1. Introduction
The primary focus of the international investment regime on the protection of foreign investment has sometimes been depicted as creating tension with various aspects related to the protection of human rights. It is in this context that some authors have highlighted conflicts between the obligations of states under international investment law and international human rights law.Footnote 1 Beyond the consideration of states’ obligations, others have focused on the failure of international investment law to take into consideration violations of human rights by foreign investors, except under limited circumstances.Footnote 2 The absence of human rights obligations for foreign investors in the majority of international investment agreements and the reluctance of some tribunals convened under these agreements to condemn human rights violations have even been considered as affecting the legitimacy of the international regime.Footnote 3
In parallel to the negotiation of international investment agreements, intergovernmental organizations have spearheaded the adoption and the implementation of standards of conduct for business enterprises operating abroad.Footnote 4 Examples of these initiatives include the Organisation for Economic Co-operation and Development Guidelines for Multinational Enterprises (OECD Guidelines),Footnote 5 the International Labour Organization Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy (ILO Tripartite Declaration),Footnote 6 the United Nations Global Compact,Footnote 7 the United Nations Guiding Principles on Business and Human Rights (UN Guiding Principles),Footnote 8 and the International Finance Corporation Performance Standards on Environmental and Social Sustainability (IFC Performance Standards).Footnote 9 Each of these initiatives includes provisions that explicitly address human rights issues for private enterprises, thus providing standards of conduct that could be taken into consideration by foreign investors. Moreover, an open-ended intergovernmental working group was established in 2014 by the UN Human Rights Council ‘to elaborate an international legally binding instrument to regulate, in international human rights law, the activities of transnational corporations and other business enterprises’.Footnote 10 Taken as a whole, these initiatives demonstrate that some actors are seeking to address business and human rights issues outside the realm of international investment law.Footnote 11
With the exception of the ongoing efforts by the open-ended intergovernmental working group, several initiatives elaborated by intergovernmental organizations to provide standards of conduct for business enterprises can be considered as ‘informal’ under international law. Following the work of Joost Pauwelyn and his collaborators on ‘informal international lawmaking’, these instruments are informal as a matter of ‘output’, ‘process’, and ‘actors’.Footnote 12 With respect to ‘output’, all the currently existing instruments have not resulted in a traditional source of international law listed at Article 38(1) of the Statute of the International Court of Justice (i.e., international agreements, customary international law, and general principles of law).Footnote 13 Regarding the ‘process’, the adoption of these instruments has also differed from other initiatives that have emerged from the auspices of intergovernmental organizations.Footnote 14 Finally, as far as ‘actors’ are concerned, experts have been particularly active in the elaboration of these initiatives, thus departing from a lawmaking process that strictly relies on traditional diplomatic actors.Footnote 15
Most importantly, the distinction between ‘formal instruments’ and ‘informal instruments’ is here preferred to the dichotomy between ‘hard law’ and ‘soft law’. While ‘soft law’ has been extensively addressed in the literature,Footnote 16 its meaning often reaches beyond the form in which an international norm is embedded and the process through which it has been elaborated. Of course, several authors use the term for international instruments that fall outside the formal sources of international law.Footnote 17 However, others suggest that international treaties can also be considered as ‘soft law’ if they are worded in vague and hortatory terms.Footnote 18 For example, when analysing the legalization of international governance, Kenneth W. Abbott and Duncan Snidal have suggested that ‘most international law is “soft” in distinctive ways’.Footnote 19 By also considering the content of international instruments, ‘soft law’ captures a phenomenon that is broader than their informal nature as a matter of output, process and actors involved in their elaboration. Given that the distinction between international instruments for present purposes mostly relates to their form, reference to ‘informal instruments’ appears to be more appropriate than ‘soft law’.
Contrasting the formal nature of international investment agreements with the informal character of initiatives elaborated by intergovernmental organizations often leads one to conclude that the latter fails to impose obligations on foreign investors. For example, in a recent account of the political economy of the investment treaty regime, Jonathan Bonnitcha and his collaborators conclude that codes of conduct elaborated by intergovernmental organizations are part of a broader investment regime complex, but nevertheless remain peripheral to the investment treaty regime itself and can only be considered as ‘non-binding’.Footnote 20 Other authors highlight the important role of these instruments to reduce the inherent asymmetry between the protection of foreign investment and the general lack of obligations on investors, but still emphasize their informal character and do not explain how they actually intersect with international investment law.Footnote 21 It is here submitted that the increasing references to these informal instruments in international investment agreements and investment arbitration suggest a synergic linkage between human rights and investment law that cannot be reduced to a simple account of the form in which international norms are embedded. An analysis focusing on the nature of the practice that has emerged and the role of international actors in shaping this practice is crucially needed. In other words, how can references to informal instruments elaborated by intergovernmental organizations contribute to the imposition of human rights obligations on foreign investors in international investment law?
