This article is written by Swathi H. Prasad, pursuing Certificate Course in International Commercial Arbitration and Mediation from LawSikho. The article has been edited by Aatima Bhatia (Associate, LawSikho) and Smriti Katiyar (Associate, LawSikho).
Investment arbitration is a dispute resolution mechanism to settle the dispute between the investing party who could be either a natural or legal person and the host State. It is also known as Investor-State Dispute Settlement or ISDS. The arbitration clause for an investment dispute may be incorporated in the investment treaty or the concerned laws of the host State. By resorting to this mechanism, the investor is assured of independent and impartial resolution of the dispute by an impartial third party and not by the domestic courts which may be biased or may even be controlled by the host State’s government.
Human Rights Law is that branch of international law containing the customs, rules and practices that grant all humans irrespective of their place of birth, race, sex etc., certain fundamental rights and freedoms. There is no exhaustive list of rights that are considered as human rights. Some of the prominent human rights are right to life (which has been given the broadest possible definition by States to encompass all the aspects that make life worth living), right to dignity and right to equality. They may either be contained in treaties or may be found in non-treaty-based principles or guidelines.
At the first glance, investment arbitration and human rights law appear to be disjoint from each other. However, on a closer look, one can see that they are two sides of the same coin. When an investment is made by a party in the host country, be it in the mining sector, construction of roads or ports etc., there is going to be an impact on the community living around the area or at times on the population of the host State as a whole, either directly or indirectly. In the following article, the author will try to throw some light on how investment arbitration and human rights are associated with one another.
Specific reference to human rights
It is uncommon to find a specific reference of human rights laws in an investment agreement or Bilateral Investment Treaty.
One such Investment treaty is the European Union- Singapore BIT wherein, the participating States give a written affirmation that they are committed to the Charter of the United Nations signed in San Francisco on 26 June 1945 and having regard to the principles articulated in The Universal Declaration of Human Rights adopted by the General Assembly of the United Nations on 10 December 1948. If a dispute is to arise between any of the States in the EU and Singapore and a question with regard to human rights law is to arise in the same as an incidental issue, the tribunal will find it easy to assume jurisdiction without explaining itself. Since an arbitral tribunal derives its power from the terms of the concerned agreement, it becomes very easy for the tribunal to make rulings on such specific provisions in the agreement or treaty.
Implied reference to human rights
The universally recognised principle of Kompetenz-Kompetenz allows an arbitral tribunal to decide the question as to its own jurisdiction. Using this principle, the tribunal may assume jurisdiction by interpreting relevant provisions of the concerned BIT.
For instance, the investment treaty may have a clause stating that “all disputes of any nature concerning the investment made by the investor in the Host State shall be arbitrable”. Certain investment agreements have provisions that are in tune with human rights law.
The ICSID Tribunal while deciding the counterclaim filed against an application under Article X of the Agreement on the Reciprocal Promotion and Protection of Investments between the Argentine Republic and the Kingdom of Spain (signed on October 3, 1991) in the case namely, Urbaser S.A. and Consorcio de Aguas Bilbao Bizkaia, Bilbao Biskaia Ur Partzuergoa vs. The Argentine Republic; ICSID Case No. ARB/07/26 (decided on 8.12.2016), had interpreted the provisions of the Bilateral Investment Treaty entered into between Spain and Argentina. The relevant portion of the BIT i.e., Article X sub-clause 5 of the BIT roughly translates to the following:
“The arbitral tribunal will decide the dispute on the basis of the principles and rights contained in the treaty entered into between the Parties, of the domestic law of the Party in which territory the investment is made including its rules of private international law and the general principles of international law”.
It is pertinent to note here that the afore-stated Article is very similar to Article 42 of the ICSID Convention.
The Tribunal interpreted that the ‘general principles of international law’ are wide enough to include principles contained in the 1948 Universal Declaration of Human Rights as well. It assumed jurisdiction to decide the counterclaim raised by the Argentine Republic that the Claimant failed to provide the necessary investment into the Concession, thus violating its commitments and its obligations under international law based on the human right to water.
