Luke Eric Peterson
Chapter 3: Reflections and Recommendations
A series of conclusions can be drawn based on the preceding scenarios where human rights issues are arising in investment treaty arbitrations. First, to the extent that human rights law issues have been referenced to date in arbitration awards and rulings, this has generally been in relation to investor rights to property, due process, etc. Thus, in a handful of cases, arbitrators have drawn analogies to human rights jurisprudence in a bid to strengthen their own reading of certain investor protections, such as those on property or due process.
Second, notwithstanding this practice, there are emerging scenarios where the human rights of non-parties (someone other than the foreign investor) are implicated in investment treaty disputes. These scenarios include those where the rights of citizens to assemble, express themselves and protest government or investor decisions; where government policies have been designed to accord preferences to certain historically disadvantaged persons or groups; where indigenous rights or claims come into friction with the rights of foreign investors; and where government regulation of the water and sanitation industry is professed to be in furtherance of human rights obligations such as the right to health, right to food, or right to water.
Third, it is also clear that in certain of these latter scenarios, governments and sometimes non-governmental organizations, are tabling legal arguments grounded in human rights law. This is most evident in the Aguas Argentinas arbitration. Given the confidentiality surrounding the pleadings in many cases there may be other instances which are not currently a matter of public record.
Fourth, confronted with these human rights law obligations, it now falls to arbitration tribunals to determine to what extent they are relevant to the resolution of a given dispute. For example, arbitrators will consider whether human rights obligations may be raised by a state as a defense or justification when the state is accused of breaching foreign investment obligations. While arbitrators do not have jurisdiction to rule that a state has breached its human rights obligations, arbitrators may express opinions as to what those human rights obligations require and demand of governments, and whether they excuse or mitigate actions affecting foreign investors.
Fifth, and finally, arbitrators have little guidance, apart from general rules of treaty interpretation, when it comes to reading and grappling with the human rights obligations of governments. Likewise, they have little explicit guidance as to how human rights obligations are to be reconciled with investment treaty obligations in concrete circumstances.
In view of these conclusions, human rights advocates should now consider taking advantage of various openings, some of which are sketched out in this chapter.
There are a growing number of investment treaty arbitrations where human rights issues are implicated. These cases raise important and largely unexplored questions as to how human rights law should be squared with investment treaty obligations.
A first, and elementary task is to monitor more effectively developments in this decentralized and opaque area of international law. There is a need for ongoing and dedicated tracking of lawsuits arising under investment treaties, so as to highlight those which raise human rights issues.142 There are a large number of investor-state arbitrations whose existence is disclosed to the public—for example by disclosure on the ICSID website – and these cases should be investigated and monitored by researchers, civil society organizations, and journalists on a systematic and ongoing basis.
Currently, there are limits on the capacity of interested observers to monitor and analyze developments in the investment law regime. Thanks to the arbitration rules utilized in investment treaty cases, an unknown number of these cases may be launched without being disclosed publicly. Governments can bring greater transparency to the field by negotiating individual treaties which mandate open dispute resolution. However, with hundreds of existing treaties already in force, there have been broad-brush proposals to revise the procedural rules of arbitration so that any investor-state disputes using those rules will play out in public.143
Study and analysis of how similar issues are resolved in the two regimes
There is a need to study and consider how the foreign investment protection and human rights systems offer overlapping forms of protection to certain actors. For example, both investment and human rights treaties provide protections in case of expropriation of property; yet, as noted earlier, human rights adjudicators and investment arbitration tribunals may take differing views as to when a particular government action will trigger a requirement to compensate the affected property-owner and what level of compensation (full market value or some lesser amount) should be awarded.
Another issue which may be handled differently in the two systems is the question of awarding compensation for moral damages (rather than financial losses). It is common in human right adjudication to award some form of moral damages to victims of human rights violations (eg. for pain and suffering, harm to dignity, fear, mental distress, etc.).144 Under the case-law of the European Court of Human Rights, the overwhelming number of cases where damages are awarded, involve awards of moral damages, rather than for financial losses.145 Notably, that practice has started to be embraced in the investment treaty arbitration context. In early 2008, arbitrators awarded moral damages to a company whose executives suffered the “stress and anxiety of being harassed, threatened and detained” and intimidated by state agents and armed individuals.146 At a glance, the amount of these damages $1 million (US)—seems to far exceed those awarded in most human rights cases, even for the most egregious of abuses including torture, disappearances, extra-judicial killings. Thus, it should be a matter of priority for scholars and policymakers to assess how these two international law regimes are handling similar types of issues including the award of moral damages.
To date, many in the human rights community have failed to grasp the extent to which individuals and/or corporations can actively choose whether to file similar-looking claims under regional human rights mechanisms (such as the Inter-American Court of Human Rights) or under the arbitration mechanisms of bilateral investment treaties. For governments, and persons living under their jurisdiction, the rulings of these different international adjudicative mechanisms could lead to widely divergent legal, policy and financial consequences.
Study and analysis of how human rights law is interpreted and applied by investment arbitrators
It is clear that foreign investor interests can come into friction with the human rights of those living in the host country. As profiled earlier, investor-state arbitrations have arisen which may have implications for the right to water or a state’s use of affirmative action policies targeting disadvantaged persons, or a state’s need to balance investor security with the human rights of protestors and critics of a particular FDI project. In such cases, arbitrators of investment treaty claims are being asked by governments (or outside parties) to consider the legal relevance of the host governments’ human rights obligations and their potential to mitigate or justify certain actions taken against foreign investors.