With a view to analysing these references, the present article relies on the interactional theory of international law elaborated by Jutta Brunnée and Stephen J. Toope.Footnote 22 It examines whether increasing references to informal instruments in international investment agreements and investment arbitration constitute a practice of legality that fosters a sense of obligation for foreign investors to comply with them. Whilst international investment law is a useful forum to ensure a broader practice surrounding these informal instruments, an empirical observation of such references denotes an uneven one. Even if some international investment agreements and documents related to investment arbitration demonstrate an attempt by members of a community of practice to hold human rights abusers accountable, the unfolding practice that is emerging with respect to these informal instruments cannot be considered as generally animated by any sense of obligation. After emphasizing the relevance of an interactional account to understand the synergy between informal instruments and international investment law (Section 2), the article sheds light on the overall lack of a practice of legality in international investment agreements (Section 3) and investment arbitration (Section 4).
2. Informal instruments in international investment law: An interactional account
The extent to which informal instruments elaborated by intergovernmental organizations can constitute a potential avenue to ensure the protection of human rights in international investment law extensively depends upon the analytical approach that one adopts. A strict legal positivist approach would undoubtedly stress their informal character, thus suggesting that they cannot be considered as a source of obligations for foreign investors under international law.Footnote 23 Without questioning the legal validity of this reasoning, such an approach provides very little theoretical grounds to explain the references to these instruments in international investment agreements and investment arbitration. Rather than focusing solely on the form in which instruments addressing human rights issues related to business enterprises are adopted, one can opt for an approach that explicitly takes into consideration the practice surrounding international norms, regardless of their inclusion in formal or informal sources of international law. It is in this regard that the interactional theory of international law is a relevant analytical tool to explain the potential role of informal instruments to impose human rights obligations on foreign investors in international investment law.
Drawing upon legal pluralism and constructivism in international relations theory, Brunnée and Toope have developed an interactional theory that allows distinguishing between social norms and legal norms.Footnote 24 According to them, the inclusion of an international norm in a formal source of international law constitutes a shorthand that can usefully distinguish legal norms.Footnote 25 Instead of focusing solely upon the form in which the norms are embedded, they nevertheless argue that the distinctiveness of legal norms lies in the creation of a sense of obligation that results from three specific requirements.Footnote 26 First, a legal norm requires the creation of legitimacy through the emergence of ‘shared understandings’ between members of a community of practice. Second, in order to promote adherence to it, a legal norm must meet eight ‘criteria of legality’ (i.e., promulgation, generality, absence of retroaction, clarity, absence of contradiction, realism, constancy, and congruence).Footnote 27 Third, a legal norm must also be maintained through a ‘practice of legality’. Rather than relying on a formalistic account of international law, the interactional theory thus provides a distinction between social norms and legal norms by explicitly considering interactions among international actors and internal criteria of legality.
Most importantly, the ‘practice of legality’ implies sustained efforts by members of a community of practice to preserve the sense of obligation underlying a legal norm.Footnote 28 Drawing upon international relations theory, a ‘community of practice’ can be defined as ‘people who are informally as well as contextually bound by a shared interest in learning and applying a common practice’.Footnote 29 One must thus analyse the normative character of an international norm by considering the interactions between states and non-state actors that form such a community and that collectively shape the nature of the practice according to which an international norm is implemented.
While the consideration of such a practice of legality is a necessary step in order to confirm the legal nature of an international norm embedded in a formal source of international law, one can also suggest that an informal source can be implemented according to a practice of legality and thus be considered as generating a sense of obligation. It is in this context that Brunnée and Toope advance the relevance of the interactional theory to analyse ‘soft law’, which primarily seems to be understood as international norms that are not included in traditional sources of international law.Footnote 30 According to them:
[a]lthough at first blush soft norms do not figure in the “cause of action” allowed in adjudicative international decision-making, for they do not fit within Article 38 of the International Court of Justice statute, such norms can figure in the practical legal reasoning of courts, states and other international actors.Footnote 31
Given that the interactional theory leaves aside a formalistic approach, one can even conclude that an international norm included in an informal source can ultimately possess more obligatory force than a norm included in a formal source of international law that is not implemented according to a genuine practice of legality.Footnote 32 Even if it is clear that some informal rules were intended to be non-binding from the very beginning, an interactional account allows focusing on the subsequent interactions among international actors to address whether a sense of obligation has emerged through a shift in shared understandings and a practice of legality.
