INVESTOR OBLIGATIONS UNDER INTERNATIONAL LAW TO RESPECT LABOUR RIGHTS AND TO COMPLY WITH INTERNATIONAL LABOUR STANDARDS
Master’s Thesis Submitted by Katarina Maletić 12604615 maletic.katarina1@gmail.com Supervised by dhr.mr.dr. Vid Prislan
International and European Law: International Trade and Investment Law
Amsterdam Law School 24 July 2020
2
TABLE OF CONTENTS
ABSTRACT………. INTRODUCTION………
1. INVESTOR LABOUR RIGHTS LAW OBLIGATIONS SOURCED FROM THE INTERNATIONAL INVESTMENT TREATIES………... 1.1. Investor obligations to comply with domestic labour law……… 1.1.1. The “In accordance with the host state law” clause……….………. 1.1.2. The clause directly imposing an obligation on investors to comply with
domestic labour law……….. 1.1.3. The social impact assessment clause……… 1.1.4. Invocation of investor obligations to comply with domestic labour law….. 1.2. Investor obligations to act in accordance with CSR standards………. 1.3. Toward investor binding obligations to comply with international labour
standards………... 2. INVESTOR LABOUR RIGHTS LAW OBLIGATIONS SOURCED OUTSIDE OF
INTERNATIONAL INVESTMENT TREATIES……...……… 2.1. Core labour rights as part of international customary law………. 2.2. Recent case law relevant to the question of investor obligations……….. 2.2.1. Urbaser v. Argentina case………... 2.2.2. Dissenting opinion in the Bear Creek v. Peru case and Aven v. Costa
Rica case………. 2.2.3. Nevsun v. Araya case………. 2.2.4. Invocation of investor labour rights law obligations……….. 3. POSSIBLE EFFECTS OF THE UN TREATY ON BUSINESS AND HUMAN
RIGHTS ON INVESTOR LABOUR RIGHTS LAW OBLIGATIONS…………. 3.1. Developments in negotiating the UN Treaty……..……….. 3.2. Improvements of the Revised Draft concerning labour rights
protection……… CONCLUSION………. BIBLIOGRAPHY………. 3 4 6 7 7 10 11 12 15 17 21 21 23 24 27 29 31 33 33 35 38 40
3
ABSTRACT
Many discussions have developed in previous years arguing for the establishment of a more balanced relationship between investors and host states, and in particular, for the introduction of investor obligations in international investment law. In that respect, the imposition of investor obligations to comply with international human and labour standards would undoubtedly foster the growth of investors that can be considered responsible.
In line with these debates, this master’s thesis focuses on the question whether investors have obligations under international law to respect labour rights and to comply with international labour standards. To answer this inquiry, an array of available legal sources have been examined. Research analysis begins with the comparison and evaluation of various international investment treaties in order to determine whether and what types of obligations these treaties may impose on investors. Further, the question as to whether investor labour rights law obligations may be sourced in international human and labour rights law instruments or customary international law is elaborated on. Finally, the currently negotiated UN Treaty on Business and Human Rights has been analyzed in order to determine its possible implications for investor labour obligations.
After the conducted analysis, this thesis concludes that it is unlikely that mandatory investor obligations to respect international labour rights exist, nor will they emerge soon in either international treaty drafting practices (both investment treaty and other international instruments) or case law before investment tribunals. The main source for investor labour obligations remains the domestic law of the host state. In that respect, the UN Treaty on Business and Human Rights may have a positive influence on the development of member states’ domestic regulations, including the imposition of a higher level of investors’ duty to comply with domestic labour standards.
4
INTRODUCTION
In recent years, the international community has presented initiatives towards fostering responsible investors who are supposed to engage in foreign investment while simultaneously promoting sustainable development (“SD”) by means of implementing corporate social responsibility (“CSR”) standards as well as international standards of responsible business conduct in their operations.
One of the main areas of SD is providing decent working conditions and contributing to the economic growth of the state, which is also recognised as one of the sustainable development goals (“SDGs”) that has been set by the UN.1 The work of the International Labour Organization
(“ILO”) is particularly important in establishing and attaining this goal, with specific emphasis on its Declaration on Fundamental Principles and Rights at Work (“1998 ILO Declaration”). This declaration affirms that all member states have the obligation to promote, respect and realise the principles concerning the fundamental rights as divided into the following four categories (also known as “core labour rights”): a) freedom of association and the effective recognition of the right to collective bargaining; b) the elimination of all forms of forced or compulsory labour; c) the effective abolition of child labour; and d) the elimination of discrimination in respect of employment and occupation. This obligation exists even if states have not ratified the respective conventions which regulate these core labour rights.2
It is uncertain in which way the behaviour of investors may be regulated under international law, and in particular, whether international labour rights law obligations may be imposed on investors. States are considered to be primary subjects of international law and therefore holders of human and labour rights law obligations. This approach is presented in the UN Guiding Principles on Business and Human Rights (“UNGPs”) in which it is emphasised that only states have legally binding international human rights law obligations, in particular obligations to respect, protect and fulfil human rights. On the other hand, corporations have only non-binding
1
United Nations Development Programme, ‘Sustainable development goal no 8’,
(2015). https://www.undp.org/content/undp/en/home/sustainable-development-goals/goal-8-decent-work-and-economic-growth.html, accessed 06 April 2020.
5
responsibilities to respect internationally recognised human rights, including those fundamental rights presented in the 1998 ILO Declaration.3 Nevertheless, some authors claim that corporations nowadays are also subjects of international law and can accordingly be liable for injuries they cause to others.4 Also, this conclusion has been reached by certain courts and judges in case law before different fora.5
The aim of this master’s thesis is to examine whether investors as private entities have obligations under international law to respect labour rights and to comply with international labour standards. The discussion is organised in the following way: the first chapter will present different types of investment treaty provisions which regulate investor behaviour related to labour standards; the second chapter will analyse whether investors may have labour rights law obligations sourced outside of the text of investment treaties, such as in the relevant international human and labour rights instruments or under international customary law; and finally, the third chapter will discuss recent developments in the field of international human and labour rights protection with a particular focus on the possible effects that the currently negotiated UN Treaty on Business and Human Rights (“UN Treaty”) may have on investor international labour rights law obligations.
3UN, ‘Guiding Principles on Business and Human Rights’ (2011) General and Principles 1, 11 and 12, p 1, 3 and 13. 4
Kwame Nyinevi,’Universal Civil Jurisdiction: An Option for Global Justice in Climate Change Litigation’ (2015) Journal of Politics and Law, Vol. 8, No 3, 143.
5
See: Autronic AG v Switzerland, App no 12726/87, European Court of Human Rights Judgment, (22 May 1990) para 47; Joseph Jesner v. Arab bank, No. 16-499, Dissenting opinion of judge Sotomayor (24 April 2018) 9.
