investors versus people: the public nature of ...€¦ · for some mainstream scholars the history...

MonicaBarriosGonzalezNovember2016

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Investorsversuspeople:thepublicnatureofinternationalInvestmentLaw

Whydoweneedhumanrightsininternationalinvestmentlaw?

TheEuro-Americanandneoliberalmeaningofeconomic freedomthat issaidtoprivilegeandpromoteeconomicgrowthandtherighttoaccumulateindividualprofitovercommunitywelfareandecologicalharmonyisraisingquestionsabouttheconditionsofinequality,depravationandthe human and environmental degradation that is taking place today. This understanding offreedom has been successfully embedded within international, political and economicinstitutions,alongwithinternationallegalframework.Thisconceptofeconomicfreedomhasservedtofreelyallocateenormousflowsofcapitaloverterritoriesintheso-called“ThirdWorld”,withlittleornocarefortheprevioususeorsignificancethattheseterritoriesheldfortheircommunities.Thisparticularmethodofexercisingeconomicfreedomhasbeensophisticatedlyinterwovenintothe international law of foreign investment (international investment law) and has beenextensivelyanduntiringlypromotedbygovernmentsand international institutionsacross theworldasameansfordevelopment.Capitalmust flow freely across the globe in order to deliver ‘development’, ‘prosperity’ and‘modernity’throughpoliticalandlegalstrategiesofprivatizationsupportedandencouragedbyinternationaleconomic institutionsandnationalelites.Yet,thesepolicieshavebroughtaboutforced displacement, legal dispossession, poverty and even the annihilation of wholecommunitiesinseveralterritories,particularlyinAsia,AfricaandLatinAmerica.Inthe‘nameofdevelopment’wholepopulationsarebeingforcedtopackupandleave(whenthereistime),findanotherland,anotherhomefarawayfromtheircommunitieswithdifferentculturaltraditions.Whenaforeign investmentprojectarrivesandneeds landfortheextractionofminerals,gas,coal,oilorsimplytoexpandmegaagriculturalbusinesses—currentinhabitantsareseenasa‘risktomanage’atbest,oragreathindranceatworst.Consequently,wholecommunitiesarebeingdisplaced,mistreated,orevenmurdered—with their cultural traditions simultaneouslywipedout.Withinthiscontext,thispaperwilldealwiththequestionaboutthepublicnatureofinternationalinvestmentlawandtheneedtoeffectivelyincorporateinternationalhumanrightsprinciplesandlawswithinitsframework.Todoso,thepaperisdividedintothreeparts.Inthefirstpart,itwillexaminewhattheoriginsofinternational investment law(ILL)are includingitsprinciplesformedduringtheneoliberalerathathelpedtoshapeitsproductionandreproduction.


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ThesecondpartwillexaminethefieldofIILanditsevolutionovertheyears,givingdetailsofhowthecurrentIILframeworkisbasedontheexistingparadigmoftheneedforeconomicgrowthasameansofdevelopment,withoutconsiderationofthefundamentalhumanrightsofthepeople.Finally,inthethirdpartitwilldiscusswhytheinternationallegalsystemneedstointegratethehumanrightsframeworkininternationalinvestmentlaw.

I. Theevolutionandprinciplesoftheinternationalinvestmentlaw

1 Theoriginsoftheinternationalinvestmentlaw

Forsomemainstreamscholarsthehistoryoftheinvestmentlawisnotjustirrelevantbutalsoan‘anachronisticandobsolete’debate.1Accordingtothem,historiccontroversiesoverthemeaningofCustomaryInternationalLawbetweencapital-exportingandcapital-importingstateshasbeenovertakenbynearly3,000bilateralinvestmenttreaties.However,authorssuchasMileconsiderthat history not only matters, but also the origins of international investment law reveal arecurringpatternofconstraintandresistancethroughlaw.Sheclaimsthatinvestmentlaw,atitsorigins,wasprincipally“avehicleforcontrollingthroughlegalmeansresistanceemanatingfromcapital-importingstates”.2

TheUNCTADhasacknowledgedthatInternationalInvestmentAgreements(IIAs)–likemostothertreaties–areaproductofthetimewhentheywerenegotiated.IIAsareconcluded“inaspecifichistoric,economicandsocialcontextandrespondtothethen-existingneedsandchallenges”.3

Formally,itcanbesaidthattheBIT(BilateralInvestmentTreaty)wasbornasanewinstrumentformedbetweendevelopedanddevelopingcountries,althoughwithrelativelyfewinvestmentprotectionsandwithoutasystemtosettledisputesbetweentheparties.Inthefirsthalfofthe20thcentury,Customary InternationalLaw(CIL)wastheprimarysourceof international legalrulesgoverningforeigninvestment.4

Inthisfigure5,theregulatorydevelopmentsoftheInternationalInvestmentAgreementRegimescanbeseen:

1R.DolzerandC.Schreuer(2008),Principlesofinternationalinvestmentlaw,p.p162K.Miles(2013),TheOriginsofinternationalinvestmentlaw:Empire,Environment,andtheSafeguardingofCapital.Cambridge:CambridgeUniversityPress.ChapterI.3UNCTAD(2015)WorldInvestmentReport2015:ReformingInternationalInvestmentGovernance,ChapterIV,p.p.1214Ibid5UNCTAD(2015)WorldInvestmentReport2015:ReformingInternationalInvestmentGovernance,FigureIV.1,p.p.121


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1950s–1964EraofInfancy

1965–1989EraofDichotomy

1990–2007EraofProliferation

2008–todayEraofRe-orientation

NewIIAs:37 NewIIAs:367 NewIIAs:2663 NewIIAs:410TotalIIAs:37 TotalIIAs:404 TotalIIAs:3067 TotalIIAs:3271NewISDScases:0 NewISDScases:1 NewISDScases:291 NewISDScases:316TotalISDScases:0 TotalISDScases:1 Total ISDS cases:

292TotalISDScases:608

GATT(1947) ICSID(1965) WorldBank

GuidelinesfortreatmentofFDI(1992)

EULisbonTreaty(2007)

DraftHavanaCharter(1948)

UNCITRAL(1966) NAFTA(1992) UNGuidingPrinciplesonBusinessandHumanRights(2011)

TreatyestablishingtheEuropeanEconomicCommunity(1957)

FirstBITwithISDSbetweenNetherlandsandIndonesia(1968)

APECInvestmentPrinciples(1994)

UNCTADInvestmentPolicyFramework(2012)

NewYorkConvention(1958)

DraftUNCodeofConductonTNCs(1973−1993)

EnergyCharterTreaty(1994)

UNTransparencyConvention(2014)

FirstBITbetweenGermanyandPakistan(1959)

UNDeclarationontheEstablishmentofaNIEO(1974)

DraftOECDMAI(1995−1998)

OECDLiberalizationCodes(1961)

DraftUNCodeofConductonTransferofTechnology(1974−1985)

WTO(GATS,TRIMs,TRIPS)(1994)

UNResolutiononPermanentSovereigntyoverNaturalResources(1962

OECDGuidelinesforMNEs(1976)

WTOWorkingGrouponTradeandInvestment(1996−2003)

MIGAConvention(1985)

EmergenceofIIAs Enhancedprotection

andISDSinIIAsProliferationofIIAsandLiberalizationcomponents

ShiftfromBITstoregionalIIAsandDeclineinannualIIAs

Weakprotection:noISDS Codesofconductforinvestors

ExpansionofISDS Exitandrevision

Independencemovements NewInternationalEconomicOrder(NIEO)

Economicliberalizationandglobalization

Developmentparadigmshift


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AccordingtoUNCTAD“theemergenceofanumberofmajorinvestmentdisputesbetweenforeigninvestors and theirhost countries after1945 showed the significant limitationsofprotectionunderCIL,andtriggeredamovetowardsinternationalinvestmenttreatymaking”.6

AssaidbyPrieto“fromanhistoricalpointofview,IILappearsasdirectresponsetoprocessesofdecolonizationtakingplaceinAfricaandAsiaaftertheendofWarWorldII.IILtreatiesofferedprotection to the right of property of foreign investors while indirectly imposing limits andboundarieson theabilityofhost countries to regulateand to takeeconomicdecisions. Thisscenariothatstartedconsolidating inthe late1940swastheperfectmatchfortheneoliberalprojectthatwasdevelopingatthesametimeinbothsidesoftheAtlantic”.7

Moreover, due to the intense promotion of the need and benefits of establishing a foreigninvestment-friendlyenvironmentbyinternationalfinancialinstitutionssuchastheWorldBankand the International Monetary Fund, the amount of international treaties increaseddramaticallyfrom404to3067between1990and2007ascanbeseeninthetableabove.