The inclusion of a practice of legality in the interactional theory of international law might lead one to consider a link with customary international law. As emphasized by Brunnée and Toope, the practice of legality that is analysed through an interactional account constitutes ‘an enriched form of practice that … would traditionally have been called opinio juris’, ultimately providing a ‘more objective, less mythical, account of how customary legal norms become binding’.Footnote 33 However, the analysis of a practice of legality should not be understood as strictly serving the purpose of determining whether an international norm is part of customary international law. This distinction is particularly important in the context of the present article. The objective of the following sections is not to determine whether the content of informal instruments to address the conduct of business enterprises could be considered as norms of customary international law. While the practice of states is sometimes considered (e.g., the inclusion of references to these informal instruments in international investment agreements or in documents submitted by respondent states in investment arbitration), the members of the community of practice surrounding these instruments are definitely not limited to traditional actors in international law. In other words, shedding light on the practice that is emerging in international investment law regarding informal instruments elaborated by intergovernmental organizations is useful on its own to assess the normative character of these instruments, without seeking to make a claim regarding their consideration as including norms of customary international law.
The interdisciplinary nature of the interactional theory of international law is also worth mentioning. The explicit reliance on constructivism in international relations theory is a key feature of the analytical framework, which allows a thorough consideration of the social construction of norms by states and non-state actors.Footnote 34 Rather than strictly focusing on the form and the content of international norms, an interdisciplinary approach that combines international law with international relations theory ensures a consideration of international actors’ role in shaping international norms (either social norms or legal norms). As summarized by Brunnée and Toope, ‘[c]onstructivism helps explain how international law can exist and influence behaviour, and international law can help inform a richer understanding of the particular roles of different categories of norms in international society’.Footnote 35
Of course, an interdisciplinary analysis of informal instruments could have been completed by mobilizing a rational institutionalist approach in international relations theory, which focuses on the importance of binding rules to signal the seriousness (or lack thereof) of international actors’ commitments.Footnote 36 Without seeking to diminish the relevance of this approach, relying on constructivism allows considering the interactions between international actors with a view to describing the nature of the actual practice that is emerging. It is in this regard that the interactional theory of international law conveniently addresses social interactions, beyond the strict consideration of advantages and costs underlying compliance with international rules. States negotiating international investment agreements, parties involved in investment disputes, amicus curiae submitting briefs and tribunals deciding the outcome of investment claims all contribute to a specific practice that can shape international norms. In order to empirically account for the interactions between these international actors rather than the rational calculations underlying their decisions, an analytical framework that is partly anchored in a constructivist understanding of international relations is thus required.
A complete interactional account of each informal instrument elaborated by intergovernmental organizations to address the conduct of business enterprises is beyond the scope of this article.Footnote 37 By contrast, the following sections strictly focus on references to these instruments in international investment agreements and documents related to investment arbitration as an integral part of a potential practice of legality. Whilst acknowledging that determining whether these instruments constitute social norms or legal norms would require a thorough consideration of shared understandings and criteria of legality, the analysis ultimately serves two purposes. On the one hand, from a descriptive perspective, the reliance on the interactional theory of international law allows making sense of the current use of these informal instruments in international investment law. Focusing on the practice surrounding these instruments contributes to providing a deeper and more nuanced assessment of their normative character. Even if the initiatives elaborated by intergovernmental organizations to address the conduct of business enterprises are not traditional sources of international law, their implementation through the interactions of members of a community of practice influences their normative character and must be taken into consideration. On the other hand, from a normative perspective, analysing this practice allows shedding light on the potential use of these instruments to impose human rights obligations on foreign investors in international investment law. Relying on few but existing instances in which these instruments have been put forward by international actors with a view to imposing obligations on foreign investors, one can call for a stronger practice to effectively take into consideration human rights violations in international investment law.
3. Scarce and unconvincing references in investment agreements
When examining the potential use of informal instruments elaborated by intergovernmental organizations to impose human rights obligations on foreign investors, an obvious place to begin is the content of international investment agreements and model treaties elaborated by states. To be clear, rather than seeking to identify all provisions that impose obligations on foreign investors,Footnote 38 the present section of the article focuses specifically on references to informal instruments. Several authors have already analysed or advocated for the inclusion of references to these informal instruments in international investment agreements to better protect human rights.Footnote 39 According to the terms of the interactional theory, states become an integral part of a community of practice when negotiating international investment agreements and elaborating model treaties that include references to these instruments. Depending upon the occurrence and the terms used in these provisions, one must nevertheless assess whether the practice embraced by these states generates a genuine sense of obligation. Despite some provisions explicitly requiring the consideration of these informal instruments to assess the conduct of foreign investors, the analysis of agreements and model treaties demonstrates that they do not foster a practice of legality to impose human rights obligations on foreign investors.
