Investment and Human Rights in Armed Conflict: Charting an Elusive Intersection 9781509911660, 9781509911653, 9781509911639

Table of contents :
Table of Contents
Table of International Instruments
Table of Judgments and Decisions
Introduction
I. Focus of the Book
II. Structure of the Book
1. Extractive Sector Investment in Conflict Countries: The Situation in Afghanistan
I. Extractive Companies in Conflict Countries: An Issue of Human Rights Protection?
II. Practical Challenges in Operationalising Human Rights Protection When Extractive Companies Invest in Conflict Countries: The Situation in Afghanistan
III. Preliminary Conclusions
2. The Relevant Legal Framework: Investment Protection in Conflict Settings
I. Foreign Investment and the Need for Protection: International Investment Law and Armed Conflict
II. Relevant Standards of Investment Protection
III. Preliminary Conclusions
3. The Relevant Legal Framework of Human Rights Protection: ESC Rights and the Right to Water
I. Reasons for a Focus on the Right to Water
II. Legal Foundations of the Right to Water
III. States' Obligations to Respect, Protect and Fulfil
IV. Article 2(1) ICESCR: Progressive Realisation and Obligations of Immediate Effect
V. Availability, Accessibility, Acceptability and Quality
VI. Maximum Available Resources
VII. International Assistance and Cooperation as a Basis for Extraterritorial Obligations
VIII. On Limitations to ESC Rights
IX. Preliminary Conclusions
4. Human Rights and Investment: Analysing the Relationship
I. The Contours of a Troubled Relationship
II. Is a Balance Between 'Investors' Rights' and Human Rights Possible?
III. Preliminary Conclusions
5. Business and Human Rights: A Tool for Investment and Human Rights Protection in Armed Conflict?
I. A Critical Appraisal of the Business and Human Rights Framework
II. The Framework at the Intersection of International Human Rights Law and Investment Law in Armed Conflict
III. Preliminary Conclusions
Conclusion: Implications for Afghanistan
Bibliography
Index

Citation preview

INVESTMENT AND HUMAN RIGHTS IN ARMED CONFLICT This book analyses the way in which international human rights law (IHRL) and international investment law (IIL) are deployed – or fail to be deployed – in conflict countries within the context of natural resources extraction. It specifically analyses the way in which IIL protections impact on the parallel protection of economic, social and cultural rights (ESC rights) in the host state, especially the right to water. Arguing that current responses have been unsatisfactory, it critically considers the emergence of the ‘Protect, Respect and Remedy’ framework and the Guiding Principles for Business and Human Rights (jointly the Framework) as a possible analytical instrument. In so doing, it examines the strengths and weaknesses of attempts at ‘recalibrating’ IIL through the Framework, and then investigates the implications of this recalibration for the IHRL-IIL interplay in a host country involved in a protracted armed conflict: Afghanistan. Through the emblematic example of Afghanistan, the book presents a practical dimension to its legal analysis. It uniquely portrays the elusive intersection between these two bodies of international law within a host country where the armed conflict continues to rage and a full economic restructuring is taking place away from the public eye, not least through the deployment of IIL and the inaction – or merely partial consideration – of IHRL. The book will be of interest to academics, policy-makers and practitioners of international organisations involved in IHRL, IIL and/or deployed in contexts of armed conflict. Volume 23: Human Rights Law in Perspective

Human Rights Law in Perspective General Editor: Colin Harvey Professor of Human Rights Law School of Law Queen’s University Belfast The language of human rights figures prominently in legal and political debates at the national, regional and international levels. In the UK the Human Rights Act 1998 has generated considerable interest in the law of human rights. It will continue to provoke much debate in the legal community and the search for original insights and new materials will intensify. The aim of this series is to provide a forum for scholarly reflection on all aspects of the law of human rights. The series will encourage work which engages with the theoretical, comparative and international dimensions of human rights law. The primary aim is to publish over time books which offer an insight into human rights law in its contextual setting. The objective is to promote an understanding of the nature and impact of human rights law. The series is inclusive, in the sense that all perspectives in legal scholarship are welcome. It will incorporate the work of new and established scholars. Human Rights Law in Perspective is not confined to consideration of the UK. It will strive to reflect comparative, regional and international perspectives. Work which focuses on human rights law in other states will therefore be included in this series. The intention is to offer an inclusive intellectual home for significant scholarly contributions to human rights law. Recent titles in this series Discrimination, Equality and the Law Aileen McColgan Property and Human Rights in a Global Context Edited by Ting Xu and Jean Allain Governing (Through) Rights Bal Sokhi-Bulley Gender Equality in Law: Uncovering the Legacies of Czech State Socialism Barbara Havelkova For the complete list of titles in this series, see ‘Human Rights Law in Perspective’ link at www.bloomsburyprofessional.com/uk/series/ human-rights-law-in-perspective/