The widely found provision in an investment treaty which impliedly refers to human rights law is the provision for fair and equitable treatment. For instance, Article II (4) of the Agreement between the Government of Canada and the Republic of Argentina for The Promotion and Protection of Investment states that: “Investments or returns of investors of either Contracting Party shall at all times be accorded fair and equitable treatment in accordance with principles international law and shall enjoy full protection and security in the territory of the other Contracting Party”.
Article 5(2) of the Hong Kong, China SAR- Mexico BIT also defines ‘fair and equitable treatment’ to mean and include the obligation not to deny justice in criminal, civil, or administrative adjudicatory proceedings in accordance with the principle of due process; and ‘full protection and security’ require each Contracting Party to provide the level of police protection required under customary international law.
Another example can be Article 17(1)(a) of the BIT between the Government of Canada and the Republic of Cameroon that gives both the participating States the option to adopt or enforce a measure necessary to protect human, animal or plant life or health.
What is the relevance of human rights in investment arbitration?
The Human Rights Law is of relevance to both the investor (especially in cases in which an investor is a natural person) and the host country. In appropriate cases, the host State, investors and even affected third parties/communities (whenever agreed by the BIT or agreement) have used the Human Rights law as a sword or a shield in investment arbitration. The wording of the arbitration clause is what entitles either of the Parties or the affected communities to approach the tribunal with a dispute with regard to the human rights violation.
The Urbaser vs. Argentina is the perfect example wherein the host State has raised human rights issues (right to water) as an issue incidental to the investment dispute raised by the foreign investor.
In Biloune vs. Ghana, the Petitioner had claimed damages for expropriation, denial of justice and violation of human rights for his detention without charge and deportation to Togo. The tribunal rejected the claim as it found that it lacked jurisdiction because there was no relevant provision in the investment treaty with regard to the protection of the human rights of the investor. The investment arbitral tribunal held that it does not have the power to deal with rights of either of the Parties available to them under separate individual contracts entered into by them.
In the conjoint petitions of Border Timbers Limited and others v. Republic of Zimbabwe, ICSID Case No. ARB/10/25 and Bernhard von Pezold and others v. Republic of Zimbabwe (ICSID Case No. ARB/10/15, the European Centre for Constitutional and Human Rights (ECCHR) had submitted a written submission as amicus curiae (‘third party’). The petition was made jointly with the Chiefs of four indigenous communities in the area of Chimaniani, Zimbabwe. The arbitration concerned timber plantations functioning in the properties which originally belonged to the indigenous groups, acquired compulsorily by the Government as part of land reforms. As amicus curiae, the right to the ancestral properties of the indigenous people under international law was raised. The same was not entertained by the tribunal as it found that the issue was beyond its jurisdiction. However, this case shows that if there was a relevant provision in the investment treaty, even an affected third party can raise their claims against the Parties to the investment treaty.
Do investor-state arbitral tribunals have jurisdiction to analyse human rights claims?
The answer to this is both yes and no.
As stated earlier, a tribunal’s jurisdiction or the power to indulge in a case is dependent on the concerned bi-lateral or multilateral arbitral treaty and the domestic laws of the host State. If consent has been given by the host State in the relevant investment treaty or domestic law, the tribunal has the power to decide on the same and vice versa.
An arbitration clause in the investment agreement/treaty may thus either limit the jurisdiction of a tribunal or may extend the spectrum to provisions of other international treaties including the principles of human rights law insofar as they are related to the investment that is in dispute.
For instance, Article X(5) of the Agreement on the Reciprocal Promotion and Protection of Investments between the Argentine Republic and the Kingdom of Spain relied on the above-mentioned case of Urbaser vs. Argentina. The provision expands the scope and powers of an arbitral tribunal.