6
1. INVESTOR LABOUR RIGHTS LAW OBLIGATIONS SOURCED FROM INTERNATIONAL INVESTMENT TREATIES
This chapter aims to analyse and compare different IIAs in order to determine whether they impose obligations on investors to respect labour rights and to comply with international labour standards. Therefore, the focus of this section is on investment treaties as potential sources of investors’ labour rights law obligations.
It is widely accepted that the primary function of international investment agreements (“IIAs”, singular: “IIA”)6 is to protect investors and to establish an international regime for foreign investment protection. However, in recent years, it has been discussed that IIAs need to be harmonised with, and made conducive to, the broader goal of SD.7 Such sustainable development-oriented IIAs are supposed to ensure that foreign investment flow will not cause harm to the economic, social and environmental development of the state, these being the three main pillars of SD8. In other words, these “new generation” IIAs are expected to promote the protection of the environment as well as human and labour rights.
One of the approaches implemented in recent IIA drafting practices for the purpose of reflecting broadly accepted SDGs (encompassing also labour-related goals) is to establish a better balance between the legitimate interests of investors and host countries. This can be achieved through provisions in investment treaties which regulate investor conduct. It is also accepted that one of the main aims concerning IIA reforms is to ensure responsible investor behaviour. This includes two dimensions: maximizing positive contributions to societies (“doing good”) and avoiding negative impacts (“doing no harm”).9
Therefore, this chapter will examine different IIA provisions which regulate investor compliance with labour standards. An overview of the types of investor obligations imposed by these provisions will be provided, as well as analysis on whether breach of these provisions may be invoked in arbitration proceedings. For the purpose of this master’s thesis, the relevant investor labour rights law obligations will be divided into three groups: 1) obligations to comply with
6
IIAs consist of various bilateral investment agreements (“BITs”, singular: “BIT”) as well as investment chapters of free trade agreements (“FTAs”, singular: “FTA”) and regional and multilateral investment agreements.
7UNCTAD, ‘UNCTAD’s Reform Package for the international investment regime’ (2018) 15. 8UN, ‘Plan of Implementation of the World Summit on Sustainable Development’ (2002) para 2. 9UNCTAD (n 7) 23.
7
domestic labour law; 2) obligations to act in accordance with CSR standards and 3) binding obligations to comply with international labour standards.
1.1. Investor obligations to comply with domestic labour law
Many IIAs contain provisions requiring investors to obey domestic law (including domestic labour regulations), such as the “in accordance with the host state law” clause (explained in part 1.1.1.) or provisions which expressly impose an obligation on investors to obey domestic laws (discussed in part 1.1.2.). Moreover, the social impact assessment (“SIA”) obligation may be covered by the two aforementioned clauses or introduced as an independent obligation (analysed in part 1.1.3.). These provisions are important because they provide the host state with the power to invoke investor non-compliance with domestic laws (including domestic labour code) during investor-state arbitration as different types of objections, depending on the circumstances of a particular case (examined in part 1.1.4.).
1.1.1. The “In accordance with the host state law” clause
Many IIAs restrict protection only to investments which have been made “in accordance with the laws and regulations” of the host state (also known as the legality requirement of investment). Therefore, in order to be protected by the treaty, an investor must act in accordance with the applicable laws of the host state in making an investment. To determine whether the scope of this duty also includes an investor’s obligation to comply with labour regulations, the scope of the subject matter of this treaty provision must be examined.
Certain tribunals have accepted that minor breaches of host state domestic law may not amount to illegal investment and consequently prevent an investor from access to investment arbitration.10
Moreover, tribunals have reached different conclusions with respect to the precise scope of the legality requirement, depending on the specific wording of this clause in respective investment
10
See: Tokios Tokelés v Ukraine, ICSID Case No. ARB/02/18, Decision on Jurisdiction (29 April 2004) para 86; Metalpar. v. Argentine Republic, ICSID Case No. ARB/03/5, Decision on Jurisdiction (27 April 2006) para 84 (in Spanish) translated in: Michael Polkinghorne and Sven-Michael Volkmer, ‘The Legality Requirement in Investment Arbitration’ in Emmanuel Gaillard, Jurisdiction in investment treaty arbitration (International Arbitration Institute 2017) series no. 8, 161.
8
treaties. For example, the Tribunal in the Saba Fakes case determined that the relevant Article 2(2) of the Netherlands-Turkey BIT includes only domestic laws governing the admission of investments in the host state.11 In other cases, the wording of IIAs’ legality requirements did not limit the scope of the provision only to the admission of investment, therefore prompting tribunals to implement a broader approach including “non-trivial violations of the host state’s legal order” and “fraud”12 or “breach of fundamental legal principles of the host country”13.
The main source for requiring investors to comply with domestic law is the IIA, which may introduce this obligation either embedded in the definition of investment itself14 or through
separate treaty provisions.15 Despite IIAs being the primary source for investment legality requirements, some tribunals have also found that there are general principles under which an investment will not be protected if it is made in violation of the host state’s law.16 One example of such an understanding is the Saur case, where the Tribunal stated that the legality requirement presents a “tacit condition to be found in every treaty”, while also emphasizing that it covers only “serious violations of the legal order”.17 Also, the Tribunal in the Phoenix case shared the view
that the legality requirement is implicit18 and gave an example that “treaty protection cannot be granted to investments made in violation of the most fundamental rules of protection of human rights”.19 Furthermore, the Tribunal in the Fraport case held that Article 25 of the Convention on
the Settlement of Investment Disputes between States and Nationals of other States (“ICSID20
Convention”) implies that an investment must be legal in order to be protected21, whereas the Tribunal in the Saba Fakes case found that the ICSID Convention does not impose the legality requirement.22 In cases where investment treaties lacked an explicit legality requirement, some
11
Saba Fakes v. Republic of Turkey, ICSID Case No. ARB/07/20, Award (14 July 2010) para 119.
12
Quiborax v. Plurinational State of Bolivia, ICSID Case No. ARB/06/2, Decision on Jurisdiction (27 September 2012) para 266.
13
Rumeli v. Republic of Kazakhstan, ICSID Case No. ARB/05/16, Award (29 July 2008) para 319.
14
See: Fraport v. Republic of the Philippines, ICSID Case No. ARB/03/25, Award (16 August 2007).
15
See: Inceysa v. Republic of El Salvador, ICSID Case No. ARB/03/26, Award (2 August 2006).
16
Gustav Hamester. v. Republic of Ghana, ICSID Case No. ARB/07/24, Award (18 June 2010), paras 123-124.
17
Saur v. Republic of Argentina, ICSID Case No. ARB/04/4, Decision on Jurisdiction and Liability (6 June 2012) para 308. (in French) translated in Michael Polkinghorne and Sven-Michael Volkmer (n 10) 156.
18
Phoenix v. Czech Republic, ICSID Case No. ARB/06/5, Award (15 April 2009) para 101.
19
Ibid, para 78.
20
International Centre for Settlement of Investment Disputes (“ICSID”)
21
Fraport (n 14) para 305.