Investment and Human Rights in Armed Conflict Charting an Elusive Intersection

Daria Davitti

HART PUBLISHING Bloomsbury Publishing Plc Kemp House, Chawley Park, Cumnor Hill, Oxford, OX2 9PH, UK HART PUBLISHING, the Hart/Stag logo, BLOOMSBURY and the Diana logo are trademarks of Bloomsbury Publishing Plc First published in Great Britain 2019 Copyright © Daria Davitti, 2019 Daria Davitti has asserted her right under the Copyright, Designs and Patents Act 1988 to be identified as Author of this work. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or any information storage or retrieval system, without prior permission in writing from the publishers. While every care has been taken to ensure the accuracy of this work, no responsibility for loss or damage occasioned to any person acting or refraining from action as a result of any statement in it can be accepted by the authors, editors or publishers. All UK Government legislation and other public sector information used in the work is Crown Copyright ©. All House of Lords and House of Commons information used in the work is Parliamentary Copyright ©. This information is reused under the terms of the Open Government Licence v3.0 (http://www.nationalarchives.gov.uk/doc/ open-government-licence/version/3) except where otherwise stated. All Eur-lex material used in the work is © European Union, http://eur-lex.europa.eu/, 1998–2019. A catalogue record for this book is available from the British Library. Library of Congress Cataloging-in-Publication data Names: Davitti, Daria, author. Title: Investment and human rights in armed conflict : charting an elusive intersection / Daria Davitti. Description: Oxford, UK ; Chicago, Illinois : Hart Publishing, 2019.  |  Series: Human rights law in perspective  |  Based on author’s thesis (doctoral – University of Nottingham, 2014) issued under title: Ensuring human rights and investment in conflict areas : implications for Afghanistan.  |  Includes bibliographical references and index. Identifiers: LCCN 2019002261 (print)  |  LCCN 2019005071 (ebook)  |  ISBN 9781509911646 (EPub)  |  ISBN 9781509911660 (hardback) Subjects: LCSH: Investments, Foreign—Law and legislation.  |  Humanitarian law.  |  Mineral industries—Law and legislation.  |  International law and human rights.  |  Afghan War, 2001—Law and legislation.  |  Investments, Foreign—Law and legislation—Afghanistan.  |  BISAC: LAW / Civil Rights.  |  POLITICAL SCIENCE / Political Freedom & Security / Human Rights.  |  LAW / International. Classification: LCC K3830 (ebook)  |  LCC K3830 .D38 2019 (print)  |  DDC 346/.092—dc23 LC record available at https://lccn.loc.gov/2019002261 ISBN: HB: 978-1-50991-166-0 ePDF: 978-1-50991-163-9 ePub: 978-1-50991-164-6 Typeset by Compuscript Ltd, Shannon

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To Eamon, Iona and Ciara Had I the heavens’ embroidered cloths, Enwrought with golden and silver light, The blue and the dim and the dark cloths Of night and light and the half light, I would spread the cloths under your feet: But I, being poor, have only my dreams; I have spread my dreams under your feet; Tread softly because you tread on my dreams. (William Butler Yeats, ‘Aedh Wishes for the Cloths of Heaven’ 1899)

vi

Table of Contents Table of International Instruments��������������������������������������������������������������� ix Table of Judgments and Decisions��������������������������������������������������������������� xi Introduction��������������������������������������������������������������������������������������������������1 I. Focus of the Book����������������������������������������������������������������������������1 II. Structure of the Book��������������������������������������������������������������������13 1. Extractive Sector Investment in Conflict Countries: The Situation in Afghanistan���������������������������������������������������������������������������������������18 I. Extractive Companies in Conflict Countries: An Issue of Human Rights Protection?��������������������������������������������������������19 A. The Human Rights Impact of Extractive Companies in Conflict Countries���������������������������������������������������������������19 B. Conceptualising the Term ‘Protection’�������������������������������������22 II. Practical Challenges in Operationalising Human Rights Protection When Extractive Companies Invest in Conflict Countries: The Situation in Afghanistan����������������������������������������28 A. Corporate Abuse and ‘Soft-law’ Mechanisms���������������������������33 B. Prioritising the Rights to be Protected��������������������������������������35 C. A Complex Political Context���������������������������������������������������39 III. Preliminary Conclusions����������������������������������������������������������������44 2. The Relevant Legal Framework: Investment Protection in Conflict Settings��������������������������������������������������������������������������������45 I. Foreign Investment and the Need for Protection: International Investment Law and Armed Conflict�������������������������46 A. The Notion of Investment��������������������������������������������������������50 II. Relevant Standards of Investment Protection����������������������������������55 A. The Evolution of FET through the Doctrine of Legitimate Expectations������������������������������������������������������55 B. Full Protection and Security�����������������������������������������������������65 C. War Clauses����������������������������������������������������������������������������69 D. Protections Against Expropriation�������������������������������������������70 E. Most-favoured Nation Treatment���������������������������������������������84 III. Preliminary Conclusions����������������������������������������������������������������93

viii

Table of Contents

3. The Relevant Legal Framework of Human Rights Protection: ESC Rights and the Right to Water��������������������������������������������������������95 I. Reasons for a Focus on the Right to Water������������������������������������96 II. Legal Foundations of the Right to Water������������������������������������ 100 III. States’ Obligations to Respect, Protect and Fulfil������������������������ 111 IV. Article 2(1) ICESCR: Progressive Realisation and Obligations of Immediate Effect�������������������������������������������������������������������� 119 A. Elimination of Discrimination���������������������������������������������� 121 B. Obligation to Take Steps������������������������������������������������������ 122 C. Prohibition of Retrogressive Measures���������������������������������� 124 D. Minimum Core Obligations������������������������������������������������� 124 V. Availability, Accessibility, Acceptability and Quality�������������������� 127 VI. Maximum Available Resources��������������������������������������������������� 132 VII. International Assistance and Cooperation as a Basis for Extraterritorial Obligations�������������������������������������������������� 135 VIII. On Limitations to ESC Rights���������������������������������������������������� 140 IX. Preliminary Conclusions������������������������������������������������������������ 142 4. Human Rights and Investment: Analysing the Relationship������������������ 143 I. The Contours of a Troubled Relationship����������������������������������� 145 A. Of Conflicting Laws: How States’ Obligations in International Investment Agreements Affect States’ Human Rights Obligations��������������������������������������������������� 145 B. Of the Inherent Limitations of International Investment Law�������������������������������������������������������������������� 166 II. Is a Balance Between ‘Investors’ Rights’ and Human Rights Possible?������������������������������������������������������������������������������������ 176 III. Preliminary Conclusions������������������������������������������������������������ 184 5. Business and Human Rights: A Tool for Investment and Human Rights Protection in Armed Conflict?�������������������������������� 186 I. A Critical Appraisal of the Business and Human Rights Framework�������������������������������������������������������������������������������� 190 A. Third Pillar: Effective Remedial Action��������������������������������� 193 B. Second Pillar: The Corporate Responsibility to Respect Human Rights��������������������������������������������������������������������� 197 C. First Pillar: The State’s Duty to Protect Human Rights���������� 204 II. The Framework at the Intersection of International Human Rights Law and Investment Law in Armed Conflict�������� 216 III. Preliminary Conclusions������������������������������������������������������������ 221 Conclusion: Implications for Afghanistan��������������������������������������������������� 223 Bibliography���������������������������������������������������������������������������������������������� 233 Index��������������������������������������������������������������������������������������������������������� 255