When considering the universe of more than 3,300 international investment agreements,Footnote 40 explicit references to informal instruments elaborated by intergovernmental organizations remain scarce and concentrated in the treaty-making practice of a limited number of states. According to an analytical tool provided by the United Nations Conference on Trade and Development, only 40 agreements include a provision that relates to corporate social responsibility.Footnote 41 The bulk of these agreements involve Brazil (seven agreements), Canada (13 agreements), Colombia (four agreements), and the European Union (five agreements). What is more, several agreements included in this number only provide general references to corporate social responsibility, without explicitly mentioning any particular initiatives. For example, Article 15(2) of the investment agreement between Canada and Côte d’Ivoire provides the following:
Each Party shall encourage enterprises operating within its territory or subject to its jurisdiction to voluntarily incorporate internationally recognized standards of corporate social responsibility in their practices and internal policies, such as statements of principle that have been endorsed or are supported by the Parties. These principles address issues such as labour, the environment, human rights, community relations and anti-corruption.Footnote 42
Even if the consideration of ‘internationally recognized standards of corporate social responsibility’ allows addressing issues beyond the strict protection of foreign investment, the extent to which it directly contributes to a practice surrounding a specific instrument remains limited.
By contrast, some agreements include an explicit reference to informal instruments elaborated under the auspices of intergovernmental organizations. These references are sometimes found in the preamble of international investment agreements and model treaties. For example, the model treaty elaborated by Austria mentions the contracting parties’ ‘belief that responsible corporate behaviour, as incorporated in the OECD Guidelines for Multinational Enterprises, can contribute to mutual confidence between enterprises and host countries’, and that the contracting parties are ‘taking note of the principles of the UN Global Compact’.Footnote 43 Although not limited to the chapter on international investment, the preamble of the Comprehensive Economic Partnership Agreement between Indonesia and the European Free Trade Association mentions that the parties:
[acknowledge] the importance of good corporate governance and corporate social responsibility for sustainable development, and [affirm] their aim to encourage enterprises to observe and adhere to internationally recognized guidelines and principles in this respect, such as the OECD Guidelines for Multinational enterprises … and the UN Global Compact.Footnote 44
Similarly, the preamble of the Comprehensive Economic and Trade Agreement between Canada and the European Union includes encouragement for ‘enterprises operating within their territory or subject to their jurisdiction to respect internationally recognised guidelines and principles of corporate social responsibility, including the OECD Guidelines for Multinational Enterprises, and to pursue best practices of responsible business conduct’.Footnote 45 Even if the preamble is useful to shed light on the object and purpose of a treaty, these references are unlikely to be sufficient to ensure the imposition of human rights obligations on foreign investors and to be considered as contributing to the emergence of a genuine practice of legality.
In addition to preambular language, some international investment agreements and model treaties include a separate provision addressing an agreement between states to promote these instruments. The Comprehensive Enhanced Partnership Agreement between the European Union and Armenia thus includes a provision on trade and investment favouring sustainable development, which provides the following:
[The Parties] agree to promote corporate social responsibility, including through the exchange of information and best practices. In that regard, the Parties refer to the relevant internationally recognized principles and guidelines, such as the OECD Guidelines for Multinational Enterprises, the UN Global Compact and the ILO Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy of 1977.Footnote 46
A similar approach focusing on the promotion of these instruments has been included in the bilateral investment agreement between the Netherlands and the United Arab Emirates.Footnote 47
In a slightly different way, other agreements focus on the encouragement of investors to consider specific informal instruments. Article 31 of the model treaty elaborated by Norway in 2015 thus mentions that ‘[t]he Parties agree to encourage investors to conduct their investment activities in compliance with the OECD Guidelines for Multinational Enterprises, the UN Guiding Principles on Business and Human Rights and to participate in the United Nations Global Compact’.Footnote 48 Moreover, echoing a corporate social responsibility clause included in other investment agreements signed by Canada, the United States–Mexico–Canada Agreement includes the following more detailed provision:
The Parties reaffirm the importance of each Party encouraging enterprises operating within its territory or subject to its jurisdiction to voluntarily incorporate into their internal policies those internationally recognized standards, guidelines, and principles of corporate social responsibility that have been endorsed or are supported by that Party, which may include the OECD Guidelines for Multinational Enterprises. These standards, guidelines, and principles may address areas such as labour, environment, gender equality, human rights, indigenous and aboriginal peoples’ rights, and corruption.Footnote 49
In itself, the inclusion of these references in a separate provision is more promising than preambular language. However, a closer look at the terms used in these provisions allows highlighting that they do not impose any obligation on foreign investors. Rather, these examples imply a commitment from states to promote the observance of specific initiatives or to encourage enterprises to voluntarily consider these informal instruments.Footnote 50 While undoubtedly evidencing a form of practice, these examples cannot be considered as generating a practice that is geared towards any sense of obligation.