2.InternationalInvestmentintheneoliberalera

Theinfluenceoftheneoliberalideologyintheframingoftheinternationallawhasbeenbroadlydiscussedinseverallegalanalyses.Amongthedifferentfieldsofinternationaleconomiclaw,theinternational investment law(IIL) inparticular,hasbothbeenshapedbyneoliberalrationalityandcontributedtowardsitscontent,formandpracticalimplementation.

Harveyhasarguedthat“foranysystemofthoughttobecomehegemonicrequiresthearticulationof fundamental concepts that become so deeply embedded in common-senseunderstandingsthattheybecometakenforgrantedandbeyondquestion”.8Thisseemstobethecasefortheneoliberal ideology,whichhaspermeatednot just institutionsandeconomicpoliciesbutalsootheraspectsofsociallifesuchaslaw,politicsandeducation.

Neoliberalism considers the idea of individual freedom as its political core value. In thisrationality,freedomisnotonlythreatenedbyfascism,dictatorshipandcommunism,butalso“byallformsofstateinterventionthatsubstitutedcollectivejudgementforthoseofindividualsfreetochoose.Thispowerfulconceptappealstoanyonewhobelievesandvaluestheabilitytomakedecisions for themselves. Moreover, the idea of the superiority of individual freedom hasempowereddifferentmovementsinsocialstrugglesacrosstheworld,especiallyinauthoritarianregimes”.9

Neoliberaltheoristsclaimthatthesortsofmeasuresthattheyadvocateindefendingindividualfreedom are both necessary and sufficient for the creation of wealth and therefore for the

6Ibid7E.Prieto(2015),Neoliberalmarketrationality:Thedriverofinternationalinvestmentlaw,issueofBirkbeckLawReview8D.Harvey (2006) “Neo– liberalismas creativedestruction”, Swedish Society forAnthropology andGeographyJournalCompilation.Geogr.Ann.,88B(2):pp.145

9D.Harvey(2005),Abriefhistoryofneoliberalism,Oxford,pp.5


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improvementofhumanwellbeing.Ithasbeensuggestedthattheredistributionofwealthwilloccurduetothenaturalforcesofthemarket.Thetheoryassumesthatindividuals’freedomisguaranteedbythefreedomofthemarket.Underthislogicstatesmustensurepropertyrightsandremoveanybarriersthatdistort theoperationof thefreemarket.Themarketshouldbe‘freed’fromregulatoryorinstitutionalrestraints10.

ScholarssuchusHayekandFriedmanbelievedthatfreelyadoptedmarketmechanismsaretheoptimalwayoforganisingallexchangesofgoodsandservices.Itisassumedthat“freemarketsandfreetradewillfreethecreativepotentialandtheentrepreneurialspiritwhichisbuiltintothespontaneousorderofanyhumansociety,andtherebyleadtomoreindividual libertyandwell-being,andamoreefficientallocationofresources”11.

AccordingtoHarvey12,neoliberalismisatheoryofpoliticaleconomicpractices“whichproposesthathumanwell-beingcanbestbeadvancedbythemaximizationofentrepreneurialfreedomswithinaninstitutionalframeworkcharacterizedbyprivatepropertyrights,individualliberty,freemarketsandfreetrade”.

Theauthorstatesthatbeyondtheseprinciples,“neoliberalismhasactuallybeenaninstrumenttorestoreandconsolidateclasspowerwhereverupperclasseshaveconsideredtobethreatenedbylabourunionsandsocialmovementdemands”.13InternationaleconomicinstitutionssuchastheInternationalMonetaryFund(IMF)andtheWorldBank have played a key role in spreading and promoting these neoliberal ideas through theconditionsofcreditsandaid,andtheadoptionofcertaindomesticchangesinlawandpolicies.These conditions were widely incorporated into structural adjustment programs, includingobligations to liberalize markets, impose fiscal austerity, privatize state owned companies,strengthenlegalsystemsfortheprotectionofprivateproperty,andpromoteforeigninvestmentsasfundamentaltoeconomicdevelopment14.AccordingtoBrown“theexpansionofthiseconomicrationalitytonon-economiclifespacesandinstitutions,diffusingtheeconomicformofthemarketthroughtheentiresocialbody,isoneoftheessentialaspectsofneoliberalism.Inthisregard,neoliberalismrationallyaffectseveryspaceof human life including non-economic institutions. Neoliberalism is deployed as a form ofideology thatpermeatesnotonly themarketbut all the institutional apparatuses, andmanyotherareassuchaseducation,economy,law,government,politics,etc”15.10Ibid,pp.711 D Thorsen (2008), What is Neoliberalism?, University of Oslo, available onhttp://folk.uio.no/daget/neoliberalism.pdf12D.Harvey (2006)“Neo– liberalismascreativedestruction”,SwedishSociety forAnthropologyandGeographyJournalCompilation.Geogr.Ann.,88B(2):pp.145-158

13Ibid14W.Robinson(2002)‘CapitalistGlobalisationandtheTransnationalizationoftheState’inMarkRupertandHazelSmith(eds),HistoricalMaterialismandGlobalisation:EssaysonContinuityandChangep.p.215.15W.Brown,Edgework(2005):CriticalEssaysonKnowledgeandPolitics(PrincetonUniversityPress2005)39-40.


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ThewaysinwhichtheneoliberalideologyhasframedtheIILcanbesummarizedinfourpoints:(i)Thestrongerandbroaderprotectionof foreign investors’privatepropertyandcontractualrightswith littleornoconsiderationofpeople’srights;(ii)Therestrictionoftheabilityofthestate to regulate matters of public interest; (iii) the submission of state–investor disputeshandledthroughprivatejusticeandcommerciallogicand(iv)thelegalconstraintofthirdpartiesto participate in judicial disputes (individuals and/or communities) and claim reparation andcompensationwhentheirrightsareaffectedbytheinvestor’sinterests.

Firstly, in perfect coherencewith the neoliberal ideology the IIL system aims to protect themaximization of wealth and capital accumulation as well as enhance private property andcontractualrelationsseenasessentialelementsforguaranteeingthespontaneousorderofthemarket.Thus,throughBilateralInvestmentTreaties(BITs)andFreeTradeAgreements(FTAs)twoormoreeconomiessetrulesforallgovernmenttreatmentofforeigninvestments.

According to the organization Public Citizen ”the Investor State Dispute Settlement (ISDS)enforcespactsbyprovidingforeigncorporationsbroadsubstantiverightsthatevensurpassthestrongpropertyrightsaffordedtodomesticfirmsinnationssuchastheUnitedStates”.16Thisincludes the “right” to a regulatory framework that conforms to foreign investors’“expectations,”which ISDS tribunals have interpreted tomean that governments should notchangeregulatorypoliciesonceaforeigninvestmenthasbeenestablished.ThebasicrulesforthesekindsofIILtreatiesinclude:obligationsonstatesnottodiscriminateinfavour of home-country or third-country investors; offer investors’ investments fair andequitabletreatmentalongwithfullprotectionandsecurity;providefullandprompt,adequateandeffectivecompensationintheeventofanexpropriation;allowinvestorstomovetheircapitalintoandoutof thecountry;not to imposeperformance requirements (suchas local contentrequirements);andallowforneutralarbitrationofdisputesiftreatyobligationsarebreached.17

Nearly3271BITsandsimilaragreementsareinplaceworldwide,includinginvestmentchaptersinfreetradeagreementsandplurilateralarrangementsliketheEnergyCharterTreaty.18