22
9
tribunals addressed investor compliance with domestic law as a jurisdictional prerequisite23, while others considered it to be a condition for admissibility of the claim.24
The temporal scope of the legality requirement has also been discussed among tribunals. Some tribunals held that this provision encompasses the applicable law of the host state at the time of the establishment of the investment in question. This conclusion is based on the interpretation of BITs which “refers to the legality requirement in the past tense by using the words investments “made” in accordance with host state laws”.25 Furthermore, the Tribunal in the Hamester case
distinguished between the legality of the creation of an investment, presenting it as a jurisdictional issue (and which is covered by the “in accordance with the law” provision), and the legality of the investor’s conduct during the life of the investment, which is a merits issue.26
In the labour context, the “in accordance with host state law” clause would cover those domestic labour provisions which an investor must respect at the moment of making an investment. Further, those labour provisions shall fall under the fundamental legal principles of the host state unless the respective IIA states otherwise, such as by narrowing the scope of legality requirement to domestic laws concerning the admission of investments. Also, some investment treaties provide clear guidelines for tribunals and note that compliance with host state labour standards is included in the legality requirement.27 Moreover, also in the case of a respective investment treaty lacking a legality requirement clause, only serious violations of the fundamental rules of labour rights protections may arguably prevent treaty application.
It may be argued that breaches of SIA obligations (as further explained in part 1.1.3.) amount to illegal investment and are covered under the “in accordance with the host state law” clause, considering that both requirements — illegality timing and the significance of obligations in question — have been arguably fulfilled. Firstly, SIA obligations expected to be fulfilled prior to making an investment are included in the investment establishment phase, as they lead to the investment’s existence. Moreover, the question of whether these obligations present part of the fundamental legal principles of the host state is to be assessed on a case by case basis. Nevertheless,
23
Hamester (n 16) para 123-124.
24
Plama v. Republic of Bulgaria, ICSID Case No. ARB/03/24, Award (27 August 2008) paras 143-146.
25
Quiborax (n 12) para. 266.
26
Hamester (n 16) para 127.
10
the importance of SIA has been emphasised on the international, domestic and regional plane. Many international instruments refer to human rights due diligence and impact assessment, such as the Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy (“ILO MNE Declaration”),28 as well as the current draft of the UN Treaty (further explained in
Chapter 3), which imposes comprehensive human right due diligence obligations on its member states.29 In addition, many European governments are currently introducing national laws imposing mandatory human rights due diligence obligations on companies.30 Finally, this trend is
noticeable also on the regional level – it has been announced that the European Union (“EU”) plans to develop corporate human rights and environmental due diligence legislation.31
While breaches of SIA obligations may be invoked during investor-state arbitration as jurisdictional or admissibility objections, investor breaches of labour provisions occurring while operating investments shall be assessed on the merits stage (further explained in part 1.1.4.).
1.1.2. The clause directly imposing an obligation on investors to comply with domestic labour law
Furthermore, IIAs may also include provisions which directly impose obligations on investors to obey domestic rules. In order to avoid any ambiguity in the provision’s scope, the International Institute for Sustainable Development (“IISD”) proposed that this provision also contain the investor’s obligation to act in accordance with “core labour standards as required by […] the law in the host state on labour standards”.32Also, the Netherlands Model Investment
Agreement explicitly states that “investors and their investments shall comply with domestic laws
28
ILO, ‘Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy’ (International Labour Office, 2017) art 10.d.
29
Gabriela Quijano, ‘A New Draft Business and Human Rights Treaty and a Promising Direction of Travel’ (2019)
https://www.business-humanrights.org/en/a-new-draft-business-and-human-rights-treaty-and-a-promising-direction-of-travel
accessed 12 July 2020.
30‘Towards Mandatory Human Rights Due Diligence’
https://www.business-humanrights.org/en/about-us/blog/towards-mandatory-human-rights-due-diligence accessed 12 July 2020.
31‘EU Commissioner for Justice commits to legislation on mandatory due diligence for companies’ (2020) https://www.business-humanrights.org/en/eu-commissioner-for-justice-commits-to-legislation-on-mandatory-due-diligence-for-companies accessed 12 July 2020.
32
IISD, ‘Harnessing Investment for Sustainable Development: Inclusion of investor obligations and corporate accountability provisions in trade and investment agreements’ (2018) 12.
11
and regulations of the host state, including labor laws.”33 Some IIAs even specify that investors have duty to comply with domestic labour regulations with respect to the management and operation of an investment.34
1.1.3. The social impact assessment clause
SIA obligations aim to identify and evaluate a project’s social risks and impact.35 According
to the Organization for Economic Cooperation and Development (“OECD”), potential social impacts include (but are not limited to) labour and working conditions and project-related human rights impacts such as forced and child labour.36 Therefore, these obligations may prove significant in the area of labour rights, considering that investors are obliged to determine a project’s potential effects on working conditions and labour rights in advance, and to prevent any foreseen negative impact. The UNGPs emphasize that business enterprises should perform human rights (including core labour rights) due diligence as part of the company’s responsibility to respect human rights.37
Many investment projects are subject to the SIA according to host state regulations, and therefore SIA obligations are contained in other investment treaty provisions, imposing general obligation on the investor to obey host state domestic regulations (examined in parts 1.1.1. and 1.1.2.).
Nevertheless, IIAs may also specifically require that investors undertake human and labour rights due diligence. In addition, IIAs could also incorporate international standards such as the International Finance Corporation’s (“IFC”) performance standards on Environmental and Social Impact Assessment (“IFC Standards”). Currently, these provisions are still mainly presented only in certain model BITs, and have been suggested to be introduced in future IIAs. The most relevant example is the Model BIT of Southern African Development Community (“SADC Model BIT”) which determines that the investor and investment shall comply with social assessment screening criteria and assessment processes applicable to their proposed investments prior to their
33Netherlands Model Investment Agreement (22 March 2019) art. 7(1). 34Ethiopia-Qatar BIT (signed 14 November 2017) art 14.
35IFC, ‘Performance standards on Environmental and Social Impact Assessment’ (2012) 6. 36
OECD, ‘Recommendation of the Council on Common Approaches for Officially Supported Export Credits and Environmental and Social Due Diligence‘(6 April 2016) TAD/ECG (2016)3 art 10.
12
establishment, as required by the either: 1) laws of the host state; 2) laws of the home state or 3) the IFC Standards, depending on which of the proposed regulations is more rigorous.38
With respect to the concluded investment treaties, the Morocco-Nigeria BIT (not yet in force) presents a rare example of an IIA which contains this type of provision, i.e. which imposes an “independent” obligation on the investor to perform SIA.39
1.1.4. Invocation of investor obligations to comply with domestic labour law
Investor compliance with host state labour laws remains primarily a matter for the domestic authorities of the host state and any disputes arising in that regard are to be resolved by the host state’s own courts.40
Furthermore, the host state may invoke breach of these obligations in different procedural stages during the arbitration proceedings, depending on the particular situation:
1. jurisdictional objection: Breach of the investment legality requirement clause may lead
that the tribunal lacks the jurisdiction ratione materiae.41 For instance, the Tribunal in the Inceysa case determined that the relevant BIT contains an “in accordance with the host state law” clause in two provisions, further indicating that investments made illegally are outside of the BIT's scope and benefits.42 As previously explained in part 1.1.1, investor breach of SIA obligations is arguably covered by the scope of the “in accordance with the host state law” clause and tribunals may decline jurisdiction.
