De Brabandere: Human Rights and Foreign Direct Investment

Eric De Brabandere (Leiden Univ. - Grotius Centre for International Legal Studies) has posted Human Rights and International Investment Law (in Research Handbook on Foreign Direct Investment, Markus Krajewski ed., forthcoming). Here's the abstract:

The interaction between foreign direct investment (FDI) and human rights is without doubt one of the most contentious issues surrounding the contemporary regulation of FDI. They seem indeed, at first glance, to be relatively separate fields of international law. Traditionally, international investment treaties were silent on issues of human rights. The main multilateral investment treaties, the North American Fair Trade Agreement (NAFTA) and the Energy Charter Treaty (ECT), to name but a few, make no mention of human rights. Although states have since recently effectively included references to human rights norms in their bilateral investment treaties (BITs), the vast majority of contemporary BITs do not mention human rights. Yet, over the past decades, it has become evident that human rights issues interact in various ways with investment law.

Investors operating in a foreign state may themselves also be bound by certain human rights obligations existing mainly under the domestic laws of the host state in which the activity takes place, but also, sometimes, under the legislation of their home state based on a certain form of extraterritoriality. While such questions fall under the general issue of how to hold international corporations accountable for human rights violations, there is a recent tendency in investment agreement to add so-called ‘legality requirements’ which imply an obligation for foreign investors to conform to and respect the domestic laws of the host state – including the applicable human rights obligations. When such clause is added in an investment agreement, the essentially domestic law obligations of the foreign investor are somehow ‘internationalized’ in the sense that the non-respect of the obligations in respect of human rights under domestic law may – depending on the precise formulation of the treaty – impact the admissibility of claims based on the treaty, or the existence, for the purposes of the treaty, of a covered investment.

Human rights may come into play as matter of applicable law in treaty-based investment arbitrations. Here, a link must be made with the limited jurisdiction of arbitral tribunals established based on an investment treaty. Since the direct access of foreign investors to investment treaty arbitration is only accepted because it is part of the protection offered to the investor for claims arising out of the investment, the competence of the arbitral tribunal is at the same time limited to these types of disputes; but the limited scope of jurisdiction of an arbitral tribunal does not imply that the tribunal cannot as a matter of principle consider human rights issues raised by either party as applicable law. Absent any specific human rights-related rule in the treaty itself, which would render the application of human rights law straightforward, compromissory clauses in investment treaties usually contain broad applicable law clauses referring to the application, besides domestic law, of ‘international law’. Consequently, it cannot be excluded as a matter of principle that arbitral tribunals can engage with human rights law, quite the contrary.