Table of International Instruments Convention on the Settlement of Investment Disputes between States and Nationals of Other States, 18 March 1965, 575 UNTS 159 (1965)������������������������������������������������������������46, 49–54, 162 Geneva Convention Relative to the Treatment of Prisoners of War (Third Geneva Convention), 12 August 1949, entered into force 21 October 1950 (1950) 75 United Nations Treaty Series 973������������������� 100 North American Free Trade Agreement, Free Trade Commission, Notes of Interpretation of Certain Chapter 11 Provisions, 31 July 2001, at www.naftalaw.org����������������������������������������������������57, 151 Protocol Additional to the Geneva Conventions of 12 August 1949, and relating to the protection of victims of international armed conflict (Protocol I), 8 June 1977, entered into force 7 December 1978 (1979) 1125 United Nations Treaty Series 17512������������������������������������� 100 Protocol Additional to the Geneva Conventions of 12 August 1949, and relating to the protection of victims of non-international armed conflict (Protocol II), 8 June 1977, entered into force 7 December 1978, (1979) 1125 United Nations Treaty Series 17513������������������������������������� 101 UN General Assembly, Rome Statute of the International Criminal Court (last amended 2010), 17 July 1998, entered into force 1 July 2002, 2187 United Nations Treaty Series 38544������������������������������101 UN General Assembly, Universal Declaration of Human Rights, 10 December 1948, 217 A (III)��������������������������������������������������������������� 104 Vienna Convention on the Law of Treaties, 23 May 1969, entered into force 27 January 1980, 1155 United Nations Treaty Series 331����������� 13–14, 178–79, 182, 185, 223

x

Table of Judgments and Decisions International Courts, Commissions and Tribunals Human Rights Committee HRC, Lopez Burgos v Uruguay, Communication No 52/1979 (29 July 1981) UN Doc CCPR/C/OP/1��������������������������������������������������� 206 ICSID and Other International Investment Tribunals ADF Group Inc v United States (NAFTA Arbitration), ICSID Case No ARB (AF)/00/1, Final Award (9 January 2003)������ 57, 61, 86 International Thunderbird Gaming Corporation v Mexico, UNCITRAL (NAFTA), Award (26 January 2006)��������������������������������������������������������61 AMCO Asia Corporation v Republic of Indonesia, ICSID Case No ARB/81/1, Award (20 November 1984) 1 ICSID Reports 413 (1993)����������77 American International Group Inc et al v Islamic Republic of Iran, et al, 4 Iran-US Claims Tribunal Reports 96 (1981)�������������������������������������������77 American Manufacturing & Trading Inc (AMT) v Republic of Zaire, ICSID Case No ARB/93/1, Award, (21 February 1997), 5 ICSID Reports 11��������������������������������������������������������������������������� 66, 70 Asian Agricultural Products Ltd (AAPL) v Republic of Sri Lanka, ICSID Case No ARB/87/3, Award (21 June 1990), 4 ICSID Report 246 (1990)����������������������������������������������������������������������������� 66, 69 AWG Group Ltd v The Argentine Republic (UNCITRAL), Decision on Jurisdiction (3 August 2006)���������������������������������������������������������������86 Azurix v Argentina, ICSID Case No ARB/01/02, Award (14 July 2006)������������������������������������������������������������������������58–59, 66–68, 73, 75, 152 Bank Mellat v HM Treasury [2013] UKSC 39����������������������������������������180–81 Bear Creek Mining Corporation v Republic of Peru (30 November 2017) Award, ICSID Case No ARB/14/2������������153, 189, 225 Benvenuti & Bonfant v Congo, ICSID Case No ARB/77/2, Award (8 August 1980) 1 ICSID Reports 330, 357 (1993)�������������������������������������77 Biloune and Marine Drive Complex Ltd v Ghana Investments Centre and the Government of Ghana, UNCITRAL Award on Jurisdiction and Liability (27 October 1989) 95 International Legal Materials 183 (1989)����������������������������������������������������������������������������������������� 72–73

xii Table of Judgments and Decisions Biwater Gauff (Tanzania) Limited v Tanzania, ICSID Case No ARB/05/22, Procedural Order No 5 (2 February 2007)���������������������������� 175 Biwater Gauff (Tanzania) Ltd v Tanzania, ICSID Case No ARB/05/22, Award (24 July 2008)��������������������������������������������������������� 53, 62, 66, 68, 75 Burlington Resources Inc v Republic of Ecuador (7 February 2017) ICISD Case No ARB/08/5, Decision on Ecuador’s Counterclaims���������� 144 Camuzzi International SA v Argentina, ICSID Case No ARB/03/2, Decision on Objections to Jurisdiction (11 May 2005)������������������������������86 CCL v Republic of Kazakhstan, Stockholm Chamber of Commerce Case No 122/2001, Final Award (1 January 2004) 1 Stockholm Investment Arbitration Report 123 (2005)������������������������������������������������73 Chevron Corporation and Texaco Petroleum Corporation v Republic of Ecuador, UNCITRAL PCA Case No 2009-23 (30 August 2018) Second Partial Award on Track II���������������������������������������������������������� 115 CME v Czech Republic, (UNCITRAL), Partial Award (13 September 2001)��������������������������������������������������������������������� 60, 67, 72 CMS Gas Transmission Company v Argentina, Award (12 May 2005) 44 International Legal Materials 1205 (2005)������������������������������� 59, 61, 69, 72, 152 Compania de Aguas del Aconquija SA and Vivendi Universal v Argentine Republic, ICSID Case No ARB/97/3, Award (20 August 2007)������������ 58, 73 Compania de Desarrollo de Santa Elena SA v Republic of Costa Rica, ICSID Case No ARB/96/1, Award (17 February 2000)������������������������������73 Continental Casualty Company v The Argentine Republic, ICSID Case No ARB/03/9, Award, (5 September 2008)������������������ 61, 63, 78 Copper Mesa Mining Corporation v Republic of Ecuador (15 March 2016) Award, PCA No 2012-2����������������������������������������189, 225 CSOB v The Slovak Republic, ICSID Case No ARB/997/4, Decision on Jurisdiction (24 March 1999)������������������������������������������ 50, 53 Daimler Financial Services AG v Argentine Republic, ICSID Case No ARB/05/1, Award (22 August 2012)���������������������� 87, 90–91 Duke Energy Electroquil Partners v Republic of Ecuador, ICSID Case No ARB/04/19, Award (18 August 2008)�������������������������������61 Eastern Sugar BV v The Czech Republic, Stockholm Chamber of Commerce Case No 088/2004, Partial Award (27 March 2007)�������������67 EDF (Services) Limited v Romania, ICSID Case No ARB/05/13, Award Merits (8 October 2009)��������������������������������������������������������� 63–64 Elettronica Sicula SpA (ELSI) (United States of America v Italy), International Court of Justice Reports, Judgment of 20 July 1989������ 56, 66 Eli Lilly and Company v The Government of Canada, ICSID Case No UNCT/14/2 (16 March 2017) Final Award�������� 79, 117, 161 Emilio Agustín Maffezini v Kingdom of Spain, ICSID Case No ARB/97/7, ICSID Case No ARB/97/7, Award (13 November 2000)����������������������������60