According to some, the rights provided by BITs and investment chapters of FTAs–fair andequitabletreatment,fullprotectionandsecurity,noexpropriationwithoutcompensationand

16PublicCitizen(2015),CaseStudies: Investor-StateAttacksonPublicInterestPolicies,Washington,availableonhttp://www.citizen.org/documents/egregious-investor-state-attacks-case-studies.pdf,consultedon2ndJune2016.Also formore information, see LoriWallach, “Fair and Equitable Treatment” and Investors’ Reasonable Expectations:RulingsinU.S.FTAs&BITsDemonstrateFETDefinitionMustbeNarrowed,”PublicCitizenmemo,Sept.5,2012.Availableat:http://www.citizen.org/documents/MST-Memo.pdfhttp://www.citizen.org/documents/MST-Memo.pdf.17 S Miller and G Hicks (2015), Investor- State Dispute Settlement: a reality check, Centre for Strategic andInternationalStudies,NewYork18UNConferenceonTradeandDevelopment(UNCTAD),“InvestmentPolicyHub:InternationalInvestmentAgreementsNavigator”http://investmentpolicyhub.unctad.org//IIA


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accesstoimpartialarbitration–areconsistentwiththeUniversalDeclarationofHumanRightsatthecoreofmostdemocracies,alongwiththeEuropeanConventionofHumanRights.19

TheUniversalDeclarationclaimsinitsArticle17that‘(1)Everyonehastherighttoownpropertyaloneaswellasinassociationwithothers;andthat(2)Nooneshallbearbitrarilydeprivedofhisproperty’.

Also,theArticle1oftheProtocoltotheEuropeanConventionfortheprotectionofHumanRightsandFundamentalFreedomsstatesthat

“Everynaturalorlegalpersonisentitledtothepeacefulenjoymentofhispossessions.Nooneshallbedeprivedofhispossessionsexceptinthepublicinterestandsubjecttotheconditionsprovidedforbylawand by the general principles of international law. The precedingprovisionsshallnot,however,inanywayimpairtherightofaStateto enforce such laws as it deems necessary to control the use ofproperty in accordance with the general interest or to secure thepaymentoftaxesorothercontributionsorpenalties”20.

In this line of argumentation, the rights that investors enjoy provided by BITs and FTAs arebasicallyuniversalrights.However,aswewillseelater,theIILsystemdoesnottaketheothersideofthecoinintoaccount,whichisthatoftenforeigninvestmentprojectsaffectpeople’slivesand territories in several harmful ways. Under the logic of the protection and promotion ofindividual wealth maximization and extreme protection of private property, the IIL lackssubstantiveandprocedural lawthatentitlesvictimsoftheseharmstoaccesstojustice inthepursuitofrestorationand/orreparation.

Secondly,therestrictionoftheabilityofthestatetoregulatemattersofpublicinterestisoneofthegreatest controversialaspectsof international investment law.The investor-statedisputesettlement (ISDS) system, included in various Free Trade Agreements (FTAs) and BilateralInvestmentTreaties(BITs),fundamentallyshiftsthebalanceofpoweramonginvestors,statesandthegeneralpublic,creatinganenforceableglobalgovernanceregimethatformallyprioritizescorporaterightsovertherightsofgovernmentstoregulate.21

Indeed,theISDSsystemallowsinvestorstochallengepublicinterestlawsandregulationsiftheyconsiderthattheseregulationsundermineorreducetheirpresentorfutureprofits.Accordingtothe NGO, Global TradeWatch, only 50 cases were initiated between the 1960s—when the

19SMillerandGHicks(2015),Investor-StateDisputeSettlement:arealitycheck,CentreforStrategicandInternationalStudies,NewYork20 European Court of Human Rights, European Convention of Human Rights, available onhttp://www.echr.coe.int/Documents/Convention_ENG.pdf21PublicCitizen (2015),CaseStudies: Investor-StateAttacksonPublic InterestPolicies,Washington,availableonhttp://www.citizen.org/documents/egregious-investor-state-attacks-case-studies.pdf,consultedon2thJune2016


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investor-statesystemwasfirstestablished—and2000;themajorityofthesecaseswerebasedonnationalizationofprivateindustries.Today,morethan500caseshavebeenlaunchedandawholeindustryofthird-partyfinancingandspecializedgloballawfirmshassprunguptoclaimmillionaire tax-payer compensations and roll back keypublic interest policies.22Corporationsopenedmorethan50casesannuallybetween2011and2013(and42in2014).23

Claimingsuchexpansiverights,foreigncorporationshaveusedtheISDStoattackanincreasinglywide array of tobacco, climate, financial, mining,medicine, energy, pollution, water, labour,toxins,andothernon-tradedomesticpolicies.24Thenumberofsuchcaseshasbeensoaring.

MultinationalCorporations(MCs)challengenotonlypublicpoliciesbutalsoadministrativeandfiscalsanctionsimposedbydomesticauthoritiesafterfollowingtheestablisheddomesticlegalprocesses. Indeed, the number of investor-state controversies increased when MCs weresuccessfulinrestrictingtheabilityofthestatetoimposefinancialsanctionsbychallengingtheapplicationofcurrentlawandfiscalregulations.

Forinstance,asPrietohassaidtheFairandEquitableTreatmentclause(FET)isa“verybroadclausethataimsatprotectingtheforeigninvestoragainstanytreatmentthatcouldaffectinanyformitsactivityandeconomicinterestsandwhichcouldbeconsideredunfair”.25ByusingthisclauseasalegalargumentMCsareclaimingbillionairecompensationsagainststateswheneverthey consider their economic expectations have been affected by a public interest law orregulation.Regarding the FET, Nathalie Bernasconi-Osterwalder and Rhea Tamara Hoffmann state thefollowing:

“Tribunalshavepredominantlyinterpretedthisvagueconceptinthespiritofthepurposeoftheinvestmentagreements,namelytocreatestableandfavourableconditionsofbusinessforinvestors.Asaresult,publicinterestplaysarelativelyminorroleinthedecisionmaking-processofarbitrationtribunals”.26

Forexample, inthecaseofthetobaccocompanyPhilipMorris,thecompanyarguedthatthepublichealthlawinAustraliahas“expropriateditsvaluableintellectualproperty”byprohibitingthedisplayofitslogo,brandcoloursandviolateditsrightto“fairandequitabletreatment”as

22http://www.citizen.org/investorcasesconsultedon2thJune201623 UNCTAD, “Recent Trends in IIAs and ISDS,” February 2015, at 5. Available at:http://unctad.org/en/PublicationsLibrary/webdiaepcb2015d1_en.pdf.24Ibid25E.Prieto(2015),Neoliberalmarketrationality:Thedriverofinternationalinvestmentlaw,issueofBirkbeckLawReview26NathalieBernasconi-Osterwalder&RheaTamaraHoffmann(2012)‘TheGermanNuclearPhase-OutPuttotheTestinInternationalInvestmentArbitration?:BackgroundtothenewdisputeVattenfallv.Germany(II)’InternationalInstituteforSustainableDevelopment.


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guaranteed under the Australia-Hong Kong BIT.27Also, PhilipMorris launched a similar caseagainstUruguayinFebruary2010undertheSwitzerland-UruguayBIT.Uruguayalsoimplementedaslateofanti-smokingmeasuresthatfeaturedtherequirementfortobaccoproductpackagingtoincludelarge,graphicpublichealthwarnings.PhilipMorrisisseekingcompensationforlostprofits,arguingthatthelabellingpolicies‘violatetheBITasexpropriationsofitstrademarksandas“unreasonable”measureswithnorationalrelationshiptopublichealthobjectives’.28

Anotherwell-knowncaseisVattenfallversusGermanyin2009,inwhichratherthancomplywiththenewGermanenvironmentalstandardsandrequirements,Vattenfall launchedits investor-state claim against Germany, arguing that ‘Hamburg’s environmental rules amounted to anexpropriation and a violation of Germany’s obligation to afford foreign investors “fair andequitable treatment.” 29 In response, Michael Müller, then Germany’s deputy environmentminister, stated, “It’s really unprecedented howwe are being pilloried just for implementingGermanandEuropeanUnion(EU)laws.”30

In addition to these cases, there are several other ongoing international disputes in whichinvestors are claiming millions in compensation due to states applying public interest laws,regulationsorrequirements.Casesrangefromhealthregulationsandpolicies,labourrightsandessentialservicestoenvironmentalprotectionandclimatechangemeasures.31

Overall,thedebateintheIILarenaiswhetherornottocontinueallowingMCstodefendtheircurrentorfutureprofitbychallenginganddisavowingdomesticlawsrelatingtopublicpoliciesthatweredemocraticallycreatedwiththeaimtoprotectpublic interest in issuessuchastheenvironment,health,foodsecurity,labourrightsandothersocialandeconomicrights.Itseemsthat statesunder the threatofpayingmillionaire compensationsarebeing forced toput theeconomicinterestsofMCsovertheirpeople’sneedsandrights.