The Tribunal in the Phoenix case offered a more flexible approach based on the judicial economy, stating that if the violation of the host state’s laws is “manifest”, it can be dealt with as a jurisdictional issue, but if the illegality is not obvious, then the tribunal should defer this issue to the merits stage.43 One suggestion to avoid tribunals adopting different approaches would be to set clear guidelines for tribunals to decline jurisdiction over investments not made in accordance
38SADC Model BIT Template with Commentary (2012) art 13.1, p 34. 39Morocco-Nigeria BIT (signed 03 December 2016), art 14.2. 40
Vid Prislan and Ruben Zandvliet, ‘Labor Provisions in International Investment Agreements: Prospects for Sustainable Development’ (2013) Grotius Centre Working Paper 2013/003-IEL, 49.
41See: Fraport (n 14) paras 396-404. 42
Inceysa (n 15) paras 142-145, 206-207.
43
13
with domestic law by introducing a provision in IIAs which determines that “an investor may not submit a claim under the treaty if the investment has been made or acquired in violation of domestic law or obligations set out in the agreement”.44
2. admissibility objection: Admissibility objection may be used when a particular investment
treaty does not explicitly contain a legality requirement or does not impose an obligation for investors to comply with domestic regulations.45 For example, the Tribunal in the Plama case found that, despite the Energy Charter Treaty's lack of a legality requirement clause, “providing protection for illegally obtained investment would be against certain principles of international law, such as: the principle that nobody can benefit from his own wrong, the principle of good faith and basic notion of international public policy”.46 Also, in the Churchill Mining case, the Tribunal declared investment claims inadmissible as a consequence of forgeries of documents during the making of an investment, which were actions the Tribunal considered to be against “international public policy”.47
In the context of human and labour rights protection, important is the view of those authors who claim that breaches of human rights impact assessment are included in the good faith principle.48 Arguably, even if the relevant investment treaty does not contain a legality requirement clause, non-compliance with social impact assessment and labour rights due diligence obligations may lead a tribunal to conclude that investments were made against the principle of good faith. As a consequence, investment claims would be declared as inadmissible.
3. defense argument on merits: Some tribunals have accepted that illegal occurrences after an
investment is made shall be examined as a merits issue, while deciding whether specific treaty provisions have been breached.49 Therefore, a tribunal shall take into consideration whether investors complied with domestic labour code while performing an investment, in order to decide
44IISD (n 32) 10. 45
When investment treaties lacked explicit legality requirement, some tribunals addressed investor compliance with domestic law as jurisdictional prerequisite- see footnote 23.
46
Plama (n 24) paras 138 and 143-146.
47
Churchill Mining v. Republic of Indonesia, ICSID Case No. ARB/12/14 and 12/40, Award (6 December 2016) paras 507-508 and 557.
48
Vivian Kube and Ernst-Ulrich Petersmann,’ Human rights law in international investment arbitration’ (2016) European University Institute, Department of Law, 22.
49
Hamester (n 16) para 127; Vladislav Kim v. Republic of Uzbekistan, ICSID Case No. ARB/13/6, Decision on Jurisdiction (8 March 2017) para 553.
14
whether certain substantive provisions have been breached, such as fair and equitable treatment (“FET”) or unlawful expropriation. In this respect, an investor’s breach of domestic law may be justification for certain host state measures, such as for instance revocation of operating licenses or termination of investment contracts, provided that these measures present a proportionate response to the investor’s behaviour.50 In the context of labour, one relevant example is that of an
investor failing to comply with labour requirements upon which the extension of an essential operating permit is dependent, after which the permit is revoked or denied extension, with the investor consequently suffering damages. Under these circumstances, a tribunal might decide that host state actions were justified by said non-compliance, finding that there is no breach of FET or unlawful expropriation.
4. grounds for reducing damages: Even if the tribunal finds a host state responsible for a
breach of the treaty, investor behaviour may have an impact on the quantification of the damage amount.51 Investor non-compliance with domestic labour requirements may contribute to the damage. For instance, in the above mentioned example — a breach of local labour requirements resulting the revocation/non extension of an operating permit — even if the investor manages to succeed on merits, a tribunal might reduce the amount of compensation proportionally to the investor’s contribution to the damage.
5. grounds for counterclaims: A host state may file a counterclaim based on an investor’s
non-compliance with domestic law, including labour legislation. In order for the host state to succeed, the tribunal must have jurisdiction over the counterclaim, both the primary and counterclaim must be sufficiently connected, and the investor’s breach of domestic labour code must be demonstrated.
In order to provide jurisdiction over counterclaims, IIAs have to contain sufficiently broad dispute settlement clauses which would include jurisdiction for deciding on counterclaims. This may be provided by a dispute settlement clause drafted to cover any dispute relating to an
50
See: Peter Muchlinski, ‘ 'Caveat Investor'? The Relevance of the Conduct of the Investor under the Fair and Equitable Treatment Standard’, (2006) International and Comparative Law Quarterly, Vol. 55, No 3.
51
See: Josefa Sicard- Mirabal and Yves Derains, Introduction to Investor- State Arbitration, Chapter 9: Damages and Costs' (Kluwer Law International 2018) 227.
15
investment or with respect to matters regulated by the investment agreement.52 The other option would be a dispute settlement clause expressly accepting jurisdiction for counterclaims.
Admissibility of the counterclaim deals with the relationship between the primary claim and counterclaim, which may be both factual and legal. In the Paushok case, the Tribunal concluded that breach of host state domestic law falls within the scope of the exclusive jurisdiction of domestic courts and cannot create a “reasonable nexus” with the primary claim.53 However, the
Urbaser Tribunal lowered this threshold and found that when both claims are based on the same
investment, they are factually connected and the counterclaim is admissible.54
1.2. Investor obligations to act in accordance with CSR standards
CSR may be defined as a “concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis”.55 One of the main areas of CSR is labour and employment practices (such as training,
diversity, gender equality and employee health and well-being).56 Therefore, investor behaviour relating to labour matters may be subsumed under CSR standards.
Guidance on fundamental CSR issues may be found in various non-binding instruments, such as the UNGPs, the revised OECD Guidelines on Multinational Enterprises (“OECD Guidelines”), the ILO MNE Declaration or The Ten Principles of the UN Global Compact.57 These documents emphasise that enterprises should respect basic human rights, including fundamental labour rights, and should not assist others in breaching such norms. With respect to labour standards, the four core labour rights determined in the 1998 ILO Declaration are accepted in most CSR instruments.
52On different ratione materiae limitations of the dispute settlement clauses see: Pohl, Joachim, Kekeletso Mashigo and Alexis
Nohen, ‘Dispute Settlement Provisions in International Investment Agreements: A Large Sample Survey’ (2012) OECD Working Papers on International Investment, 2012/02, 16.