By contrast, some rare agreements include a provision that refers to informal instruments, and that is directly addressed to foreign investors. While such a reference was not included in the model treaty elaborated by Brazil, the agreement that it signed with Ethiopia provides the following:
Investors and their investment shall strive to achieve the highest possible level of contribution to the sustainable development of the Host State and the local community, through the adoption of a high degree of socially responsible practices, based on the principles and standards set out in this Article and the OECD Guidelines for Multinational Enterprises … as may be applicable on the State Parties.Footnote 51
The bilateral investment treaty between Morocco and Nigeria also includes a direct requirement for investors to ‘apply the ILO Tripartite Declaration on Multinational [Enterprises] and Social Policy as well as specific or sectorial standards of responsible practice where these exist’.Footnote 52 These examples sharply contrast with provisions that are geared towards the protection of foreign investment and are phrased in a way that establishes a direct obligation for investors to comply with the content of these informal instruments.
The model treaty elaborated by the Netherlands in 2019 offers a particularly promising avenue to contribute to the practice surrounding the OECD Guidelines and the UN Guiding Principles as a way to hold violators of human rights accountable. In addition to encouraging investors to voluntarily incorporate into their internal policies several informal instruments,Footnote 53 the model treaty provides that a tribunal deciding on the amount of compensation that should be awarded to an investor after finding a breach of the host state’s international obligations ‘is expected to take into account non-compliance by the investor with its commitments under the UN Guiding Principles on Business and Human Rights, and the OECD Guidelines for Multinational Enterprises’.Footnote 54 In addition to implying that foreign investors have a responsibility to comply with these informal instruments, this model treaty provides a practical means through which tribunals can rely upon these instruments in a way that contributes to establishing a practice of legality.
Overall, the extent to which references to informal instruments elaborated by intergovernmental organizations contribute to the emergence of a practice of legality is significantly limited. It is plain that the negotiation of international investment agreements and the preparation of model treaties offer an avenue for members of a community of practice to recall the existence of these instruments beyond the activities of the intergovernmental organizations in which they have been elaborated. However, when considering the limited number of states spearheading these references and their relative scarcity in comparison to the total number of agreements, one must acknowledge that the practice is relatively thin. Furthermore, most of the interactions among states have materialized in preambles as well as provisions that are phrased in hortatory terms. It is clear that such references cannot be considered as forming the basis of a genuine practice of legality. At the end of the day, only a limited number of examples relying upon specific informal instruments to impose direct obligations on foreign investors and limiting the amount of compensation to be paid to investors can be considered as contributing to the emergence of a sense of obligation. Taken as a whole, it would be an exaggeration to suggest that the reliance upon informal instruments in international investment agreements constitutes a genuine practice of legality that effectively allows imposing human rights obligations on foreign investors in international investment law.
4. Diverging approaches in international investment arbitration
In addition to investment agreements and model treaties, the practice surrounding informal instruments from intergovernmental organizations to address business and human rights issues unfolds in investment arbitration. Whilst references to these instruments in investment agreements mostly involve state actors, the community of practice that pertains to investment arbitration includes respondent states, foreign investors, amicus curiae and tribunals. In order to assess the nature of the practice that has emerged among these actors, this section provides an analysis of various documents that were submitted by disputing and non-disputing parties, as well as awards rendered by investment tribunals. Amidst a relatively limited number of references, the analysis sheds light on a clash between two diverging approaches that has globally impeded the emergence of a practice of legality. On the one hand, some respondent states and amicus curiae have pushed for the consideration of these instruments as a source of obligations for foreign investors. This approach has been followed by at least one tribunal (Section 4.1). On the other hand, foreign investors have refused to acknowledge such a binding character and emphasized the voluntary nature of informal instruments, while tribunals have generally avoided addressing their normativity (Section 4.2).
4.1 Attempts at fostering a practice of legality
It has often been emphasized that investment arbitration tribunals’ jurisdiction is limited to the adjudication of investment claims.Footnote 55 Tribunals must determine whether a measure adopted by the respondent state is consistent with its international obligations. Especially with respect to investment arbitration resulting from an international agreement that does not explicitly impose obligations on foreign investors, the conduct of the latter is not the primary focus of investment arbitration. However, concerns pertaining to the conduct of foreign investors can be raised by respondent states or amicus curiae with a view to justifying measures that were adopted by states and that are challenged by claimants. It is in this context that some actors have relied upon informal instruments elaborated by intergovernmental organizations and have argued that foreign investors have an obligation to comply with the international norms that they encompass.