27PhilipMorrisAsiaLimitedv.TheCommonwealthofAustralia,NoticeofArbitration,Adhoc—UNCITRALArbitrationRules(2011),atparas.1.5-1.628MatthewC.PorterfieldandChristopherR.Byrnes,PhilipMorrisv.Uruguay:WillInvestor-StateArbitrationSendRestriction on Tobacco Marketing up in Smoke?, Investor Treaty News, July 12, 2011. Available at:http://www.iisd.org/itn/2011/07/12/philip-morris-v-uruguay-will-investor-state-arbitration-send-restrictions-on-tobacco-marketing-up-in-smoke/.29VattenfallAB,VattenfallEuropeAG,VattenfallEuropeGenerationAGv.FederalRepublicofGermany,ICSIDCaseNo.ARB/09/6, Request for Arbitration, March 30, 2009, at paras. 52-54. Available at:http://italaw.com/documents/VattenfallRequestforArbitration.pdf.30SebastianKnauer,“Vattenfallvs.Germany:PowerPlantBattleGoestoInternationalArbitration,”SpiegelOnlineInternational,July15,2009.Availableat:http://www.spiegel.de/international/germany/vattenfall-vs-germany-power-plant-battle-goes-to-international-arbitration-a-636334.html.31 Agoodreviewabout the latestcasesof investorsagainst states inwhichapublic interest regulation isbeingchallengedcanbe find it inPublicCitizen (2015),CaseStudies: Investor-StateAttacksonPublic InterestPolicies,Washington, available on http://www.citizen.org/documents/egregious-investor-state-attacks-case-studies.pdf,consultedon2ndJune2016,http://www.citizen.org/investorcasesconsultedon2ndJune2016.


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Despitethefactthatthestateisapublicsubjectininternationallaw,thestate-investordisputespositionsthestateanditsforeigninvestorsinthesamecategory,asifbothhadthesamenatureandfunctions.

Theprivatejusticeappliedtostate-investordisputesfacesseveraldifficultieswhenstatesaimtoprotecttheirpublicinterests.First,arbitraltribunalsarenotboundbyanyformofprecedentoropinionsofstates,thustheyareprompttointerpretanyregulatoryactivityofahoststateasanactagainsttheFairandEquitableTreatmentclause.32Forinstance,previousOECDresearchhasshown that arbitration proceedings in the ISDS are lightly regulated; consequently, treatiesgenerallydonotprovidemuchguidanceonmatterssuchaswhichbodiesoflawaretobeappliedor the relationship of the ISDS procedures with other adjudication processes.As a result,arbitrationpanelsundertheISDShavebroaddecisionmakingpowers.33

Also, investment arbitrators have been criticised of being bias. This has been a directconsequenceontheonehandofthetemporarynatureoftheirpositions,andontheotherhandof the administrative structure and ethos of institutions such as the International Centre forSettlementofInvestmentDisputes(partoftheWorldBank)andtheInternationalChamberofCommerce.34The arbitral tribunals that decide these cases are composed of three private attorneys,unaccountabletoanyelectorate.AccordingtoPohlsomeattorneysrotatebetweenservingas“judges”andassistingcorporationsinwinninglegalbattlesagainstgovernments.Hestatesthat“suchdualroleswouldbedeemedunethicalinmostlegalsystemsundertheruleofconflictofinterestthatisapplicableinmostofthesystemsofjustice,andtheirrulingscannotbeappealedonthemerits”.35Hementionsthat“thearbitraltribunalshavenoprecedentsandnorulesbuttheirownsubjectiveinterpretationthatmostoftimescorrespondstothecommerciallawprinciplesandlogicsthatdonottakeintoaccountpublicinterest”.36Finally,itisimportanttoexaminetheissueofthelegalconstraintsofthirdparties(individualsand/or communities) to participate in judicial disputes in order to claim reparation andcompensationwhentheirrightsareaffectedbytheinvestor’sinterest.

Despitethepublicnatureofinvestmenttreatyarbitration(giventhattheseagreementsaremadebetweenstates)itsproceduresaremodelledonthoseofinternationalcommercialarbitration.

32E.Prieto(2015),Neoliberalmarketrationality:Thedriverofinternationalinvestmentlaw,issueofBirkbeckLawReview33JPohlJ,KMashigo,ANohen(2012)DisputeSettlementProvisionsinInternationalInvestmentAgreements,OECDWorkingPapersonInternationalInvestment.34Ibid35Ibid36PublicCitizen(2015),CaseStudies:Investor-StateAttacksonPublicInterestPolicies,Washintong,avalaibleonhttp://www.citizen.org/documents/egregious-investor-state-attacks-case-studies.pdf,consultedon2thJune2016


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Thishascreatedagapbetween(public)substanceand(private)procedureininvestmenttreatyarbitration.37AstheOECDhasacknowledged,thesystemofinvestmentdisputesettlementhasborroweditsmainelementsfromthesystemofcommercialarbitrationandunderthislogic,onlythose who are part of the contract (this includes investors and the state) are able to claimresponsibilityandcompensation for ‘business related’harmordamage, therefore,anypublicinterestrelatingtoaninvestmenttreatyissimplyignored.38

AsTomokoIshikawahaspointedout,“thirdpartiesdonothaveanyrightsorprivilegesinthearbitralproceedings.Becauseinvestmenttreatyarbitrationproceedingsareprivate,theprivacyandconfidentialityof theproceedingsare fundamental conceptsof international commercialarbitrationandpreventvictimsofharmfromhavingaccesstothefilesofthecontractsandlateroncontroversydisputefiles”.39

The public nature of investment treaty arbitration derives from the substantive rights andobligationsthataresetbytreaties.Thus,internationalpubliclawanddomesticlawofthehoststateshouldbeapplicablenotjusttosubstantialinvestmentlawbutalsotoinvestmenttreatyarbitrationprocedures.

However,aswehaveseenabove,giventhatinternationalinvestmentlawhasbeenshapedundertheneoliberalprinciplesanditsaimistoprotectinvestors’rightsagainstthe‘insecurity’ofstates’acts and regulations, the procedure of investment treaty arbitration and the Investor StateDisputeSystem(ISDS) ingeneral,respondstothelogic inwhichtwoprivatesubjectsargueindefenceoftheirpersonalinterest.Thisviewdisavowsanddespisesthepublicnature,notjustoftheIIL,butalsoofthestateasapublicinternationalsubjectresponsibleforprotecting,promotingandguaranteeingpeople’shumanrights.

Thisphenomenoncanbeanalysedfromahistoricalpointofview.ThecolonialoriginoftheIILallowsustounderstandtheunevensystemofinternationalrelations;thefactthatitignoresthestructural disparities between countries. The IIL treats all countries as equals (investors andreceivers)althoughtheyclearlyarenot. Inthisway,the IILenforcesand legitimisesanunfaireconomicandglobalpoliticalsystem.