Table of Judgments and Decisions  xiii Emilio Augustín Maffezini v Kingdom of Spain, ICSID Case No ARB/97/7, Decision on Jurisdiction (25 January 2000) 5 ICSID Reports 396 (2002)����������������������������������������������������������������������������������85 Enron Corporation and Ponderosa Assets, LP v Argentine Republic, ICSID Case No ARB/01/3, Award (22 May 2007)������������������������������� 58, 61 Enron Corporation and Ponderosa Assets, LP v Argentine Republic, ICSID Case No ARB/01/3, Decision on Annulment (31 July 2010)������������59 Fedax v Venezuela, ICSID Case No ARB/96/3, Award on Jurisdiction (11 July 1997)����������������������������������������������������������������������������������� 50, 52 Feldman v Mexico, ICSID Case No ARB(AF)/99/1, Award (16 December 2002)�������������������������������������������������������������������������� 61, 78 GAMI v Mexico, Award (15 November 2004) 44 International Law Materials (2005)�������������������������������������������������������������������������������������61 Gas Natural SDG v Argentina, ICSID Case No ARB/03/10, Decision on Preliminary Questions on Jurisdiction (17 June 2005)�����������86 Generation Ukraine Inc v Ukraine, ICSID Case No ARB/00/9, Award (16 September 2003)�������������������������������������������������������������������������� 53, 72 Genin v Estonia, Award, 25 June 2001 (2002) 17 ICSID Review 395���������������57 Glamis Gold Ltd v United States of America, UNCITRAL, Award, NAFTA Arbitration Tribunal 8 June 2009, at http://italaw.com/ sites/default/files/case-documents/ita0378.pdf����������������������������������57, 143, 146–54, 157, 193 Hochtief AG v The Argentine Republic, ICSID Case No ARB/07/31, Decision on Jurisdiction (24 October 2011)���������������������������������� 87, 89–90 ICS Inspection and Control Services Limited (United Kingdom) v The Argentine Republic, UNCITRAL, PCA, Case No 2010-9, Award on Jurisdiction (10 February 2012)������������������������������������������ 87, 90 Impregilo SpA v Argentine Republic, ICSID Case No ARB/07/17, Award (21 June 2011)������������������������������������������������������������������� 87–90, 92 Iurii Bogdanov, Agurdino-Invest Ltd and Agurdino-Chimia JSC v Republic of Moldova, Stockholm Chamber of Commerce, Award (22 September 2005)���������������������������������������������������������������������72 Jan de Nul NV and Dredging International NV v Arab Republic of Egypt, ICSID Case No ABR/04/13, Decision on Jurisdiction (16 June 2006)��������52 Jan de Nul NV and Dredging International NV v Arab Republic of Egypt, ICSID Case No ARB/04/13 Award (6 November 2008)�����������������������������66 Joy Mining Machinery Limited v The Arab Republic of Egypt, ICSID Case No ARB/03/11, Award on Jurisdiction (6 August 2004) 19 ICSID Review 486 (2004)��������������������������������������������������������������������52 LFH Neer and Pauline Neer (USA) v United Mexican States (1926) 4 United Nations Reports of International Arbitral Awards 60�����������������56 LG&E Energy Corp., LG&E Capital Corp, LG&E International Inc v The Argentine Republic, ICSID Case No ARN/02/1, Decision on Liability (3 October 2006)����������������������������������������� 61, 73, 75

xiv Table of Judgments and Decisions LG&E Energy v Argentina ICSID Case No ARB/02/1, Award (25 July 2007)������48 Loewen Group Inc v United States of America, Award (26 June 2003) 42 International Legal Materials 811 (2003)������������������������������������������� 152 Malaysian Historical Salvors Sdn Bhd (MHS) v Malaysia, ICSID Case No ARB/05/10, Award on Jurisdiction (17 May 2007)������������52 Malaysian Historical Salvors Sdn Bhd (MHS) v Malaysia, ICSID Case No ARB/05/10, Decision on the Application for Annulment (16 April 2009)����������������������������������������������������������������53 Malaysian Historical Salvors Sdn Bhd (MHS) v Malaysia, ICSID Case No ARB/05/10, Dissenting Opinion of Judge Mohamed Shahabuddeen (16 April 2009)������������������������������������������������53 MCI Power Group LC and New Turbine, Inc v Ecuador, ICSID Case No ARB/03/6, Award (31 July 2007)��������������������������������������59 Metalclad Corporation v Mexico (NAFTA Arbitration), ICSID Case No ARB(AF)/97/1, Award (30 August 2000)������������������� 55–56, 60, 72, 150 Middle East Cement Shipping and Handling Co SA v Arab Republic of Egypt, ICSID Case No ARB/99/6, Award (12 April 2002)���������������������73 Mondev International Ltd v United States of America, ICSID Case No ARB/(AF)/99/2, Award (11 October 2002)���������� 57, 61, 152 MTD Equity Sdn Bhd and MTD Chile SA v Republic of Chile, ICSID Case No ARB(AF)/00/1, Award (9 January 2003)�������������� 61, 86, 155 National Grid plc v The Argentine Republic (UNCITRAL), Decision on Jurisdiction (20 June 2006)���������������������������������������������������86 Noble Ventures Inc v Romania, ICSID Case No ARB/01/11, Award (5 October 2005) International Investment Claims 179 (2005)������������������66 Occidental Exploration and Production Company v Ecuador, London Court of International Arbitration Case No UN3467, Award (1 July 2004) 12 ICSID Reports 59������������������������������59, 61, 65, 152 Olguin v Republic of Paraguay, ICSID Case No ARB/98/5, Award (26 July 2001)�������������������������������������������������������������������������������72 Pantechniki SA Contractors & Engineers v The Republic of Albania, ICSID Case No ARB/07/21, Award (30 July 2009)������������������������������������66 Parkerings-Compagniet AS v Lithuania, ICSID Case No ARB/05/8, Final Award (11 September 2007)������������������������������������������������� 62, 65–66 Philip Morris Asia Limited v The Commonwealth of Australia (17 December 2015) Final Award on Jurisdiction and Admissibility, PCA Case No 2012-12 paras 106 and 389�����������������������������������������79, 161 Philip Morris Brands Sàrl, Philip Morris Products SA and Abal Hermanos SA v Oriental Republic of Uruguay, ICSID Case No ARB/10/7, Award (8 July 2016)��������������������������������79, 157 Philip Morris Brands Sàrl, Philip Morris Products SA and Abal Hermanos SA v Oriental Republic of Uruguay, ICSID Case No ARB/10/7, Uruguay’s Reply on Jurisdiction (20 April 2012)����������������������������������������������������������������������������������������87