This dynamic has led respondent states to explicitly rely upon informal instruments in documents submitted to investment arbitration tribunals. For example, in South American Silver Limited v. Plurinational State of Bolivia (South American Silver), the respondent state discussed the inclusion of informal instruments as part of the applicable law in its objections to jurisdiction, admissibility, and counter-memorial on the merits.Footnote 56 In order to ensure that the protection of Indigenous communities’ rights is included in the applicable law to the investment dispute, the respondent state maintained the following:
Lastly, within applicable usages of trade and as evidence of the international public order, the Arbitral Tribunal shall consider some instruments such as United Nations Guiding Principles on Business and Human Rights and the OECD [G]uidelines for Multinational Enterprises, which expressly provide the need to respect and protect human rights, and particularly indigenous peoples’ rights.Footnote 57
Similarly, in Copper Mesa Mining Corporation v. Republic of Ecuador (Copper Mesa), the respondent state challenged the jurisdiction of the tribunal on the ground that the investment made by the claimant was tainted with illegality.Footnote 58 As summarized by the tribunal:
the conduct of the Claimant’s alleged subsidiaries, as well as that of its agents and employees amounts, so the Respondent submits, to severe breaches of legal principles governing corporate social responsibility and is contrary to international public policy, including the UN Global Compact [and] the OECD Guidelines.Footnote 59
The respondent state’s consideration of specific instruments as amounting to the level of ‘legal principles’ and ‘international public policy’ constitutes an interesting attempt at generating a practice of legality despite their informal character.
In Bear Creek Mining Corporation v. Republic of Peru (Bear Creek), the respondent state was seeking to justify the termination of the claimant’s rights to operate a mining concession by arguing that the investor did not have a social license to operate and that it contributed to the emergence of the social unrest that preceded the termination. When asked by the tribunal which international legal provisions were applicable to determine whether the claimant sufficiently reached out to the relevant communities with a view to obtaining a social license, the respondent state maintained that ‘multiple international authorities and instruments do explicitly recognize the right of local communities to be consulted … about mining projects that could affect their land’.Footnote 60 It continued by stating that ‘when natural resources are to be exploited by private companies, it is the companies that have to engage in a dialogue with the local communities to gain their approval and trust’.Footnote 61 In order to support this assertion, Peru emphasized that the home state of the claimant (i.e., Canada) has endorsed the IFC Performance Standards.Footnote 62
In addition to the arguments provided by respondent states, amicus curiae have explicitly referred to informal instruments with a view to demonstrating the inadequacy of the conduct adopted by investors.Footnote 63 For example, in Glamis Gold Ltd. v. United States of America, a non-disputing party relied upon the IFC Performance Standards among other international instruments to emphasize the responsibilities of business enterprises regarding sacred sites of Indigenous Peoples. In a non-party supplemental submission, the Quechan Indian Nation referred to Performance Standards 7 and 8, and maintained that ‘the International Finance Corporation and the Equator Banks also recognize the importance of sacred sites regardless of whether such sites may be protected under by positive law’.Footnote 64
In Piero Foresti, Laura de Carli et al. v. Republic of South Africa, a group of four non-governmental organizations asked for limited participation as non-disputing parties. In their petition, the organizations emphasized that the arbitration raised important questions with respect to the ability of the respondent state to implement legislative changes intended to redress the consequences of apartheid.Footnote 65 After mentioning that states have the ability to promote economic and social rights, the petitioners referred to the UN Global Compact to support ‘[t]he concomitant international responsibility of investors to contribute to human rights fulfilment, environmental protection, and the social upliftment of affected workers and communities when exploiting a nation’s natural resources’.Footnote 66
In Bear Creek, the Association of Human Rights and the Environment-Puno, as well as Dr. Carlos Lopez, submitted a brief as non-disputing parties.Footnote 67 An entire section of the brief focused on ‘the duty of the company to carry out a process of due diligence and obtain social license’.Footnote 68 By explicitly referring to the UN Guiding Principles, the non-disputing parties mentioned the existence of international standards stipulating:
that it is the responsibility of the company to respect all human rights, and as part of that responsibility, it has the obligation to carry out a process of human rights due diligence in a permanent and dynamic way with the aim of obtaining the consent of the local population to its operations and to ensure its own sustainability.Footnote 69
This argument was subsequently echoed by the respondent state, which maintained that ‘[t]here can be no dispute that compliance with the [UN Guiding Principles] are expected of every company, Bear Creek included’.Footnote 70