53
Sergei Paushok v. Mongolia, UNICITRAL, Award on Jurisdiction and Liability (28 April 2011) para 694.
54
Urbaser v. Argentine Republic, ICSID case no: ARB/07/26, Award (8 December 2016) para 1151.
55
European Commission, ‘Promoting a European Framework for Corporate Social Responsibility’ (2001) COM(2001) 366 final, 6 https://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2001:0366:FIN:EN:PDF accessed 19 May 2020.
56
European Commission, ‘A renewed EU strategy 2011-14 for Corporate Social Responsibility’ (2011) COM(2011) 681 final, 7
https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52011DC0681&from=EN accessed 19 May 2020.
57
SDG Compass: The guide for business action on the SDGs, 10 https://sdgcompass.org/wp-content/uploads/2016/05/019104_SDG_Compass_Guide_2015_v29.pdf accessed 18 May 2020.
16
Some IIAs contain provisions drafted in the “double-soft law” manner58, where states are required to remind or encourage investors to voluntarily adopt the guidelines and principles of CSR standards.59 However, bearing in mind the great social concerns arising out of the operation of international companies, recent IIAs include provisions which directly call upon investors to incorporate CSR standards in their business conduct.
CSR provisions may have different content and consequently have a broader or narrower scope. Some IIAs define broadly that “investors should make effort to voluntarily incorporate internationally recognised standards of CSR in their business policies and practices”.60 Certain
IIAs additionally specify that these principles address labour issues.61 Various IIAs include more precise clauses where the CSR standard is defined by referring to certain international instruments, such as in the Morocco-Nigeria BIT, which defines CSR by referring to SDGs and the ILO MNE Declaration62. On the other hand, the EFTA-Georgia FTA defines the scope of CSR by indication to OECD Guidelines, the OECD Principles of Corporate Governance and the UN Global Compact.63
Although CSR clauses present soft law standards, they may influence tribunals to interpret treaties in a more balanced manner. Firstly, CSR provisions may facilitate a tribunal’s selection of the ordinary meaning that should be given to treaty terms and help identify the materials which the tribunal should take into account in the treaty’s interpretation.64 Further, it is more likely that ambiguously or open-ended wordings will be subject to more balanced interpretations.65 In particular, CSR provisions may be considered as a base for a more restrictive approach of FET standards and thus may help to better define the scope of investors’ legitimate expectations.66 For
58Prislan and Zandvliet (n 40) 32. 59
See: Netherlands Model Investment Agreement, art 7(2); Pacific Agreement on Closer Economic Relations (signed 14 June 2017) Chapter 9, art 5; Argentina - Japan BIT (signed 01 December 2018), art 17; Australia-Hong Kong Investment Agreement (entered into force 17 January 2020), art 16.
60Argentina–Qatar BIT (signed 06 November 2016) art 12.
61India-Belarus BIT (signed 24 September 2018), art 12; Kyrgyzstan Republic- India BIT (signed 14 June 2019) art 12. 62Morocco-Nigeria BIT, art 24.
63European Free Trade Association (“EFTA”)-Georgia FTA (entered into force 01 September 2017) Preamble, 4. 64
See: Barnali Choudhury, ‘Investor Obligations for Human Rights’ (2019) ICSID Review (Forthcoming). Available at SSRN:
https://ssrn.com/abstract=3500991. 20. 65Ibid.
66
Laurence Dubin, ‘Corporate Social Responsibility Clauses in Investment Treaties’ (2018) Investment Treaty News 3
https://www.iisd.org/itn/2018/12/21/corporate-social-responsibility-clauses-in-investment-treaties-laurence-dubin/ accessed 20 May 2020.
17
instance, it may be argued that investors who are supposed to incorporate CSR into operations cannot legitimately expect a host state not to fulfil its obligations sourced in ratified ILO conventions and consequently introduce higher labour standards into domestic frameworks.
Also, it is claimed that CSR provisions may lead to establishing a doctrine of a minimum standard of corporate social diligence: therefore, investors will have to be minimally (socially) diligent in order to seek protection under an investment treaty.67 Positive development is noticeable in the Netherlands Model Investment Agreement which expressly states that investor non-compliance with UNGPs and OECD Guidelines shall be taken into consideration in deciding on the amount of compensation.68
Finally, although CSR provisions currently present soft law standards, they may start transforming from social expectations into hard law with time. In this respect terms such as “expected” or “encouraged” will be replaced with the term “shall”. The following section will further analyse whether investment treaties impose binding obligations on investors.
1.3. Toward investor binding obligations to comply with international labour standards
Some model BITs contain provisions imposing directly binding obligations on investors. The IISD Model International Agreement on Investment for Sustainable Development (“IISD Model
BIT”) was the earliest model which contained a broader range of investor obligations, including
obligations concerning international labour standards. Also, the SADC Model BIT included different direct obligations for investors in relation to labour rights. For instance, the IISD Model BIT determined that “investors should uphold human rights in the workplace,”69 while the SADC
Model BIT noted that “investors have duty to respect” said human rights.70 Both model BITs stated that investors “shall not undertake or cause to be undertaken acts that breach such human rights”71
67Nitish Monebhurrun, ‘Mapping the Duties of Private Companies in International Investment Law’ (2017) Brazilian Journal of
International Law, Vol. 14, No. 2, 60.
68Netherlands Model Investment Agreement, art 23. 69 IISD Model BIT (April 2005) art 14 B).
70 SADC Model BIT (July 2012) art 15.1.
18
and “shall act in accordance with core labour standards as required by the 1998 ILO Declaration”.72 Some authors noted that compliance by enterprises with non-binding documents, such as the 1998 ILO Declaration, are not always suitable for direct application, but must firstly be transposed in domestic legislation.73 Moreover, both model BITs imposed an obligation on investors “not to manage or operate the investments in a manner that circumvents international labour rights law obligations to which the host state and/or home state are parties”.74 This provision includes obligations arising out of international agreements concluded by host or home states (for instance, the ILO convention), which are ratified but not fully incorporated into domestic law.
Although model BITs are significant, in order to conclude whether current IIAs contain binding obligations for investors it is necessary to determine the text of concluded treaties. In that respect, the Morocco-Nigeria BIT (signed in 2016, but still has not come into force) is described as a “remarkable attempt made by two developing countries to bring investment treaties in line with the recent evolution of international law”.75
This BIT determines that investors shall uphold human rights in the host state, as well as to act in accordance with core labour standards as required by the 1998 ILO Declaration.76 The treaty uses the term “shall”, therefore obligations imposed on investors are mandatory and directly enforceable. Additionally, some authors posit that the term “uphold” should be interpreted to mean “respect, protect and fulfil” human rights.77 Further, this BIT establishes that investors are obliged
not to manage or operate investments in a manner that circumvents international environmental, labour and human rights law obligations to which the host state and/or home state are parties.78
72IISD Model BIT, art 14 C); SADC Model BIT, art 15.2. 73
Ruben Zandvliet, Trade, Investment and Labour: Interactions in International Law (Leiden University 2019) Doctoral Thesis, 204.