Table of Judgments and Decisions  xv Philippe Gruslin v Malaysia, Award, ICSID Case No ARB/99/3 (27 November 2000)��������������������������������������������������������������������������������53 Phillips Petrolem Co v Iran, Iran-US Claims Tribunal, 29 June 1989, 21 Iran-US Claims Tribunal Reports 79���������������������������������������������������73 Phoenix Action Ltd v Czech Republic, ICSID Case No ARB/06/5, Award (15 April 2009)����������������������������������������������������������������������� 52–53 Piero Foresti, Laura de Carli and Others v The Republic of South Africa, Award (4 August 2010) ICSID Case No ARB(AF)/07/1��������������������������� 146 Plama Consortium Ltd v Bulgaria, ICSID Case No ARB/03/24, Decision on Jurisdiction (8 February 2005)���������������������������������������� 66, 86 Pope & Talbot Inc v Government of Canada, Merits Phase 2 (10 April 2001) 13 World Trade and Arbitration Materials 61������������ 56–57, 72, 78 PSEG Global, Inc, The North American Coal Corporation, and Konya Ingin Electrik Uretim ve Ticaret Limited Sirketi v Turkey, ICSID Case No ARB/02/5, Award (19 January 2007)��������������������������������65 Renta 4 SVSA et al v The Russian Federation, Arbitration V (024/2007) Arbitration Institute of the Stockholm Chamber of Commerce, Award on Preliminary Objections (20 March 2009)�����������87 RFCC v The Kingdom of Morocco, ICSID Case No ARB/00/6, Award (22 December 2003)���������������������������������������������������������������������73 Ronald S Lauder v The Czech Republic, UNCITRAL Case No 0709, Final Award (3 September 2001) 9 ICSID Report 66 (2001)�����������������������67 RSM Prod Corp v Grenada, ICSID Case No ARB/05/14, Award (13 March 2009)���������������������������������������������������������������������������52 Rumeli Telekom AS and Telsim Mobil Telekomunikasyon Hizmetleri AS v Republic of Kazakhstan, ICSID Case No ARB/05/16, Award (28 July 2008)����������������������������������������������������������������������������������� 66–67 Salini Costruttori SpA and Italstrade SpA v Kingdom of Morocco, ICSID Case No ARB/00/4, Decision on Jurisdiction (23 July 2001)������������������������������������������������������������������������������ 51–53, 86 Saluka Investment BV (The Netherlands) v The Czech Republic, Partial Award (17 March 2006)��������������������������������������������������������� 59–60, 66–67, 155 SD Meyers Inc v Canada, UNCITRAL (NAFTA), Partial Award (13 November 2000) 40 International Law Materials 1408������������������ 56, 72 SD Meyers v Canada, Second Partial Award (21 October 2002)���������������������61 Sempra Energy v The Argentine Republic, ICSID Case No ARB/02/16, Award (28 September 2007)�������������������������������������������������������� 55, 58, 158 Sempra Energy v The Argentine Republic, ICSID Case No ARB/02/16, Decision on Annulment (29 June 2010)����������������������������������������������������59 Siemens AG v The Argentine Republic, ICSID Case No ARB/02/8, Award (6 February 2007)���������������������������������������������������������59, 66–68, 73 Starrett Housing Corp v Iran, Iran-US Claims Tribunal, 19 December 1983, 4 Iran-US Claims Tribunal Reports 122���������������� 72–73