Relatingtothispoint,wecanbringtheFanoniandimensionofinternationalrelationsbetweenthe“FirstandThirdWorld”intoconsideration,inparticularhisviewregardingpoliticaleconomicrelations:

“Other countries of the ThirdWorld refuse to undergo this order andagreetogetoveritbyacceptingtheconditionsoftheformerguardian

37 Tomoko Ishikawa (2010), Third Party Participation In Investment Treaty Arbitration, The International andComparativeLawQuarterly,Vol.59,No.2,pp.373-41238OECD(2005),“TransparencyandThirdPartyParticipationinInvestor-StateDisputeSettlementProcedures”,OECDWorkingPapersonInternationalInvestment,2005/01,OECDPublishing.39TomokoIshikawa(2010),ThirdPartyParticipationInInvestmentTreatyArbitration,TheInternationalandComparativeLawQuarterly,Vol.59,No.2,pp.373-412


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power. These countries use their strategic position -a position whichaccordsthemprivilegedtreatmentinthestrugglebetweenthetwoblocs-to conclude treaties and give undertakings. The former dominatedcountry becomes an economically dependent country. The ex-colonialpower, which has kept intact and sometimes even reinforced itscolonialist trade channels, agrees to provision the budget of theindependentnationbysmallinjections” 40

ConcerningforeigninvestmentFanonclaims:

“Assoonasthecapitalistsknow-andofcoursetheyarethefirst toknow- that their government is getting ready to decolonize, theyhastentowithdrawalltheircapitalfromthecolonyinquestion.Thespectacularflightofcapitalisoneofthemostconstantphenomenaofdecolonization.

Privatecompanies,whenaskedtoinvestinindependentcountries,laydownconditionswhichare shown inpractice tobe inacceptableorunrealizable. Faithful to theprincipleof immediate returnswhich istheirs as soon as they go "overseas," the capitalists are very charyconcerningalllong-terminvestments(...)

Theprivatecompaniesputpressureontheirowngovernmentstoatleast set up military bases in these countries for the purpose ofassuring the protection of their interests. In the last resort thesecompaniesasktheirgovernmenttoguaranteetheinvestmentswhichtheydecidetomakeinsuch-and-suchanunderdevelopedregion”.41

As Fanon has taught us, the international investment law is a legal, political and economicmechanismtodisciplinetheso-called“ThirdWord”.Undertheformalequalitythatassumesthetwopartieshavethesamepowerofnegotiationwheninreality,one(thedeveloped)imposesovertheother(thedeveloping)withthelegitimacygivenbytheinternationallegalframeworkthathasbeensculptedbytheeconomicandgeopoliticalinterestoftheWestovertherestoftheworld.

Tocomprehendthisbetter,itisalsoimportanttolookattheroleofthestateintheneoliberalrationality.Statesmustensurepropertyrightsandremoveanybarrierthatdistortstheoperationofthefreemarket.‘Themarketshouldbe‘freed’fromregulatoryorinstitutionalrestraints’.42

40FFanon’s(1961)“ViolenceintheInternationalcontext”in“ConcerningViolence”,Chapter1,inTheWretchedoftheEarth,PenguinClassicsEdition(2001),p.p.27-7541Ibid42D.Harvey(2005),Abriefhistoryofneoliberalism,Oxford,pp.5


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Undertheneoliberallogicthestateisnolongerresponsibleforensuringandenhancingpeople’ssocial and economic rights, it is just in chargeof keeping the ‘rule of law’ and status quo ofpropertyandcontractualrightswithlittleornoconsiderationofwhatthatcouldmeanintermsofenvironmentaldegradationorhumansuffering.

ThecurrentinternationalinvestmentlawSystemignoresthefactthatgovernmentalregulationsandmeasureschallengedbyinvestorsarebasedonpublicpolicyandthereforetheissuesraisedinsuchdisputesconcernnotonlythepartiesinvolvedinthedisputebutalsothepublic.43

Legitimatestates’measuresrelatingtotheenvironmentorhealthandsafetyregulationsarenotevenfreefrombeingchallengedbytheMCspresentorfutureprofitprotectionrightswithoutacknowledgingthevoiceofthepeople.

Thesovereignexercisebythegovernmenttoenforceitsrighttoestablishregulationstopreventormitigateharm topublichealthand theenvironmenthave implications thatgo farbeyondcommercialimpacts.44

Despitethisreality,victimsofinvestmenttreatiesarebeingrestrictedaccesstojusticethatwouldenable restoration, compensation, and reparation of their rights. As Ishikawa shows in herresearchafterassessingagreatnumberofinvestor-statedisputesaroundtheworld,“withoutexception,thearbitraltribunalsdonotallowthirdpartiesattendanceatthehearingsandoralamicus curiae submissions. The legislative ground for this refusal appears to be clear.Underarticle25(4)oftheUNCITRALArbitrationRules45andRule32oftheICSIDArbitrationRules(bothbeforeandafter the2006amendment), a tribunalmaynot allow thirdparties to attend thehearings”.46

Moreover,inthecase’sobjectofanalysis,Ishikawafoundthat,“againwithoutexception,thirdpartiesdonotgrantaccesstothematerialsoftheproceedings.Thelegislativegroundforthisrefusal of disclosure is less clearunder theUNCITRALArbitrationRules and the reasons varybetween cases: the existence of the previous agreement between the disputing parties; theexistenceofthepreviousorderofthesametribunalonconfidentiality;toprotecttheproceduralintegrity;thatthereleaseofeachmaterialisnottobedecidedgenerallybutcasebycase;thatthepetitionershaveenoughinformationtomakeargumentsonthepolicyissues”.47

43E.Prieto(2015),Neoliberalmarketrationality:Thedriverofinternationalinvestmentlaw,issueofBirkbeckLawReview44ACosbey(2005)'TheRoadtoHell?InvestorProtectionsinNAFTA'sChapter11'inLZarsky(ed)InternationalInvestmentforSustainableDevelopment:BalancingRightsandRewards(Earthscan)45TheUNCITRALArbitrationRulesprovideasetofproceduralrulesuponwhichpartiesmayagreefortheconductofarbitralproceedings.http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/2010Arbitration_rules.html.46TomokoIshikawa(2010),ThirdPartyParticipationInInvestmentTreatyArbitration,TheInternationalandComparativeLawQuarterly,Vol.59,No.2,pp.373-41247Ibid


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These arbitral positions remain despite the latest development of the UNCITRAL Rules onTransparency inTreaty-based Investor-StateArbitration (the "RulesonTransparency"),whichcameintoeffecton1April2014.48

Therehavebeensomeattemptstobringbroadunderstandingofpublicmatterissuestoarbitralinvestor-statedisputesthroughmechanismssuchasthatofamicuscuriae.Ithasbeenarguedthat ‘amicuscuriaebriefs, if theyhavegonethroughaproperscreeningprocess,willactuallycontribute to the better quality of an investment arbitration award by providing tribunals abroaderperspective,comprehensivefactual/legalargumentsandexpertknowledge’.49

However,whereasamicuscuriaebriefscouldbeuseful forarbitrationtribunals torealise thepublic issues surrounding the relevant dispute and gain a better understandingof the actualimpactoftheirdecisionsmadeonthepublic,underthecurrentrulesandpractice,thereceiptofanamicuscuriaesubmissionisamatterofdiscretionintheeyesofthetribunal.Thismakesitsuseininternationalinvestmentdisputesveryfragile.50

Moreover,duetothenatureoftheamicuscuriae,itdoesnotseemtobeasuitableoreffectivelegal mechanism for accessing and obtaining justice and reparation for victims’ investment-relatedharm.Tosumup,asIshikawasaid,thirdpartiesorinvestments’victimsinthiscase,donothaveany rightsorprivileges in thearbitralproceedings, this legalmalfunctionultimatelypreventsthemfromclaimingjusticeandcompensation.

As we have seen throughout this chapter, the real problem is that international public law,international economic law in general, and international investment law in particular, arestrangers of the same family that are not bound by enforceable legal bridges, making itimpossibleforvictimstoobtainanyreparation.

48Seehttp://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/2014Transparency.html49TomokoIshikawa(2010),ThirdPartyParticipationInInvestmentTreatyArbitration,TheInternationalandComparativeLawQuarterly,Vol.59,No.2,pp.373-41250Ibid


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II. Foreigninvestmentisgoodfordevelopment:Whichtypeofdevelopment?