74IISD Model BIT, art 14 D); SADC Model BIT, art 15.3. 75
Tarcisio Gazzini, ‘The 2016 Morocco–Nigeria BIT: An Important Contribution to the Reform of Investment Treaties’ (2017) Investment Treaty News https://www.iisd.org/itn/2017/09/26/the-2016-morocco-nigeria-bit-an-important-contribution-to-the-reform-of-investment-treaties-tarcisio-gazzini/ accessed 17 May 2020.
76Morocco-Nigeria BIT, art 18.2 and 18.3. 77
Markus Krajewski, ‘A Nightmare or a Noble Dream? Establishing Investor Obligations Through Making and Treaty-Application’ (2020) Business and Human Rights Journal, Vol. 5, Issue 1, 115.
19
It may be argued that the Morocco-Nigeria BIT approach on imposing direct investor obligations arose out of the tendency adopted in African investment treaty practice.79 However, it is questionable whether this trend will be further accepted in future investment treaties. Even the contracting party — Morocco — departed from this direct investor obligation approach in IIAs:80 the Morocco-Brazil BIT is based on the Brazilian Model BIT, while the Morocco-Republic of Congo BIT and Morocco-Japan BIT81 do not contain any provisions prescribing investor obligations.82 The other contracting party — Nigeria — has not recently concluded investment
treaties.
Arguably, states still seem reluctant to include mandatory investor obligations in their IIAs. Despite some model agreements showing progress with respect to the investor obligation provisions, there is no evidence that new IIAs will accept these developments and include direct obligations for investors to obey international labour standards.
When it comes to the invocation of these mandatory and directly enforceable investor obligations, their main significance would be that the host state might use breach of these obligations not only as an argument for the defense of its liability or reduction of the amount of damages,83 but also as grounds for a counterclaim (under the condition that a tribunal has jurisdiction over said claim84 and that counterclaim is admissible85). By explicitly introducing directly enforceable obligations for investors to comply with international labour standards and respect labour rights in the text of IIAs, the tribunals would be enabled to hold investors responsible for breaching these obligations and to award damages to host states.
79
See: African Union, ‘Draft Pan-African Investment Code’ (December 2016) Eco/STC/MAEPI/EXP/3, art 34(3); Supplementary Act on Investment of the Economic Community of West African States (ECOWAS) (entered into force 09 January 2009) art 14 (2).
80
Analysis does not include examination of Morocco-Zambia BIT (signed 20 February 2017) and Morocco-South Sudan BIT (signed 01 February 2017), due to their unavailability.
81Morocco-Japan BIT (signed on 08 January 2020). 82Markus Krajewski (n 77) 115-116.
83For example, if a state’s actions (such as termination of investment contract) were determined as necessary to put an end to the
breach of investor labour right law obligations determined in the investment treaty. See also: Ioana Tudor, The Fair and Equitable Treatment Standard in the International Law of Foreign Investment (Oxford Scholarship Online 2009) 222.
84
Respective IIAs must contain a broad dispute settlement clause covering all disputes relating to investment or matter regulated by investment treaties, or a clause including jurisdiction over counterclaims.
20
* * *
Based on the above, most binding investor obligations sourced in IIAs are related to their duty to comply with the domestic framework of the state (including domestic labour provisions). Furthermore, certain investment treaties contain provisions on CSR standards, and some of them even directly call upon investors to apply these standards in their operations. Finally, although investors’ direct and binding obligations to comply with international labour standards may be found in certain model BITs, states are still not introducing these obligations in their concluded IIAs. Now that an analysis of investor labour rights law obligations sourced in investment treaties has been provided, the following chapter will be devoted to examining whether these investor obligations may be sourced outside of the text of respective investment treaties.
21
2. INVESTOR LABOUR RIGHTS LAW OBLIGATIONS SOURCED OUTSIDE OF INTERNATIONAL INVESTMENT TREATIES
A further question that may arise in relation to an investor’s duty to comply with international labour standards is whether this obligation may be imposed outside of the text of relevant investment treaties. In other words, if the respective IIA is silent with regards to an investor’s labour rights law obligation, is it possible to source this duty in any other instrument? Article 31(3)(c) of the Vienna Convention on the Law of Treaties stipulates that any relevant rules of international law applicable in the relations between parties shall be taken into consideration when a treaty is interpreted.86 This article encompasses the principle of systemic integration which deals with cases in which material sources external to the treaty are relevant to interpretation, such as other treaties, customary rules or general principles of law.87
Therefore, this chapter will firstly examine whether core labour rights have attained the status of international customary law and therefore present a source of international labour obligations outside the scope of IIAs (part 2.1.). Further, recent case law before international investment tribunals dealing with investors as subjects of international law and holders of duties beyond the text of investment treaty will be analysed (part 2.2.1 and 2.2.2). Also, the recent Nevsun case before the Canadian Supreme Court will be discussed, dealing with the question of investor obligation to comply with international labour rights sourced in customary law (part 2.2.3). Finally, in which way a host state may invoke these obligations outside of treaty text during investment arbitration will be investigated (part 2.2.4.).
2.1. Core labour rights as part of international customary law
The notion of core labour rights was introduced in the 1998 ILO Declaration, determining that all member states have the obligation to promote, respect and realise principles concerning fundamental rights in the following categories: a) freedom of association and the effective
86Vienna Convention on the Law of Treaties (entered into force 27 January 1980) 1155 UNTS 331, art 31.3.c. 87
UN, International Law Commission, Conclusions of the Work of the Study Group on the Fragmentation of International Law: Difficulties arising from the Diversification and Expansion of International Law (2006)
22
recognition of the right to collective bargaining; b) the elimination of all forms of forced or compulsory labour; c) the effective abolition of child labour; and d) the elimination of discrimination in respect of employment and occupation. These obligations arise for each member state based on their ILO membership, even if they have not ratified relevant conventions.88 IISD emphasised the universal nature of these fundamental labour rights and noted that almost all states have subscribed to these minimum standards.89
A broad discussion arose about whether core labour rights can be considered as customary international law or even peremptory norms. There are no studies on this topic, and therefore, no definite conclusion exists. Different authors have taken various positions on the topic, as will be discussed below.