xvi Table of Judgments and Decisions Suez, Sociedad General de Aguas de Barcelona SA, and Vivendi Universal SA v The Argentine Republic, consolidated with AWG Group v The Argentine Republic, Decision on Liability (30 July 2010) ICSID Case No ARB/03/19�����������������������������������������64–65, 143, 146, 148, 153–57, 162, 175, 182 Tecnicas Medioambientales TECMED SA v Mexico, ICSID Case No ARB (AF)/00/2 (29 May 2003)����������������������������������58, 151 Teinver SA, Transportes de Cercanías SA and Autobuses Urbanos del Sur SA v The Argentine Republic, ICSID Case No ARB/09/1, Decision on Jurisdiction (21 December 2012)������������������������������������� 87, 91 Telenor Mobile Communications AS v Hungary, ICSID Case No ARB/04/15, Award (13 September 2006)�������������������� 72, 86 Toto Costruzioni Generali SpA v Republic of Lebanon, ICSID Case No ARB/07/12, Decision on Jurisdiction (11 September 2009)��������������������������������������������������������������������������������52 UP and CD Holding Internationale v Hungary (9 October 2018) Award ICSID Case No ARB/13/35��������������������������������������������������������� 184 Urbaser SA and Consorcio de Aguas Bilbao Bizkaia, Bilbao Biskaia Ur Partzuergoa v Argentine Republic (8 December 2016) Award, ICSID Case No ARB/07/26���������������������������������������������� 70, 107, 143, 146, 148, 160–66, 188 Vattenfall AB and Others v Federal Republic of Germany (31 August 2018) Decision on the Achmea issue, ICSID Case No ARB/12/12������������������������������������������������������������������� 161 Vladimir Berschader and Moise Berschader v Russia, SCC Case No 080/2004, BLEU-USSR BIT, Sjovall P, Lebedev & Weiler (21 April 2006)�����������������������������������������������������������������������������91 Waste Management, Inc v United Mexican States (Number 2), ICSID Case No ARB(AF)/00/3, Final Award (30 April 2004)������� 60–61, 151 Wena Hotels Ltd v Arab Republic of Egypt, ICSIS Case No ARB/98/4, Award (8 December 2000)������������������������������������������������������������ 65–66, 73 International Court of Justice and Permanent Court of International Justice Ahmadou Sadio Diallo (Republic of Guinea v Democratic Republic of the Congo) Merits, Judgment, ICJ Reports 2010, 369��������������������������14 Application of the Convention on the Prevention and Punishment of the Crime of Genocide (Bosnia and Herzegovina v Serbia and Montenegro), Judgment, ICJ Reports 2007, 43�������������������������������� 209 Case Concerning Certain German Interests in Polish Upper Silesia (Merits), PCIJ, Judgment (25 May 1926) PCIJ Rep Series A No 7����������������������������82 Case concerning the Factory at Chorzów (Indemnities) Germany v Poland, PCIJ Rep Series A No 12, Order on Interim Protection (21 November 1927)��������������������������������������������������������������������������������79

Table of Judgments and Decisions  xvii Corfu Channel Case (United Kingdom v Albania), ICJ Decision of 9 April 1949 [1949] ICJ Reports 4����������������������������������������������208, 210 Legal Consequences for States of the Continued Presence of South Africa in Namibia (South West Africa) notwithstanding Security Council Resolution 276 (1970), Advisory Opinion, [1971] ICJ Rep 16��������������������������������������������������������������������������������� 178 Oil Platforms (Islamic Republic of Iran v United States of America) Judgment, [2003] ICJ Rep 73����������������������������������������������������������������� 178 Trail Smelter Arbitral Decision (United States v Canada) (1941) 35 American Journal of International Law 684, reprinted in Bratspies & Miller���������������������������������������������������������������������208, 210 Inter-American Commission on Human Rights/Inter-American Court of Human Rights Inter-American Commission on Human Rights, Annual Report 1979–1980, OEA/Ser.L/V/II.50, doc 13 rev 1, at 2 (1980)������������������������������������������� 112 Inter-American Court of Human Rights, Caso Villagrán Morales y Otros (Caso de los “Niños de la Calle”), 19 November1999 (Ser C) No 63��������������������������������������������������������������������������������������� 112 Velasquez Rodriguez v Honduras, Series C: Decisions and Judgments, Case No 04, Inter-American Court of Human Rights 29 July 1988������������������������������������������������������������������� 209 Iran-US Claims Tribunal The United States of America v The Islamic Republic of Iran, Case No B36 (3 December 1996) 32 Iran-US Claims Tribunal Reports 162 (1996)�����������������������������������������������������������������������������������������������47 Tippetts, Abbett, McCarthy, Stratton v TAMS-AFFA, Consulting Engineers of Iran, Iran-US Claims Tribunal (22 June 1984) 6 Iran-US Claims Tribunal Reports 219��������������������������������������������� 72–73 Judgments of National Courts South Africa City of Johannesburg and Others v Mazibuko and Others (489/08) [2009] ZASCA 20 (25 March 2009)�������������������������������������������������128, 130 Government of the Republic of South Africa and Others v Grootboom and Others, (2000) 11 Butterworths Constitutional Law Reports 1169 (CC), 1188�����������������������������������������������������������������������������125, 129 Lindiwe Mazibuko and Others v The City of Johannesburg and Others, 30 April 2008 ZAGPHC 106 (HC)��������������������������������������������������������� 128

xviii Table of Judgments and Decisions Lindiwe Mazibuko and Others v City of Johannesburg and Others, Case CCT 39/09 (2009) ZAAC 28 (Constitutional Court of South Africa)������������������������������������������������������������������������������������ 113 Minister of Health v Treatment Action Campaign (2002) 10 Butterworths Constitutional Law Reports 1033 (CC), 1045������������������� 125 United States Kiobel v Royal Dutch Petroleum (17 April 2013) Supreme Court of the United States 133 Supreme Court 1659���������������������������������������� 194 Jesner v Arab Bank Plc (24 April 2018) 138 Supreme Court of the United States 1386���������������������������������������������������������������������� 194

Introduction I.  FOCUS OF THE BOOK

I

n this book I focus on the way in which international investment law (IIL) and international human rights law (IHRL) are deployed, or not, in conflict countries within the context of natural resources extraction. More specifically, I analyse the way in which IIL protections impact on the parallel protection of economic, social and cultural rights (ESC rights) in the host state, with a special emphasis on the right to water. In doing so, I outline the specificities and inherent shortcomings of both bodies of international law,1 examining the way in which IIL insulated foreign investment from democratic processes and redistributive claims,2 whilst the right to water foreclosed more radical claims against the privatisation and commodification of water.3 After examining the way in which existing tensions between these two bodies of international law have been unsatisfactorily approached so far, I consider the emergence of the ‘Protect, Respect and Remedy’ framework and the Guiding Principles for Business and Human Rights (jointly the Framework) as an alternative analytical instrument.4

