Evolving Human Right Norms in Investor-State Dispute Settlement

By: Francis Ohiwere Oleghe, FCArb

Introduction

The spectrum of Investor-State Dispute Settlement (ISDS), which used to be synonymous with Investor-State Arbitration (ISA), is getting wider every day. ISDS includes dispute resolution mechanisms other than arbitration, such as conciliation and mediation. In fact, with the present dissatisfaction of many States with ISA, some States are coming up with new approaches to ISDS that portend its unnecessary fragmentation.[1]

One reason for the present state of affairs is the perception by some scholars that ISA is skewed towards investors.[2] While still trying to balance the interests of investors and States, there is another striking issue, namely, whether, in fact, ISDS arbitrators should act as agents only for the concerned parties or, in addition, for the larger global community.[3]

As scholars pushed their arguments in favour of ISDS arbitrators acting also as agents for the larger community, the need for ISDS arbitrators to consider human right norms in appropriate cases became more and more obvious.[4] The connection between human rights and ISA, especially those that are treaty-based, is the focus of this short article.

The Clamour for ISDS Reform in Relation to Human Rights

There are on-going agitations for and actions towards ISDS reform. The reform agenda as it stands today may be categorised into the following subsets: (a) reform to address the lack of consistency, coherence, predictability and correctness of arbitral decisions by ISDS tribunals;[5] (b) concerns pertaining to arbitrators and decision makers;[6] (c) concerns pertaining to cost and duration of ISDS cases;[7] d) the need for human right norms to be given adequate consideration in ISDS cases;[8] and e) the perceived need to establish a Multilateral Investment Court (MIC).[9]  In this article, however, our concern is narrowed down to item (d) as it relates to ISA.

The need for human right norms to be given adequate consideration in ISA is meant to address some fundamental issues, such as: the issue of human rights breaches by transnational corporations and other business enterprises; the issue of the right to development; the issue of human rights obligations relating to the enjoyment of a safe, clean, healthy and sustainable environment; the issue of the rights of indigenous peoples; and the issue of human rights to safe drinking water and sanitation.[10] These concerns arose because of the perception of scholars that the innately unequal nature of the ISDS system, lack of investors’ human rights obligations and extremely high amount of arbitral awards, among other factors, have led to undue restrictions of States’ fiscal space and undermined their ability to realise their citizens’ economic, social, cultural and environmental rights.[11]

The developing jurisprudence, therefore, is that international arbitral tribunals should be bound to consider the issues of human rights violations that come before them by way of third party claim.[12] The corollary is that, though the investment agreement may be between two States or a State and a foreign investor, as the case may be, the arbitral tribunal, as agent of the larger community, must seriously consider the issue of human rights violations affecting members of the public even though they are not, strictly speaking, party to the investment agreement.

Usually, by the nature of bilateral or multilateral investment agreements, their twin aim of promoting foreign investment in host States is not emphasised but contingent on the fact that protecting foreign investment would attract investors. This template does not directly include obligations on foreign investors for the protection of the human rights of indigenes of host communities that may be breached as a result of their investment activities. And, these rights become easily violated, especially in third world countries.[13] We submit that it behooves an international arbitral tribunal to always consider the interests of individuals and communities who seek judicial protection against human rights violations.[14]

Conclusion

The rationale for the foregoing position is that rights vested in a person must attract obligations as well. The opposite approach has resulted in the continuing human rights violations in Nigeria by government and transnational companies. These violations stem from the pollution and degradation of the environment as a result of oil exploitation and other mining activities, without regard for how these activities affect the indigenes of the host communities.[15] This has led to agitations, insurgencies and deaths. It is against this background that, in 2014, a people’s victory was celebrated when the United Nations Human Rights Council (UNHRC) adopted Resolution 26/9,[16] which established a new intergovernmental Working Group (IGWG) to develop an international legally binding instrument to regulate transnational corporations (TNCs) and other businesses with respect to human rights.^[17]

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[1] See Report of the United Nations Commission on International Trade Law (Fiftieth session, 3-21 July 2017) paras 243-250 

[2] Karen L. Remmer, ‘Investment Treaty Arbitration in Latin America’ (2019) 54(4) Latin American Research Rev 795, 796

[3] Alec Stone Sweet, ‘Investor-State Arbitration: Proportionality’s New Frontier’ (2020) Law and Ethics of Human Rights 1

[4] See ibid

[5] Doug Jones, ‘Investor-State Arbitration in Times of Crisis’ (2013) 25 Nat’l L Sch Indian Rev 27, 57-58; see also IIED, CCSI and IISD, ‘Shaping the Reform Agenda: Concerns Identified and Cross-Cutting Issues’ (15 July 2019) para 1

[6] See IIED, CCSI and IISD (n 5)

[7] See ibid, Table 1

[8] ‘Mandates of the Working Group on the Issue of Human rights and Transnational Corporations and other Businesses’ (7 March 2019) 4

[9] See Marc Bungenberg and August Reinisch, From Bilateral Arbitral Tribunals and Investment Courts to a Multilateral Court: Options Regarding the Institutionalization of Investor-State Dispute Settlement (European Yearbook of International Economic Law, Springer Open, Berlin 2020) 117

[10] ‘Mandates of the Working Group on the Issue of Human rights’ (n 8)

[11] ibid, para 1

[12] Sweet (n 3) 14

[13] ‘Investor-State Dispute Settlement’ < https://www.elstel.org/ISDS.html.en> accessed 28 May 2021

[14] Sweet (n 3) 14

[15] Social and Economic Rights Action Centre and the Centre for Economic and Social Rights v. Nigeria (African Commission Communication 156/96, pp 9-10)

[16]  A/HRC/RES/26/9

^[17] Friends of the Earth International, ‘The UN Treaty on Transnational Corporations and Human Rights’ (2019) <https://www.foei.org/un-treaty-tncs-human-rights> accessed on 20 January 2020.