Withinneoliberalpolicies,foreigninvestmenthasbeenextensivelypromotedbyinternationaleconomicinstitutionssuchastheWorldBankasameansfordevelopment.51Theincentivesforprivatizationareintimatelyencouragedbythepossibilityformultinationalcorporationstobothexploitnaturalresourcesandtakeoverdeliveryofpublicservicesincludingwater,electricityandtransport in the so-called “developing countries”. 52 Consequently, foreign investment isconsideredtobeoneofthemostimportantmeansforachievingdevelopment.

Underneoliberalrationality,developmentisunderstoodasfinancialliberalisation,privatisationofpublicgoodsandservices,deregulation,opennesstoforeigninvestment,fiscaldisciplineandsmallgovernance.Themeaningofdevelopmentinvolvesbasicallythenotionofeconomicgrowththroughthelogicofthefreemarket,individualpropertyandfreeflowofcapital,allwithinthegameofadvantageandunequalpowerrelationsbetweentheNorthandSouth.53MostoftheMCscomefromthesocalled“FirstWorld”andbyplayingtheirroleas‘developers’carryontheirprojects in the “ThirdWorld” under the promise of bringing prosperity and welfare for thepeople.ButhasforeigninvestmentactuallybroughtprosperityandwelfaretothesepeoplesthatinhabittheGlobalSouth?Theanswerdependsonwhoisdefiningandassessingdevelopment.

AsBaxihasclaimedtheideaofdevelopmentcannotbeexplainedusingjustoneconceptasitdependsonthesociety,contextandtimeinwhichtheconceptisconstructedandimplemented.Themodernideasofdevelopmentinclude‘thesocialplanned’andbasicallycontentnotionsofwhatneedstobeimprovedandhow;howmay‘primarymoralgoods‘beredistributedandwhatisthe ‘best’meansformovingahead?Inthesameway,the ideaofdevelopmentdetermineswhat may count as a change in the short, as well as, in the long run. Despite the generalacceptanceoftheneedforparticipatorymechanismstodiscusswhatdevelopmentisandhowitcanbeachieved,thechallengeofpluralvisionsisstillanongoingissueandthequestionofwhomaydevelopwhombringstheproblemoflegitimacyandauthoritytothearena.54

AccordingtoBaxi“thequestionofwhomayconstitutethemselvesasdevelopersandhowmaytheclassesofthedevelopeesbeconstructedisaquestionaboutrepresentationanddistributionofthelegalandpoliticalauthority.Moreover,ifthedevelopmentideasandmeanscomefromoutside the communities it is necessary to look at the problem of the accountability, coulddevelopeesclaimresponsibilityandreparationwhentheyarehurtorharmedbydevelopers?”.5551D.Harvey(2006)“Neo-liberalismascreativedestruction”,SwedishSocietyforAnthropologyandGeographyJournalCompilation.Geogr.Ann.,88B(2):pp.145–15852A.Perry-Kessaris(2011)‘Prepareyourindicators:economicimperialismonthesharesoflawanddevelopment’InternationalJournalofLawinContext7:4p.p.401-42153M.Salomon(2008)’Poverty,PrivilegeandInternationalLaw:TheMillenniumDevelopmentGoalsandtheGuiseofHumanitarianism’InternationalLawAssociation/UCLandtheCentreforInternationalandPublicLawSeminarSeries,consulted on http://www.lse.ac.uk/humanRights/aboutUs/articlesAndTranscripts/SalomonGYIL08.pdf on 23thMarch,201654BaxiUpendra(2009),TheUncannyideaofdevelopment,HumanRightsinaposthumanworld,p.p.76-12355Ibid


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Aswehaveseen inthefirstchapterthisdoesnotseemtobeaclear issue inthecaseoftheinternationalinvestmentlaw.

Ithasbeenbroadlyacknowledged that the idea thatdevelopment isequivalent toeconomicgrowthhasbroughtaboutdrasticsocialandenvironmentaldestruction.56Whatisaconsidereda‘benefit’andwhatisaconsidereda‘cost’constituteselementalaspectsofdevelopment.AsBaxi has stated ‘if there is no denying that development (vikas) entails a just measure ofdestruction (vinash) theaxiom isnovikaswithoutvinash.But thequestion iswhoandunderwhichauthorityorlegitimizationdetermineswhatshouldbethe‘rightmeasureofdestruction’,andwhohastosuffertheconsequencesofthat.Inotherwords,whydosomehavetobearthe‘costsofdevelopment’iftheydonotreceivethebenefits?57Thisisaveryrelevantquestioninthecaseofthe‘costs’and‘benefits’offoreigninvestments.

Themegadevelopmentprojectsthathavebeenpromotedvianeoliberalideasandinstitutionshave not just undermined the rights of the people to health, food security, access towater,housingoracleanenvironmentbutalsotheirdignity,culturalidentityanddiversity,thatistosay, theirownunderstandingofbeinghuman.Theworld isnowdividedbetween twobroadglobalisedclasses:thedevelopersandthedevelopeesasJacquesDerridadescribesinhiswriting,andwhatthisactuallymeansisthatdevelopmenttheory,policiesandpracticesareproducingaconstantstrugglebetweenwinnersandlosers.The‘losers’ordevelopeesareresponding,oftenviolently, to thethreeD’sembedded in themoderndevelopmentconcept:denationalization,disinvestmentandderegulation.58

Marxistquestionsaboutwhogetswhat,howmuchandforhowlongarerelatedtoglobaljusticeandtheyhaveanintrinsicrelationshiptothediscussionregardingthestructureofproductionanddistribution.However,the‘truths’aboutdevelopmentseemtohaveresolvedthesecomplexproblemsina‘standardmagicrecipe’thatshouldbeappliedacrosstheworld,mainlyinthoseplacesthaturgentlyneedtobemodernised.

Indeed,ithasbeenuntiringlysaidandpromotedbytheinternationaleconomicinstitutionsandthe orthodox scholarship that the best way of achieving development is through economicgrowth, and inorder toachieve this theguaranteeof a freemarketand ‘fair’ competition isneeded.Moreover, to achievedevelopment it is necessary toprovide asmuchprotection aspossibleofprivatepropertyandcontractualrightsaswellasensurethefreemovementofglobalcapital through international trade, commerce and direct foreign investment59. Indicators of‘development’suchasthedoingbusinessprojectoftheWorldBankmeasureshow‘advanced’the country is in these areas and thus how ‘trustable’ it is likely to be in the international

56D.Harvey (2006)“Neo– liberalismascreativedestruction”,SwedishSociety forAnthropologyandGeographyJournalCompilation.Geogr.Ann.,88B(2)

57Ibidnote158JDerridaandGBorradori,‘Autoinmunity:RealandSymbolicSuicides’,inBorradori(ed),PhilosophyinatimeofTerror,95–6(Chicago:ChicagoUniversityPress,2003)citedinBaxinote159Ibid


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economicarena.Obviously,thisindicatordoesnottakeintoaccounttheconditionsunderwhichthese ‘advances’ are being made, namely the impact it is having on people’s rights or theenvironmental.60

Theroleofthestateistocreateandpreserveaninstitutionalframeworkappropriateforsuchpractices. In this view, the state is responsible for keepingpeace throughmilitary andpolicefunctionsandsecuringpropertyrightstooptimizemarketdevelopment.Thedistributionofallkindsofresourcesincludingbasicsocialonessuchashealthcare,socialsecurity,socialhousing,or education should be in the hands of the market. The state should not intervene in thisdistributionasitspowerfulinterestscouldinfluencebiasthatmightruinthe‘neutrality’ofthemarket.

Thestatehasnoobligationtodeliverwelfaretoitspeopleastheyhavethepowerto‘earnit’.Theredistributionthen,comestobeanaturalphenomenonthatwilloccursmoothlyifthestatedoesnotintervenetodistortthedynamicsofthemarket.Iftherearesomesocialproblemssuchaspoverty, deprivationor inequality, theywill be steadilyovercomeas longas theeconomygrows.However, according to Harvey the neoliberal rationality has been redistributive rather thangenerative, driven by strategies of ‘accumulation by dispossession’ 61 . This is a mode ofaccumulation which, through practices like privatization, free trade and foreign investment,seekstotransferpubliclyorcommonlyheldassetsandresourcestoprivateproperty.62Thefactthatmillionsofpeoplehavebeendisplacedfromtheirlandacrosstheworldasaresultofthealliancebetweenbigcorporationsandillegallyarmedgroupsshowsusthematerializationofwhat Harvey has called “accumulation by dispossession”. The land taken has been at theserviceofpowerfulindustriesruledbyeconomicelites(atnationalandinternationallevels).

