more keen to accept restrictions on investment protection if such restrictions are determined by the protection of human rights.3 Clauses providing for a respect of human rights were progressively introduced in the new generation of BITs. Some of these additions are:

  • Provisions taking into account selected human rights: while the US Model BIT of 19844 had no mention of human rights, the situation was developed in 2004,5 then in 2012.6 Today, more BITs7 as well as FTAs8 include provisions on human rights, mostly environmental and labor rights.
  • “Non-lowering of standards” provisions: the aim is to avoid lowering environmental, labor and other human rights standards for the sake of attracting foreign investment.9
  • Rules on corporate social responsibility (CSR): it is one of the possibilities to ensure investors’ regard for human rights.10 (See also Social Rights) Despite the fact that CSR provisions are non-binding, their inclusion is a step forward in the task of raising the bar of obligations for foreign investors.
  • Treaties mentioning international instruments on human rights in their preambles.11

B. Investment contracts

5.

Investment contracts are not unfamiliar with human rights considerations.12 On one hand, parties to contracts can decide to exempt health, safety and environment regulations from the application of stabilisation clauses to allow the State to regulate in favor of human rights.13 On the other hand, parties can include clauses explicitly providing for human rights obligations towards investors.14 More specifically, some clauses include obligations relating to forced labor,15 as well as to the safety and health of employees.16 

C. Soft law

6.

Elaborated provisions on corporate social responsibility are contained today in soft law instruments. The initiative came from companies, States and international organizations. These instruments were recently considered by arbitral tribunals in ISDS disputes suggesting that investors are no longer “immune from becoming subjects of international law”.17 Some of these instruments were mentioned in Urbaser v. Argentina18 and Tulip Real Estate v. Turkey:19

7.

A new set of arbitration rules were developed to provide for a procedure suitable for cases with complex chains of distribution, in which different companies from different jurisdictions can be involved. The Hague Rules on Business and Human Rights Arbitration can be used as the applicable law to an arbitration under certain conditions.

III. Mechanisms in arbitration

8.

There are several ways in which human rights are used in investor-State disputes:

  1. as part of investors’ claims;
  2. as counterclaims used by the host State; and
  3. as interventions from third parties who are not parties to the investment agreement and/or the dispute – amicus curiae.

A. Claims by investors

9.

Investors may base their claims directly on international obligations relating to human rights or refer to human rights jurisprudence to assert claims of violation of the BIT clauses.20

10.

Where the BIT is sufficiently broad, some tribunals have allowed investors to advance claims of violations of human rights based on general international law within the scope of the dispute before the arbitral tribunal.21 On the other hand, where the applicable BIT does not allow for such expansion of the scope of the dispute, tribunals refused to consider these claims within their jurisdiction.22

11.

As standards of protection from international investment agreements (IIAs) provide more specific rules than those of protection of right to property, to life, to health and physical security, the latter are not usually claimed, and are instead secured in the framework of investment protection standards.23 Some tribunals even refused to recognize incompatibilities between human rights and BIT obligations.24 (See also Full Protection and Security, Minimum Standard of Treatment, Expropriation and Fair and Equitable Treatment).

12.

Nonetheless, claimants have relied on the standards of treatment contained in the BIT while incorporating references to human rights in their allegations and tribunals took them into consideration to properly assess and interpret BIT provisions, such as for the nationality of investor,25 expropriation26 and fair and equitable treatment.27 Others have been more reluctant.28

B. Counterclaims by the host State

13.

The mechanism of counterclaims for host States allows them to advance claims against investors for breaches of these human rights.29 (See further Human Right Counterclaims)

C. Amicus curiae

14.

Investment tribunals accept third-party view on the dispute to ensure just resolution.30 In October 2003, the NAFTA Free Trade Commission issued guidelines on non-disputing parties (amici curiae).31 Although third party interventions cannot always be justified due to the consensual nature of arbitration,32 many interventions were possible since the issues involved in the dispute are of public interest, can “have the potential, directly or indirectly, to affect persons beyond those immediately involved as parties in the case33 or are relevant to the dispute at hand.34

IV. Current issues

15.

There are still a number of unresolved concerns presented by the insertion of human rights issues into investment arbitration. Human rights provisions are still absent in most applicable BITs and MITs and there is still a lack of coordination between investment arbitration and human rights jurisprudence in terms of the application of a human rights concept or in awarding damages.35

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