Amidst the submissions from respondent states and amicus curiae, at least one tribunal has relied upon the content of informal instruments to address the conduct of investors and to acknowledge the emergence of a responsibility to respect human rights. In Urbaser S.A. and Consortio de Aguas Bilbao Bizkaia, Bilbao Biskaia Ur Partzuergoa v. Argentine Republic (Urbaser), the respondent state initiated a counterclaim based on damages that it suffered and that allegedly resulted from the claimants’ administration of concession for water and sewage services.Footnote 71 When assessing the merits of the counterclaim, the tribunal recalled the references to several informal instruments by the respondent state with a view to conveying an understanding of human rights recognized in international law as binding upon business enterprises.Footnote 72 After rejecting the claimants’ principled objection that the applicable investment agreement does not impose any obligation upon foreign investors,Footnote 73 the tribunal proceeded with the analysis of the duty to guarantee a human right to water. By explicitly referring to the UN Guiding Principles, the tribunal mentioned that ‘international law accepts corporate social responsibility as a standard of crucial importance for companies operating in the field of international commerce’.Footnote 74 It nevertheless continued by stating that ‘even though several initiatives undertaken at the international scene are seriously targeting corporations human rights conduct, they are not, on their own, sufficient to oblige corporations to put their policies in line with human rights law’.Footnote 75
The tribunal subsequently sought to resolve this tension by focusing on the content of various informal and formal international instruments, including the ILO Tripartite Declaration.Footnote 76 It is by relying upon these instruments that the tribunal found an obligation for business enterprises not to actively aim at destroying human rights. The tribunal thus admitted that ‘the human right for everyone’s dignity and its right for adequate housing and living conditions are complemented by an obligation on all parts, public and private parties, not to engage in activity aimed at destroying such rights’.Footnote 77 However, such an obligation was considered as distinct from the obligation of states to enforce the human right to water.Footnote 78 Even if the counterclaim was ultimately dismissed,Footnote 79 the tribunal in Urbaser adopted a relatively cautious approach that contributes to the elaboration of a practice according to which informal instruments elaborated by intergovernmental organizations can be used to impose human rights obligations on foreign investors.Footnote 80
To be clear, the fact that few international actors have relied upon informal instruments to assess the conduct of foreign investors in investment arbitration evidences a very limited practice. In itself, this practice suggests that informal instruments do not constitute international legal norms. If there was a stronger consensus regarding the use of these informal instruments to impose human rights obligations on foreign investors, they would be more broadly applied by disputing parties, amicus curiae and tribunals. Such a practice must nevertheless be taken into consideration when empirically assessing the normative character of informal instruments elaborated by intergovernmental organizations to address human rights issues. While it is clear that attempts at fostering a practice of legality are only minority practice, some international actors have explicitly referred to these instruments in investment arbitration, thus denoting their role as social norms that can help to address the conduct of foreign investors.
4.2 Roadblocks to the emergence of a sense of obligation
In contrast to attempts at generating a sense of obligation for foreign investors to comply with informal instruments addressing human rights issues, other members of the community of practice have purposely sought to deny the existence of any obligations resulting from these initiatives. More specifically, foreign investors have responded to arguments from respondent states and non-disputing parties by stressing the instruments’ informal and voluntary character under international law. The absence of a practice of legality is also evidenced by the lack of engagement of several tribunals with respect to the normative character of the informal instruments that were cited by disputing parties.
It is quite unsurprising to notice that efforts to breathe in a sense of obligation into informal instruments have been met with stark opposition from foreign investors. For example, in Pac Rim Cayman LLC v. Republic of El Salvador, the claimant responded to an amicus curiae submission by strongly criticizing the authors’ use of informal instruments to support their arguments. The claimant provided an entire section of its response on the fact that several sources used in the brief do not reflect binding obligations under international law.Footnote 81 After referring to the reliance upon the resolution in which the Human Rights Council endorsed the UN Guiding Principles, Pac Rim Cayman LLC mentioned the following:
The principles expressed in these texts may indeed have the potential to eventually transition into binding law, either through incorporation into an international legal instrument or adoption into customary international law. However, amici here do not even attempt to demonstrate how or by what mechanism they could have “hardened” into legal obligations that would be binding on El Salvador right now, much less at the time of the action at issue in this case.Footnote 82
Ultimately, the claimant sought to stress the informal character of several sources mentioned in the brief to prevent their use as a source of obligation that could impose obligations on the foreign investor.