Harvey(2005)definestheconceptof“accumulationbydispossession”asfollows:

‘ThecontinuationandproliferationofaccumulationpracticeswhichMarxhadtreatedofas“primitive”or“original”duringtheriseofcapitalism.Theseinclude the commodification and privatization of land and the forcefulexpulsionofpeasantpopulationsconversionofvarious formsofpropertyrights(common,collective,state,etc.)intoexclusiveprivatepropertyrightssuppressionofrightstothecommons;commodificationoflabourpowerandthe suppression of alternative (indigenous) forms of production and

60A.Perry-Kessaris(2011)‘Prepareyourindicators:economicimperialismonthesharesoflawanddevelopment’InternationalJournalofLawinContext7:4p.p.401-42161D.Harvey(2005)AccumulationbydispossessioninThenewimperialism,OxfordUniversityPress,Chapter462C.Barnett(2010),What’swrongwithNeoliberalism?,TheHandbookofSocialGeography,editedbySusanSmith,SallieMarston,RachelPain,andJohnPaulJonesIII.LondonandNewYork:Sage


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consumption;colonial,neocolonial,andimperialprocessesofappropriationof assets (including natural resources); monetization of exchange andtaxation,particularlyofland;theslavetrade(whichcontinuesparticularlyinthesexindustry);andusury,thenationaldebtand,mostdevastatingofall,the use of the credit system as a radical means of accumulation bydispossession’63

Under the principles ofwealthmaximization and economic growth human rights are just anexpensive ‘cost of production’ to be considered and people who live in the territories ofdevelopmentprojectsarepartofthe ‘legalrisk’ thatneedstobeaddressed. Inthis logic, theinvestors’propertyandcontractual rightsneed to ‘overcome’ the fact that their interestandprofitmightharmpeoples’ lives, identitiesanddignity. Inanycase, thepowerto inflictharmuponothersisprotectedbyseverallawinstrumentssuchasinternationaltreaties,domesticlawandstate-investorcontracts.

The fact that indigenous and local communities live in territories that need intervention by‘developmentprojectsof investment’ followingthe ‘developmenttruths’ofeconomicgrowthandwealthmaximizationisseenasjustanother‘barrier’thatneedstoberemovedinordertoguarantee the free flow of global capital and the welcoming of prosperity, modernity andcivilization. The mechanism of the removal might be very painful and might range fromdisplacementtogenocide.However,thisisthecostthatpeopleneedtopayinorderto‘catchup’withtheEuro-Americanideaofprogressandenlightenment.

The human suffering caused in the name of development and progress has been welldocumentedby scholarship64. For instance,Padeldescribeshow local communitiesarebeingdisplacedfromtheirtraditionalterritoriesinorderto“clearup”thespaceforinvestmentprojectsin India.Thesepeoplearenotbeingprovidedwithnewjobsor lifeopportunitiesand insteadtheirliveshavenotablyworsenedincultural,political,socialandeconomicterms.HearguesthatactuallythepublicpoliciesandlegalmeasuresadoptedandimplementedbylocalandnationalgovernmentsinintimatealliancewithMCsandsupportedbyinternationaleconomicinstitutionssuch as the World Bank made, of course, in the name of development, have actuallyimpoverished the communities and driven them away from their lands, resources and socialnetworks.65

63D.Harvey(2005)AccumulationbydispossessioninThenewimperialism,OxfordUniversityPress,Chapter464 SeeFPadelandSDas (2013), “Resettlement realities:Thegulfbetweenpolicyandpractice” inHariMohanMathur Resettling and Displacement in India: The human cost of development, Springer editions; Bennett,O.,McDowell (2012),Displaced: TheHumanCost ofDevelopment andResettlement, Palgrave Studies inOralHistory, Palgrave Macmillan US andHari MohanMathur (2015) Assessing the Social Impact of DevelopmentProjects:ExperienceinIndiaandOtherAsianCountries,Springereditions. 65SeeFPadelandSDas(2013),“Resettlementrealities:Thegulfbetweenpolicyandpractice”inHariMohanMathurResettlingandDisplacementinIndia:Thehumancostofdevelopment,Springereditions.


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The development project under the neoliberal rationality sees native people as removableobjectsthatcanjustbe¨re-locatedorre-settled’atbestwithlittleornoconsiderationfortheircultural, familiar, social and political attachments to their lands and territories. As Padel hasargued:

‘A basic problem in the issue of resettlement is theway that displacedpeople are ‘objectified’: turned into objects, using a language that isalienating and dehumanising”. Feedback from the ‘oustees’ and ‘PAPs’(project-affected persons), though placed at the top of new R&R(resettlement and rehabilitation) policies, is not part of the system. Toremedythissituationandincorporatedisplacedpeople’sperspectives,thetablesneedtobeturnedasitwere,bymakingthesystemofdisplacement,resettlement and rehabilitation into the subject of analysis, andhighlighting disjunctions between what is meant to happen and whatactuallyhappens’66

Farmers, peasants, indigenous, Afro communities and in general local inhabitants of theseterritories are resisting these views and practices of the neoliberal development project. Tounderstandthestrengthofresistanceagainst‘displacementprojects’,itisnecessarytoanalysethe clash of ideologies between a belief in development as something based on materialconstructs, especially mining-based industrialisation, and village people’s belief in their ownculture andway of life,measuring development bywhether their quality of life improves orworsens.67Aswehaveseenabove,intheendthisisastruggleofwhatBaxihascalledthe‘axiomofnovikaswithoutvinash’.Simplyput, it refers to thedilemmaofwhatshouldbethe ‘rightmeasureofdestruction’,andwhowillhavetosuffertheconsequencesofit.68

In the economic sense, frombeing self-reliant, rooted to the land, fundamentally egalitariancultivatorsgrowingmostoftheirownfood,thedisplacedfarmingcommunitiesareforcedtothebottomoftheladder,dependentonobscureandcruelcorporatehierarchies,whichunderminetheir former freedom and control over their labour and environment. What the ‘fantasticopportunitiesof foreigndirect investment’actually translate to is invasion,dispossessionandtake-overofcultivators’landandresources.69

Moreover, it is importanttonotethattheculturalannihilationisoftenaforgottendimensionwhenitcomestotheanalysisofthebenefitsandoverallgoodoftheneoliberaldevelopmentproject. As Padel has stated,when farming communities aredisplaced, especially from tribalvillages,whatoccursisnotonlyanewlevelofimpoverishment,butalsoculturalgenocide,sinceeveryaspectofthesocialstructureisfundamentallyaltered.70

66Ibid67Ibid68BaxiUpendra(2009),TheUncannyideaofdevelopment,HumanRightsinaposthumanworld,p.p.76–12369Ibidnote5770Ibidnote57


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Tosumup,aswehaveseenthroughoutthischapter,thedevelopmentthatinducesdisplacementundermines all spheres of people’s lives including the economy, political system, culture,relationshipwiththeenvironment,religionandvaluesystems.InPadel’swords“Likefishesthatdiewhentakenoutofwater,acultivatordieswhenhislandistakenawayfromhim”.

The social construction of the idea of progress and development based on the economicrationalityofwealthmaximisationhasprivilegedforeigninvestorsprofitoverpeoples’livesandterritories,andhassilencedandmadetheimpoverishment,social,political,environmentalandculturaldegradationthatthetraditionalandnativeinhabitantsaresufferinginvisible.Sadly,thisrealityisnotjustignoredbydomesticgovernments,policymakersandinternationaleconomicinstitutionsbuthasevenbeenencouragedandprotectedthroughlegalandpoliticalstrategieswithintheinternationalinvestmentlawframework.