1 See in particular ch 4. Throughout this book I adopt Tzouvala’s definition of neoliberalism ‘as an intellectual and political project that arose as a reaction to a crisis of nineteenth-century classical liberalism and the rise of the redistributive state. It rests on ideas of generalized competition and state intervention in the construction, guarantee and expansion of competitive relations, including within the structure and functions of the state itself’. N Tzouvala, ‘The Academic Debate About Mega-Regionals and International Lawyers: Legalism as Critique?’ (2018) 6 London Review of International Law 189, 191. 2 Q Slobodian, Globalists: The End of Empire and the Birth of Neoliberalism (Cambridge MA, Harvard University Press, 2018) 6: ‘If we place too much emphasis on the category of market fundamentalism, we will fail to notice that the real focus of neoliberal proposals is not on the market per se but on redesigning states, laws, and other institutions to protect the market’ (emphasis added). At 7, Slobodian posits that the neoliberal idea is centred not so much on the withdrawal or shrinking of the state, but on the concept that markets ‘are products of the political construction of institutions to encase them’ (emphasis added). A clear example of this ‘encasing’ can be seen in the emergence of IIL, and in its consolidation and expansion through investor-state arbitration (ISDS), which crystallised the rights of foreign investors: see Slobodian’s ch 4 ‘A World of Rights’. 3 C Clark, ‘Of What Use is a Deradicalized Human Right to Water?’ (2017) 17 Human Rights Law Review 231, 241. See also J Wills, Contesting World Order: Socioeconomic Rights and Global Justice Movements (Cambridge, Cambridge University Press, 2017) especially ch 5 ‘A Commodity or a Right? Evoking the Human Rights to Water to Challenge Neo-liberal Water Governance’. See further, K Bakker, ‘The “Common” versus the ‘Commodity”: Alter-Globalization, AntiPrivatization and the Human Right to Water in the Global South’ (2007) 39 Antipode 430, 432; and B Morgan, ‘The Regulatory Face of the Human Right to Water’ (2004) 15 Journal of Water Law 179, 180. 4 Throughout this book the term Framework is used to refer both to the Protect, Respect and Remedy Framework endorsed by the UN Human Rights Council in 2008 (individually referred to

2  Introduction I examine the claim, advanced by some scholars, that the Framework could create opportunities for a different articulation of the relationship between IIL and IHRL.5 In so doing, I investigate whether attempts to ‘recalibrate’ IIL or the Framework itself6 could be successful in preventing corporate abuse, especially in relation to the right to water in the conflict context of Afghanistan. Through the emblematic example of Afghanistan I seek to examine the elusive intersection between these two bodies of international law, which, it has been claimed, have so much in common,7 yet remain so far apart. Afghanistan is a host country where the armed conflict continues to rage and a full economic restructuring continues to take place away from the public eye, not least through the deployment of investment-friendly reforms and the apparent inaction – or willed agnosticism8 – of IHRL. As such, Afghanistan is perfectly placed to represent a worse-case scenario in terms of both protection of human rights and of so-called investors’ rights.9

as the UN Framework) and the Guiding Principles for the operationalisation of the UN Framework adopted in 2011 (individually referred to as the Guiding Principles or UNGPs). 5 S Deva, ‘The Zero Draft of the Proposed Business and Human Rights Treaty, Part II: On the Right Track, but Not Ready Yet’ at www.business-humanrights.org/en/the-zero-draft-of-theproposed-business-and-human-rights-treaty-part-ii-on-the-right-track-but-not-ready-yet, where it is suggested that provisions under Arts 13(6), 13(7) and 14 of the Zero Draft of the proposed business and human rights treaty are first steps, albeit insufficient ones, towards ‘humanising international investment agreements (IIAs)’. As further discussed in chs 4 and 5, this idea of ‘humanising’ international investment law leads to a conceptualisation of market-friendly human rights which is not only undesirable, but also ineffective in terms of addressing the way in which IIAs adversely impact the rights of a host country’s population. On ‘humanising’ IIAs, see also S Deva, ‘Managing States’ Fatal Attraction to International Investment Agreements’ (13 August 2018) at http:// investmentpolicyhub.unctad.org/Blog/Index/75. 6 Ruggie himself referred to a need to carefully calibrate ‘the interplay between systems of legal compliance and the broader social dynamics that can contribute to positive change’. JG Ruggie, ‘Business and Human Rights: The Evolving International Agenda’ (2007) 101 American Journal of International Law 822, 839–40. In ch 4 I question whether any recalibration is at all possible and/or desirable. 7 See eg Eric De Brabandere, ‘Human Rights and International Investment Law’, Grotius Centre Working Paper 2018/75-HRL (April 2018), at https://papers.ssrn.com/sol3/papers.cfm?abstract_ id=3149387, also forthcoming in M Krajewski and R Hoffmann (ed), Research Handbook on Foreign Direct Investment (Cheltenham, Edward Elgar, 2018). See also Y Radi, ‘The “Human Nature” of International Investment Law’ (2013) 1 Transnational Dispute Management at www. transnational-dispute-management.com/article.asp?key=1928. 8 J Whyte, ‘Human Rights and the Collateral Damage of Neoliberalism’ (2017) 20 Theory & Event 137, where at 137 (citing Asad) Whyte argues that economic restructuring and privatisation may have more far-reaching effects than armed intervention, ‘yet the ensuing devastation cannot be viewed as an abuse of human rights’. See also T Asad, ‘What Human Rights Do? An Anthropological Enquiry’ (2000) 4 Theory & Event 1. See further KM Son, ‘The Making of the Neoliberal Subject: Response to Whyte’ (2018) Political Theory at http://journals.sagepub.com/doi/ full/10.1177/0090591718774572. 9 As further discussed in ch 4, it is preferable to understand investment standards as granting protection to a specific foreign investment, rather than creating investors’ rights. This has implications in terms of how we conceptualise the nature and scope of the protection granted, vis-à-vis competing state’s obligations under human rights instruments.