Similarly, the reliance upon the UN Guiding Principles and the OECD Guidelines by the respondent state in South American Silver was addressed by the claimant in a reply submitted to the tribunal. The claimant explicitly challenged the failure of the respondent state to establish that such instruments constitute ‘binding international law’.Footnote 83 Relying upon Article 38 of the Statute of the International Court of Justice, the claimant argued that these instruments ‘are non-binding, de lege ferenda instruments and lack the State practice and opinio juris elements that would transform them into embodiments of customary international law’.Footnote 84
When responding to the submission by the amicus curiae in Bear Creek, the claimant also vehemently opposed the allegations of the amicus curiae according to which it failed to engage in a positive relationship with the communities.Footnote 85 After referring to the UN Guiding Principles, the claimant implicitly denied the existence of a sense of obligation to this instrument by maintaining the following:
If the obligations and standards set forth in international and Peruvian law are insufficient to promote the Amici’s agenda, the present arbitration is not the appropriate forum to impose additional, new requirements on Bear Creek and fault the company retroactively for not complying with standards and requirements that did not exist at the relevant time.Footnote 86
Some foreign investors have also referred to initiatives elaborated by intergovernmental organizations in a way that emphasizes their voluntary character. In Gabriel Resources Ltd and Gabriel Resources (Jersey) Ltd v. Romania, the claimants mentioned that they had designed the mining project related to the investment dispute to comply with international practices and legislative requirements.Footnote 87 They further mentioned that they ‘committed to comply with voluntary initiatives over and above the applicable legal requirements, including the UN Global Compact, the OECD Guidelines for Multinational Enterprises [and] the IFC’s performance indicators for environmental and social protection’.Footnote 88 Even if their inclusion in documents submitted to a tribunal expands the practice surrounding these initiatives, explicitly recalling their voluntary character and their distinction from legal requirements is incompatible with the implementation of these initiatives that would follow a practice of legality. Interestingly, when providing comments on a non-disputing parties submission alleging that the claimants had violated one of the IFC Performance Standards, the claimants merely maintained that the non-disputing parties did not have the expertise to argue that this initiative formed part of their legal obligations.Footnote 89
The opposing views between the respondent state and the claimant in South American Silver were explicitly addressed by the tribunal. When determining the law applicable to the investment dispute, the tribunal took into consideration three issues articulated by the parties, including the relevance of human rights and Indigenous rights instruments. After emphasizing the importance of applying systemic interpretation with caution,Footnote 90 the tribunal considered that the respondent state failed to justify why it must apply ‘various rules that do not constitute customary law’ and how these rules should prevail over the provisions of the applicable investment agreement.Footnote 91
More fundamentally, except for the brief discussion provided by the tribunal in South American Silver, the level of disengagement demonstrated by other tribunals is also telling of the absence of a practice of legality. Even when disputing parties and amicus curiae have explicitly referred to informal instruments addressing human rights concerns, investment tribunals have almost never addressed their normative character. For example, in Copper Mesa, the tribunal addressed matters related to the conduct of the investor under the headings of ‘causation’, ‘contributory fault’, and ‘unclean hands’.Footnote 92 However, the analysis was conducted without referring to informal instruments elaborated by intergovernmental organizations. Similarly, the tribunal in Bear Creek only summarized the comments that were addressed by the respondent state regarding similar concerns, without seeking to determine if the instruments could be considered as a source of obligation.Footnote 93 In other words, the fact that several tribunals have not addressed the normative character of informal instruments constitutes an important roadblock to the emergence of a practice of legality.
In sum, in addition to the rare references to informal instruments elaborated by intergovernmental organizations in international investment arbitration, one can notice diverging approaches among the members of the community of practice. These instruments have been considered as a source of obligations for foreign investors to respect human rights by a limited number of respondent states and some amicus curiae submitting briefs to tribunals. Moreover, one tribunal relied upon informal instruments to justify the existence of human rights obligations for foreign investors. These developments have nevertheless met stark opposition from several foreign investors, which have stressed the non-binding and voluntary character of these instruments, as well as a general lack of engagement by the overwhelming majority of tribunals. It is also striking that members of the community of practice that have referred to informal instruments have sought to instrumentalize these instruments in a way that is consistent with their interests.
5. Conclusion
References in international investment law to informal instruments elaborated by intergovernmental organizations to address business and human rights issues instantiate a practice whose existence cannot be denied. Regardless of their informal character under international law, states and non-state actors rely upon these initiatives when crafting provisions of investment agreements and preparing various documents pertaining to investment disputes. However, the occurrence of these references is not sufficient to conclude that they effectively contribute to imposing human rights obligations on foreign investors. It is in this context that an interactional account calls for a closer examination of interactions underlying these instruments with a view to shedding light on the nature of the practice that has emerged. With a limited number of exceptions, international investment agreements and model treaties demonstrate a practice that is primarily characterized by calls to promote and encourage the consideration of initiatives without imposing any obligations on foreign investors to comply with them. With respect to investment arbitration, attempts by some actors to consider informal instruments as a source of obligations for foreign investors are generally counterbalanced by the opposition of powerful private actors and the reluctance of tribunals to explicitly address their normative character. Ultimately, a closer analysis illuminates an existing practice that nevertheless cannot be considered as generating a genuine sense of obligation. To be clear, an interactional account allows making sense of the references to these informal instruments in international investment law, but sheds light on a practice that cannot be considered as a general practice of legality.
From a normative perspective, the analysis presented above shows that there is a largely untapped potential for these initiatives to be included in international investment law and to address human rights violations by foreign investors. States, foreign investors, amicus curiae, and tribunals are all part of a community of practice that can influence the sense of obligation underlying instruments elaborated by intergovernmental organizations through their practice. According to an interactional account, the informal character of these instruments does not prevent their use to effectively impose human rights obligations on foreign investors. Deeper integration of these instruments by various actors in international investment law should thus be considered as an option to further address human rights violations.