It is to be noted that a tribunal always has the power to adjudicate upon the human rights issues that are incidental to the claims of either of the parties. In the Urbaser vs. Argentina, the Claimants had raised contentions that they were treated unequally by the standards of BIT by the host State/Respondent. It is also to be noted here that as per the terms of the agreement, the investor may be treated at par with such other foreign investors or respective domestic investors. Even though in the instant case, the tribunal found the claim to be not valid, it deemed itself to be competent to indulge in the issue. Therefore, if either of the parties claims that there is a violation of investment treaty/agreement terms along with an incidental violation of human rights, the tribunal may assume jurisdiction to decide on it irrespective of the fact that there is no provision in the agreement/treaty with respect to human rights law per se.
How could investor-state arbitral tribunals apply human rights law in investment arbitration disputes?
Investment treaties generally have dispute resolution clauses that state that it will be resolved as per the domestic laws of the host State along with the principles of international law. Article X (4) of the Agreement between the Government of Canada and the Republic of Argentina for The Promotion and Protection of Investment and Article X (5) of the Agreement on the Reciprocal Promotion and Protection of Investments between the Argentine Republic and the Kingdom of Spain are just two examples of such provisions. Such clauses in an investment treaty are very similarly worded to the provisions of Article 42 of the ICSID Convention. The relevant portion of the Convention is extracted as hereunder:
“42(1). The Tribunal shall decide a dispute in accordance with such rules of law as may be agreed by the parties. In the absence of such agreement, the Tribunal shall apply the law of the Contracting State party to the dispute (including its rules on the conflict of laws) and such rules of international law as may be applicable.”
The ICSID Tribunal while deciding the Urbaser vs. Argentina case had relied on the findings of Cf. Tulip Real Estate and Development Netherlands B.V. v. Republic of Turkey, ICSID/ARB/11/28 (decided on 30.12.2015) to hold that:
“1200. The Tribunal further retains that the Convention has to be interpreted in the light of the rules set out in the Vienna Convention on the Law of Treaties of May 23, 1969, and that Article 31 § 3 (c) of that Treaty indicates that account is to be taken of “any relevant rules of international law applicable in the relations between the parties.” The BIT cannot be interpreted and applied in a vacuum. The Tribunal must certainly be mindful of the BIT’s special purpose as a Treaty promoting foreign investments, but it cannot do so without taking the relevant rules of international law into account. The BIT has to be constructed in harmony with other rules of international law of which it forms part, including those relating to human rights”.
It is to be noted that the particular human right that is claimed to be violated by one of the Parties has to be one that is based on a treaty of such human rights, to which both the investor’s State and the host State are signatories to. As such human rights granted by the domestic law of the investor’s State may not be used to raise claims before the tribunal.
Globalization resulted in increased foreign investment across the globe. This in turn has increased the investment disputes between the foreign investor and the host State. An Investor-State Arbitration or ISDS is primarily entered into by the Parties to protect the interests of the investor from possible partiality of domestic Courts in the host State. The investor can raise any issue that is existing between the Parties including any incidental violation of its human rights. These sorts of arbitration are hardly resorted to by the host State to settle investment disputes because they generally make use of the domestic dispute adjudication system. This does not mean that the investor can get away with any breach or violation of their side of the agreement including the human rights law of the population of the host State once they initiate arbitration. Article 46 of the ICSID Convention allows the tribunal to entertain any counterclaim by the host State against the investor on any incidental issues including the violation of human rights law. The only requirement when raising such issues is that the tribunal should be granted jurisdiction to entertain such claims either explicitly or impliedly in the bilateral or multilateral treaty.
It is pertinent to state here that the United Nations have initiated a strategic policy for business namely the UN Global Compact and Corporate Social Responsibility which is a policy initiative for businesses that are committed to aligning their operations and strategies with ten universally accepted principles in the areas of human rights, labour, environment and anticorruption. By doing so, businesses, as a primary agent driving globalization, can help ensure that markets, commerce, technology and finance advance in ways that benefit economies and societies everywhere. This clearly shows that there is a correlation between the investment treaty and international human rights law.
- https://www.cambridge.org/core/books/cambridge-companion-to-business-and human-rights-law/role-of-human-rights-in-investment-law-and-arbitration/0CEC4ECADB1BBAA3B451EA634F2DA1DC
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