On one side, authors such as Kaufmann claimed that labour rights contained in the Universal Declaration on Human Rights (“UDHR”) are considered customary international law.90 Articles of the UDHR relating to labour standards are those which prohibit slavery, torture, and cruel, inhuman or degrading treatment; as well as those which claim the rights to work and rest, free choice of employment, just and favourable working conditions, the right to equal pay for equal work without any discrimination and the right to form and to join trade unions.91 Essentially, all core labour rights aside from the prohibition of child labour are present in the UDHR. Moreover, Kaufmann also examined whether the 1998 ILO Declaration further developed this concept. She stated that, despite the 1998 ILO Declaration’s initial controversy, most of the 19 abstaining governments have co-operated in the implementation of the declaration through ILO reporting procedures, consequently underlining an international consensus as to core labour rights.92 Furthermore, it is accepted that core labour rights are the base for any human activity in the workplace and therefore are binding for all ILO members. Finally, she concluded that, given the large number of ILO members, these obligations come close to being erga omnes.93
881998 ILO Declaration, art 2. 89IISD (n 32) 12.
90
Christine Kaufmann, Globalisation and Labour rights: The Conflicts Between Core Labour Rights and International Economic Law (Hart Publishing 2007), 75.
91Universal Declaration on Human Rights (10 December 1948) UNGA Res 217A (III), art 4, 5, 23 and 24. 92Christine Kaufmann (n 90) 75.
23
On the other hand, some authors such as Alston stated that, in order to claim that the 1998 ILO Declaration has customary law status, it would be necessary to demonstrate that each of the standards contained in the declaration has satisfied all of the requirements for the establishment customary international law norms. He emphasised that, while such an argument could be made, it would be contested by traditionalists whose list of customary norms remains limited.94
Therefore, through examination of the legal nature of each of the core labour rights, different discussions may arise. When it comes to the prohibition of child labour, some authors argue that the worst forms of child labour are equal with slavery, which implies that this prohibition presents both part of customary law and a peremptory norm.95 With respect to forced labour, the Court in the Nevsun case referred to the ILO’s report entitled “Forced labour in Myanmar (Burma),” noting that “there exists in international law a peremptory norm prohibiting any recourse to forced labour and that the right not to be compelled to perform forced or compulsory labour is one of the basic human rights”.96 However, the Court has recognised that debate may exist about whether prohibition of forced labour is a peremptory norm, but there can be no doubt that it is at least a norm of customary international law.97 In relation to the remaining two core labour rights — the right to freedom of association and collective bargaining and the right to non-discrimination in occupation and employment — some authors stated that there are few sources that explicitly confirm or deny customary status98, which makes drawing a conclusion about their legal nature challenging.
2.2. Recent case law relevant to the question of investor obligations
The following analysis will be focused on recent case law pertaining to investor obligations under public international law.
94
Philip Alston, ‘“Core Labour Standards” and the Transformation of the International Labour Rights Regime’ (2004) European Journal of International Law, Vol. 15, Issue 13, 493.
95
Federico Lenzerini, ‘International Trade and Child Labour Standards’ in Francesco Franconi, Environment, Human Rights and International Trade (Hart Publishing 2001), 308.
96ILO, Forced labour in Myanmar (Burma) Report (International Labour Office 1998) para 203. 97
Nevsun Resources v. Araya, Case no. 37919, Canadian Supreme Court Judgment, (28 February 2020), para 111.
24
2.2.1. Urbaser v. Argentina case
The recent Urbaser case leads to a significant shift in establishing more balanced relations between the investor and host state in international investment law. In this case, Argentina filed a counterclaim in which it alleged that an investor’s failure to provide the necessary level of investment in the supply services violated the human right to water.99 In order to decide on counterclaims, the Tribunal took into consideration international human rights instruments as part of the applicable law since the relevant Argentina-Spain BIT included a reference to “general principles of international law”.100 The Tribunal expressly noted that, despite the BIT’s purpose being to promote foreign investments, it “has to be construed in harmony with other rules of international law of which it forms part, including those relating to human rights”.101
Therefore, the Tribunal applied systemic integration and expressly stated that human rights instruments shall also be taken into consideration while interpreting investment treaties. This approach may also include labour rights instruments, such as ILO conventions to which the host state is a party, as well as core labour rights, which would be applicable in each case to the extent to which they have attained the status of customary law.
Moreover, the Tribunal pointed out that CSR presents a “standard of crucial importance for companies”, as well as that “companies operating internationally cannot be immune from becoming subjects of international law”.102 Accordingly, the Tribunal implied that public international law has the potential to bind investors as well.103 This conclusion has been reached through an examination of international instruments covering the human right to water, in particular the UDHR, the International Covenant on Economic, Social and Cultural Rights (”ICESCR”) and the ILO MNE Declaration. The UDHR and the ICESCR stipulated that “nothing in them may be interpreted as implying for any state, group or person any right to engage in any
99Urbaser (n 54) para 36. 100
Urbaser (n 54), paras 1189 and 1192.
101Ibid, para 1200. 102Ibid, para 1195. 103
Edward Guntrip, ’Private Actors, Public Goods and Responsibility for the Right to Water in International Investment Law: An Analysis of Urbaser v. Argentina’ (2018) Brill Open Book, Vol. 1, Issue 1, 47.
25
activity aimed at the destruction of any of the rights set forth”.104 Therefore, the Tribunal concluded that these instruments may also address multinational companies.105 However, this conclusion is criticized by some authors who noted that the previously cited provision of the UDHR and the ICESCR may not be applicable, since it can be used only for the purpose of preventing the deliberate misinterpretation of one human rights law obligation to justify the violation of other rights and cannot extend its application to rights sourced from BITs.106
Further, other scholars criticised the Urbaser award, pointing out that the Tribunal sourced its reasoning from Henkin’s article in which he advocated that the UDHR applies to everyone based on the UDHR Preamble which states that “every individual and every organ of society shall strive […] to secure universal and effective recognition and observance”.107 Consequently, these scholars
noted that it is questionable whether a preamble can establish any binding effects, as well as whether above cited sentence may create a binding human rights law obligation for companies.108 Finally, some authors claimed that the UDHR and ILO MNE Declaration lack status as sources of international law as reflected in Article 38(1) of the Statute of the International Court of Justice, and therefore they cannot establish an international obligation for investors.109
The reasoning provided by the Urbaser Tribunal is also significant for the area of labour law standards. The Tribunal explicitly stated that the UDHR is part of customary international rules110 and indicated that it is potentially binding to investors. If the tribunal is challenged with the question of an investor’s duty to comply with international labour standards and it follows the same approach as the Tribunal in the Urbaser case, it is likely to reach the conclusion that fundamental labour rights, which are contained in the UDHR and further elaborated in the
104
UDHR, art 30; International Covenant on Economic, Social and Cultural Rights (entered into force 03 January 1976) 993 UNTS 3, art. 5(1).
105
Urbaser (n 54) paras 1196-1199.
106
Edward Guntrip, ‘Urbaser v Argentina: The Origins of a Host State Human Rights Counterclaim in ICSID Arbitration?’ (2017) EJIL: Talk! https://www.ejiltalk.org/urbaser-v-argentina-the-origins-of-a-host-state-human-rights-counterclaim-in-icsid-arbitration/ accessed 25 April, 2020. See also: Patrick Abel, ‘Counterclaims Based on International Human Rights Obligations of Investors in International Investment Arbitration‘ (2018) Brill Open Book, Vol. 1, Issue 1, 20.