Because most investment treaties are silent as to human rights law considerations, governments may choose, in future, to introduce explicit human rights language into treaties.147 This would make explicit the requirement of arbitrators to consider the relevance of human rights law to the matters in dispute. However, this leads inevitably to broader questions as to the capacity of arbitrators to handle the human rights law dimensions of such disputes. As Anne van Aaken has remarked, the power of this interpretative role is not to be underestimated particularly in a context where dozens of investor-state arbitrations are initiated each year under investment treaties. Thus, van Aaken observes, “the question who adjudicates becomes important.”148 Indeed, there is something of a Catch-22 dilemma for those who advocate for arbitrators to take account of the wider body of international law, including human rights law. In the event that arbitrators comply, they will need to draw conclusions as to how the human rights obligations of governments should be interpreted and understood.149 On rare occasions, arbitrators may have clear human rights law expertise. For example, some individuals who sit as investment arbitrators have expertise or experience in the human rights law field.150 At other times, however, arbitrators may have little in the way of specific human rights expertise.
Various strategies might be undertaken in an effort to ameliorate these gaps. For instance, arbitrators with human rights law expertise could be chosen. However, in the absence of binding requirements, it falls to each side to choose its own arbitrator. Alternatively, arbitrators might consult outside experts or specialized agencies, including human rights treaty bodies, to brief them on any human rights issues implicated in a case. However, in the absence of mandates to this effect, much discretion is given to arbitrators to determine to what extent human rights obligations will be examined and on what basis. Notably, arbitrators in an investment treaty dispute recently declined a request by a government to seek an opinion from the European Court of Justice and/or the European Commission on questions of EU Law.151 Governments should study whether there is a need for investment treaties to include mandatory referral procedures providing for consultation with expert agencies or human rights adjudicative mechanisms on human rights law issues.
The international regime for the protection of foreign investment is a robust and far-reaching system of international law, with several thousand treaties giving rise to concrete disputes that may have far-reaching consequences. The arbitrators charged with resolving such disputes are confronting human rights issues in a number of instances, and it falls to those concerned with the promotion and protection of human rights to monitor and study the broader implications of this emerging trend.
142- The ICSID website provides information on arbitrations pending at that particular institution (www.worldbank.org/icsid). Other means of tracking developments more generally are the Investment Arbitration Reporter (www.iareporter.com) and the American Lawyer Magazine’s biannual survey of large (in financial terms) investment arbitrations.
143- Recently, Prof. John Ruggie, the UN Special Representative to the Secretary General called upon the state-parties to the UNCITRAL to consider changes to its procedural rules which would ensure that investor-state arbitrations touching upon “human rights and other state responsibilities” are played out in a more transparent fashion. Proposed changes might encompass the disclosure of all such arbitrations, as well as open access to hearings and documents. However, it remains to be seen whether—and to what extent—governments will implement such proposals during their ongoing review of the UNCITRAL arbitration rules. See Statement of John Ruggie to the UNCITRAL Working Group II, February 4-8, 2008, available on-line at www.reports-and-materials.org/.
144- Dinah Shelton, Remedies in International Human Rights Law, Second Edition, Oxford University Press, 2005, pp. 291-93.
145- Shelton, op.cit., p. 296.
146- Desert Line Properties LLC v. Yemen, ICSID Case no. ARB/05/17, Award of February 6, 2008.
147- Notably, the UN Special Representative John Ruggie has recently called for greater coherence on the part of government agencies in the drafting of investment (and other economic) treaties, observing that trade and economic departments have too often worked at “cross purposes with the States’ human rights obligations and the agencies charged with implementing them.” See Report of April 7, 2008, par. 33. Indeed, briefings prepared for the UN Special Representative have called for the development of investment treaty language related to human rights, see Mann, 2008, p. 39.
148- Anne van Aaken, “Fragmentation of International Law: The Case of International Investment Protection,” University of St. Gallen Law School, Law and Economics Research Paper Series, Working Paper no. 2008-1, p. 33.
149- While clearly lacking the jurisdiction to hold governments in breach of human rights obligation, tribunals may need to draw their own assessments as to the demands of such human rights obligations as part of their effort to interpret investment treaty obligations. For example, in the case of the right to water—which has been subjected to minimal interpretation by international courts or tribunals—nvestment arbitrators could find themselves very much in the vanguard of analyzing that evolving human right.
150- Judge Pedro Nikken, a former member of the Inter-American Court of Human Rights, presides as a member of the arbitral tribunal in the Aguas Argentinas arbitration. Elsewhere, Judge Thomas Burgenthal, a former President of the same Court, and Prof Lucius Caflisch, a former member of the same court, have presided in some investment treaty arbitrations.
151- Although investment treaty texts do not provide for such referrals, governments have, on occasion, requested that arbitrators seek the input of other agencies or tribunals. For example, in the Eastern Sugar v. Czech Republic arbitration pursuant to the Netherlands-Czech Republic bilateral investment treaty, the Czech Republic had urged arbitrators to refer the matter to the European Court of Justice and/or the European Commission in order to seek an opinion on certain questions, including whether the relevant treaty may have been implicitly terminated when the Czech Republic joined the European Union. Arbitrators were not bound to accede to this request, and did not do so in the Eastern Sugar case. See Eastern Sugar B.V. v. Czech Republic, Partial Award of March 27, 2007, available on-line at http://ita.law.uvic.ca/documents/EasternSugar.pdf.