3.ThepublicnatureofIIL:WhydoweneedHumanRightsininternationalinvestmentlaw?

Aswehaveseenthroughoutthispaper,foreigninvestmentisfarfrombeingjustanexclusiveprivate issue relating to investors’ economicprofit. Instead it involvesagreatdealofhumanrightsandpublicinterestconcerns.Thus,theinteractionbetweenhumanrightsandinternationalinvestmentlawraisesfundamentalquestionsaboutinternationallaw’sfragmentation:dothesetwobranchesofinternationallawmerelycoexistordothey,attimes,intermingle?71AsGordonhasclaimed,through investmenttreaties,statesguaranteerightsto investors,someofwhichoffersimilarguaranteestothosecontainedininternationalhumanrightslaw,suchastherighttonottobearbitrarilydeprivedofpropertyandtherighttoequalprotectionunderthelaw.

At the same time, someof these investors’ rights canaffect issuesofpublic interest suchashealth, labour conditions, food security, environment and access to safe drinkingwater. Forinstance, the conceptofexpropriation in international investment law includes thenotionof“indirectexpropriation”throughregulatoryinstruments,whichbasicallymeansthatifthestatetightensitsregulationstoprotectandpromotehumanrightsandthisregulatorychangereducesthepresentor futureeconomicprofitof investors, they could claimmultimillionaire taxpaidcompensationwithintheInvestorStateDisputesystemestablishedinmostoftheBTsandFTAs.

AsGordonclaims,investmenttreatylawputsitsownstamponhowtheseinvestors’rightsareconstruedandenforced,diverginginimportantwaysfromhumanrightslaw.Furthermore,the

71 KGordon,JPohlandMBouchard(2014), ‘Investorsrightsandhumanrights–interactionsunderinvestmenttreaty law’, available in http://blogs.lse.ac.uk/investment-and-human-rights/portfolio-items/investors-rights-and-human-rights-interactions-under-investment-treaty-law-by-kathryn-gordon-joachim-pohl-and-marie-uchard/?portfolioID=4601,consultedon13thJune2016


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enforcement of these guarantees for investors can, in turn, implicate the human rightsguaranteesofotherswhomaynotberepresentedinsuchproceedings.72

Ontheotherhand,despitethefactthatthearbitraldecisionstouchon importantmattersofregulatoryand fiscalpolicy, theyarenotalwayspubliclyavailableandsubsequently it isverydifficulttoexerciseanykindofaccountabilitywithrespecttothem.Difficultiesstemfromthefactthatthetextualbasisofinvestmenttreatylawisdispersedacrossmorethan3,000treatiesandalsofromthehistoricallyweakstandardsoftransparencyassociatedwithISDSdecisions.73

The littleandalmost inexistentconsiderationofhumanrights in international investment lawcanbeseenintherecentOECDreportabout“InvestmentTreatyLaw,SustainableDevelopmentandResponsibleBusinessConduct”.74AsGordonshowsinthisreport‘treatylanguagereferringto“humanrights”isextremelyrare–itappearsinlessthan1%ofthe2,107treatiescontainedinthesample.Thisissmallnotonlyrelativetothetotalsample,butalsorelativetotheotherissuescoveredbythestudy(protectionoftheenvironment,labourconditionsandstandardsandthefightagainstcorruption).Environmentistheconcernthathasthemostnumberofreferencesinthesample,withalittleover10%ofthetreatiesincludingsomereferencetotheprotectionoftheenvironment, followedby labour conditionsand standardswith5%and the fight againstcorruptionwith1.5%’

Anotherinterestingdifferencetobenotedbetweenhumanrightsreferencesandotherrelatedissuesininvestmenttreatiesbyexaminingthefunctionofthetreatylanguageisthatallhumanrightsreferencesoccurinthepreambletothetreatyandthereforehelptoclarifythecontext,objectiveandpurposeofthetreatyfortheinterpretiveprocess.Thiscontrasts,forexample,withenvironmentalreferences,whichappearnotonlyinpreambles,butalsoinprovisionsrelatingtopreservingpolicyspaceorindirectexpropriation.

Theissuesofwhetherandhowstatesshouldintegratehumanrightslawwithintheirinvestmenttreatiesisactuallyaquestionaboutthe‘pureprivatenature’oftheinternationalinvestmentlawanditsmainpurposeofprotectinginvestors’rightsandprofit.

Untilthisintegrationoccurs,peopleharmedbyforeigninvestmentprojectswillnothaveclearmechanismstoclaimjusticeandreparation.Theirrightswillbesubjectedtoajusticesystemthatisdrivenbyapurelyprivatecommerciallogicthatispromptedtoawardcasesexclusivelyfocusedtowardsservingtheprivateeconomicinterestofinvestors.

72Ibid73Ibid74Gordon,K.,J.PohlandM.Bouchard(2014),“InvestmentTreatyLaw,SustainableDevelopmentandResponsibleBusiness Conduct: A Fact Finding Survey”, OECDWorking Papers on International Investment, 2014/01, OECDPublishing


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ThefactthatthepublicarenotabletoparticipateinthenegotiationofinvestmenttreatiesorintheirdisputesshouldbeenoughofareasontodemandadequateandeffectiveincorporationofhumanrightslawinIIL.

Also,thefactthatthecurrentinternationalhumanrightslawframeworkobligesonlystatestopromote,protectandguaranteepeople’s rights ignores thecurrentglobaleconomicorder inwhichcorporationsholdagreaterpowerofinfluenceoverpeople’sliveswithouttheneedforbeingaccountablefortheiractions;atleast,notbyformalmeans.

AsMacmillanhassaid75despitethetraditionaldistinctionbetweenpublicandprivate,“itishardtoseehowthesystemofinternationaleconomiclawhaseverbeenprivateinanyrealway.Likethesystemofpublicinternationallaw,itsformalactorsarestates.Thereisnothingprivateaboutentitieswhosesocio-economicpowerandinfluenceexceedsthatofmanynationstates.”

Theauthormadethispointclearasfollows:

“While international economic law and public international law aresegregatedlegalsystems,theysharesomeimportantqualitiesincommon:both are generated through treaty-makingby states; both are essentiallyaddressedtostateobligations;and,bothareasaconsequenceinsufficientlyconcernedwiththeexerciseofpoweroutsidethecognizanceorjurisdictionofthestate.However,asnotedabove,theirfocushasbeendifferent.Thetendencyofpublicinternationallawhasbeentofocusonrelationsbetweenandwithinnationstates.Theresultofthisisthatthesortofpoliticalpowerrecognisedandregulatedbyinternationallawisprimarilyexercisedatthelevelofthenationstate.Theinstitutionsofinternationaleconomiclaw,ontheotherhand,havehadaglobalisingeffectoneconomicactivity.Thishasbeen closely implicated in the growth of the power and influence oftransnationalcorporations”76

AswecanseeitistimetoacknowledgethatinthecurrentglobalorderMCsarecomingfacetofacemorefrequentlywithstatesandactingasiftheywerecouples,bringingthepublicinterestandthepeople’srightsintothearenaandlogicofprivatelaw,aswehaveseeninthecaseofthestate-investordisputes;thisneedstochange.Internationallawneedstoevolveaccordingtothecurrentrealityandcannotkeeptreatingactorsasequalswhentheyarenot.MCsasprivateprofitorientedentitiesneedtobesubjectedtothepublicinterestnotjustatdomesticlevelbutontheinternationalstage.

75MacmillanF(2004),Internationaleconomiclawandpublicinternationallaw:strangersinthenight,InternationalTradeLawandRegulation,6,pp.115-12476Ibid


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GovernmentsshouldevaluatethecostsandbenefitsofIILandreflectontheirfutureobjectivesandstrategies.ItisalsonecessarytoincludespecificlanguageaimedatmakingitclearthattheinvestmentprotectionandliberalizationobjectivesofIILmustnotbepursuedattheexpenseoftheprotectionofhealth,safety,theenvironmentorthepromotionofinternationallyrecognizedlabourrights.77

77UNCTAD(2015)WorldInvestmentReport2015:ReformingInternationalInvestmentGovernance,ChapterIV,p.p.121


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