107
Louis Henkin, ‘The Universal Declaration at 50 and the Challenge of Global Markets’ (1999) Brooklyn Journal of International Law, Vol. 25, Issue 1, 25.
108Markus Krajewski (n 77) 124. 109Patrick Abel (n 106) 19. 110
26
ICESCR111 and the International Covenant on Political and Civil Rights112, are applicable and provide grounds for investor duties. When it comes to the possible application of the 1998 ILO Declaration as a source for such investor duties, it shall be emphasised that it is a non-binding instrument113, although in part 2.1. it was discussed whether labour rights determined in the declaration attained customary law status. Further, it has been argued that it does not apply directly to multinational enterprises, although it should be expected that the ILO 1998 Declaration and corporate policies converge in the long run.114
Furthermore, the Urbaser Tribunal differentiates the effects of positive and negative obligations. Negative obligations require investors to abstain or not violate human rights, while positive obligations require performing necessary steps in order to provide that the local population enjoys human rights.115 The Tribunal stated that for a positive obligation to exist for investors, a “contract or similar legal relationship of civil and commercial law is required.”116 Contrarily, the
Tribunal found that negative obligation can be of immediate application on individuals and other private parties.117 Some authors argued that this distinction has been properly made, since non-state actor capacity is limited to controlling their own conduct and therefore the most appropriate obligation for them is one that mirrors the state’s duty to respect (i.e. not destroy) human rights.118
Therefore, by applying this approach to international labour obligations, it would lead to differentiating positive and negative labour obligations, where only negative labour obligations are binding toward investors. However, as some authors have pointed out, sometimes it can be questionable whether a certain obligation has the characteristics to perform or to abstain. For instance, it can be argued that the principle of non-discrimination in employment and work encompasses both negative and positive obligations.119According to the ILO Committee of
111ICESCR (n 104) art 6,7,8 and 10.
112International Covenant on Political and Civil Rights (entered into force 23 March 1976) 999 UNTS 171, art 7-8. 113
Lars Thomann, Steps to Compliance with International Labour Standards: The International Labour Organization (ILO) and the Abolition of Forced Labour (VS Verlag für Sozialwissenschaften 2012) 174.
114OECD, ’Foreign direct investment, development and corporate responsibility’ (2000) 61. 115Urbaser (n 54) paras 1209-1210. 116 Urbaser (n 54) para 1210. 117Ibid. 118Guntrip (n 103), 53. 119
Arne Daniel Albert Vandaele, International Labour Rights and the Social Clause: Friends Or Foes (Cameron May 2004), 164.
27
Experts, non-discrimination includes the positive obligation to pursue an active policy and take practical measures to ensure equality of opportunity and treatment in the employment and activities under its control.120 Contrarily, when it comes to the prohibition of forced labour, it is merely negatively formulated121 and therefore arguably included in the obligations directly applicable to the investors.
2.2.2. Dissenting opinion in the Bear Creek v. Peru case and Aven v. Costa Rica case
Although the Urbaser award has been criticised by many authors, it is clear that the approach accepted by this Tribunal influenced further case law. Two recent decisions which referred to the
Urbaser case are the dissenting opinion of Professor Sands in the Bear Creek case and the award
in the Aven case.
One of the main issues in the Bear Creek case was tension between investment protection and the rights of indigenous communities. In this case, the investor was barred from operating its investment due to the distrust of the local communities toward the project. Investor failure to engage in proper consultations with local communities and to obtain a “social licence” culminated in social unrest.122 The Tribunal concluded that ILO Convention 169 (Indigenous and Tribal Peoples Convention)123 imposes obligation only on the host state to introduce consultations with local communities into the domestic law framework.124 Nevertheless, the Dissenter acknowledged that, although ILO Convention 169 does not impose obligations directly on investors, “it does not mean that it is without significance or legal effects for them.”125 He held that was ultimately the investor itself that must obtain the “social license” and it had failed to do so.126 Therefore, the
120
International Labour Office, 80th Session, ’Report of the Committee of Experts on the Application of Conventions and
Recommendations’ (Report III), Observations on the Application of the Convention No. 111 in Brazil (1993) 321.
121Arne Daniel Albert Vandaele (n 119) 164.
122See: Bear Creek v. Republic of Peru, ICSID Case No. ARB/14/21, Award (30 November 2017) paras 119-216. 123ILO’s Indigenous and Tribal Peoples Convention (ILO Convention 169) (entered into force 05 September, 1991). 124Bear Creek (n 122) para 664.
125
Bear Creek v. Republic of Peru, ICSID Case No. ARB/14/21, Partial Dissenting Opinion of Professor Philippe Sands (30 November 2017), para 10.
126
Jarrod Hepburn, ‘‘Tribunal rejects DCF approach in Bear Creek case; Dissenter sees ILO Convention on Indigenous and Tribal Peoples as imposing obligations in context of miner’s ICSID claim’ (Investment Arbitration Reporter 2017)
28
Dissenter argued that tribunals shall take into consideration investor violations of human rights while determining the amount of damages.127 In his view, Bear Creek carried equal responsibility with the host state for the project’s failure, which should have led to reducing damages by one half.128
This approach leads to the conclusion that investors do not have direct obligations based on human and labour rights law, but that they shall adhere to human and labour rights in order to minimise possible harm and damages. Therefore, if a tribunal determines that an investor did not comply with certain ILO conventions to which host state is a party, it may take this into account while calculating damages.
The Urbaser case also influenced the Tribunal in the Aven case.129 In this case, Costa Rica filed a counterclaim stating that the investor had caused environmental damages violating certain host state environmental regulations.130 While deciding on jurisdiction over the counterclaim, the Tribunal touched upon the question whether investor obligations may arise out of the investment according to international law. With that respect, the Tribunal acknowledged the Urbaser approach that foreign investors cannot be immune from becoming subjects of international law and that it is particularly convincing when it comes to erga omnes obligations where all states have a legal interest in their protection, as it happens in the protection of the environment.131 In addition, the Tribunal noted that under Chapter 10 of DR-CAFTA (regulating investment regime) investors are obliged to abide by and comply with the measures taken by the host state to protect the environment, as well as that in case of a breach of these obligations, the investor shall not be exempted from the scope of claims, particularly in the field of environmental law.132
Some authors emphasised that, based on the Tribunal’s arguments, two interpretations are possible: either the Tribunal derives investor obligations from all erga omnes norms because they are binding on all subjects of international law; or the Tribunal refers to the obligations of investors
https://www.iareporter.com/articles/tribunal-rejects-dcf-approach-in-bear-creek-case-dissenter-sees-ilo-convention-on-indigenous-and-tribal-peoples-as-imposing-obligations-in-context-of-miners-icsid-claim/ accessed 14 July 2020.
127Markus Krajewski (n 77) 125. 128
Bear Creek, Dissenting opinion (n 125) para 39.
129
David R Aven v. Republic of Costa Rica, ICSID Case No. UNCT/15/3, Award (18 September 2018).
130Ibid, para 689. 131Ibid, paras 737-738. 132Ibid, para 739.