Focus of the Book  3 My aim, in part, is to highlight some of the underlying dynamics of the Afghan restructuring, so that they can be openly analysed and, where appropriate, challenged. In larger part, the aim is to advance two claims, reflecting the outcomes of this research project. The first claim (mirroring the analysis in chapters one to four) is that existing research and energy would be better directed into redefining alternative purposes for the IIL and IHRL projects. In particular, in my view, research and energy need to be channelled into understanding and acknowledging the inherent shortcomings of these two bodies of international law, in order to avoid proposals for reform that maintain and entrench the status quo and the structural inequalities that underpin it.10 Much of the existing literature on IIL and IHRL tends to focus, for instance, on interpretative strategies aimed at overcoming (mainly via ‘harmonisation’ and ‘systemic integration’) the fragmentation of international law,11 of which the tensions between IIL and IHRL are often seen as a clear example. Various commentators have offered suggestions on how international investment tribunals could ‘balance’ human rights against so-called investors’ rights. As discussed in chapter four, however, such ‘balancing’ ultimately serves the self-preserving purposes of a legal system which is currently under intense public scrutiny, and in much need of gaining legitimacy, not least by accommodating certain (mainly innocuous) human rights considerations. This focus on balancing largely ignores, however, that IIL, with investment treaty arbitration at its core, is ‘part of a historically specific complex of ideas about government and democracy held by influential elites today that has enormous consequences for the distribution of material values among and between societies’.12 Similarly, it also ignores the limitations of articulating justice claims in human rights terms, since ‘fram[ing] questions of justice in the language of human rights implies certain assumptions about what constitutes injustice – and how to vanquish it’.13 Thus, within the current debate

10 An example of such proposals is the debate by Working Group III at UNCITRAL in Vienna on the possible reform of investor-state dispute settlement (ISDS). See available recordings of all sessions at www.uncitral.org/uncitral/audio/meetings.jsp. For an analysis of the proposed reform, see A Roberts, ‘UNCITRAL and ISDS Reform: Not Business as Usual’ EJILTalk! (11 December 2017) at www.ejiltalk.org/uncitral-and-isds-reform-not-business-as-usual/. 11 See eg PM Dupuy, ‘Unification Rather Than Fragmentation of International Law? The Case of International Investment Law and Human Rights Law’ in PM Dupuy et al (eds), Human Rights in International Investment Law and Arbitration (Oxford, Oxford University Press, 2009). See also V Kube and EU Petersmann, ‘Human Rights Law in International Investment Arbitration’ (2016) 11 Asian Journal of WTO and International Health and Law Policy 65, where it is conveniently claimed that ‘arbitral tribunals are more open towards human rights as due process rights and as principles of procedural fairness and balancing than towards integrating human rights as an authoritative legal regime consisting of legally enforceable entitlements. The only exception to this general trend remains the right to property’. See further A Peters, ‘The Refinement of International Law: From Fragmentation to Regime Interaction and Politicization’ (2017) 15 I-Con 671. 12 M Koskenniemi, ‘It’s not the Cases, It’s the System’ (2017) 18 Journal of World Investment and Trade 343, 347. 13 Whyte (n 8) 138.

4  Introduction on IIL and IHRL the purpose and scope of these two legal projects are not, in and of themselves, challenged. As a result, and as argued by Lang within the context of the ‘trade and’ debate, this approach precludes any discussion on what the specific projects of IIL and IHRL law could be, whether and how they could change and pursue different objectives.14 The second claim I advance (mirroring the analysis in chapter five) is that the current over-reliance on the Framework for business and human rights when pursuing ways to reconcile IIL and IHRL is largely misplaced, especially when it comes to conflict contexts. More specifically, I contend that the inherent limitations of ESC rights (discussed in chapter three) are exacerbated by the astigmatism of the Framework15 which, with its non-recognition of home states’ obligation to regulate the extraterritorial activities of companies domiciled in their territory and/or under their jurisdiction, missed the opportunity to add value to the IIL–IHRL debate in two regrettable ways. First, as the predominant discourse on business and human rights, the Framework could have been an initial springboard for further action: given the way it was accepted by most business stakeholders, efforts could have been made to overcome the legal gaps which were left unaddressed by the UNGP. Despite claims that the UNGP only marked ‘the end of the beginning’, attempts to refine or recalibrate the Framework are often met by significant resistance from its main proponents, including the former United Nations (UN) Special Representative of the ­Secretary-General on the issue of human rights and transnational corporations and other business enterprises (SRSG) himself.16 As further discussed in ­chapter  five, the shortcomings already identified at the time of the adoption of the UNGP in 2011 have transformed what was initially welcomed by many as a tool for human rights protection into a management tool,17 which 14 A Lang, World Trade after Neoliberalism: Reimagining the Global Economic Order (Oxford, Oxford University Press, 2011) 61. See also A Lang, ‘Re-thinking Trade and Human Rights’ (2007) 15 Tulane Journal of International and Comparative Law 335, 339. 15 D Davitti, ‘Article 4 UDHR and The Prohibition against Slavery: A Critical Look at Contemporary Slavery in Company Operations and Supply Chains’ in Humberto Cantú Rivera, The Universal Declaration of Human Rights: A Commentary (Leiden, Brill/Nijhoff, forthcoming 2019). 16 See eg J Bonnnitcha and R McCorquodale, ‘The Concept of “Due Diligence” in the UN Guiding Principles on Business and Human Rights’ (2017) 28 European Journal of International Law 899, 900–01; the response in JG Ruggie and JF Sherman, ‘The Concept of “Due Diligence” in the UN Guiding Principles on Business and Human Rights: A Reply to Jonathan Bonnitcha and Robert McCorquodale’ (2017) 28 European Journal of International Law 921; and the rejoinder in J Bonnitcha and R McCorquodale, ‘The Concept of “Due Diligence” in the UN Guiding Principles on Business and Human Rights: A Rejoinder to John Gerard Ruggie and John F Sherman, III’ (2017) 28 European Journal of International Law 929. 17 See eg Principles for Responsible Investment Initiative (PRI), ‘Human Rights in the ­Extractive Industry: Why Engage, Who to Engage, How to Engage’ (July 2015) at www.unpri.org/ download?ac=1655: in this report the UN Guiding Principles Reporting Framework and the questions it offers are taken as key elements of performance. As explained by Caroline Rees, Director and Co-Founder of Shift, the UN Guiding Principles Reporting Framework ‘offers [companies] questions to which they won’t have answers anyway, just to know they are managing the issues’: www. ungpreporting.org/. See also PRI, Research Note: The Extractive Industry and the UN Guiding Principles on Business and Human Rights (2015) at www.unpri.org/download?ac=1797.

Focus of the Book  5 tends to prioritise procedural mechanisms for measuring, tracking and assessing human rights harm at the expense of substantive protection and effective remedies for the victims of corporate abuse.18 Second, and on the basis of this latter statement, I contend that, in its current form, the Framework can do little but maintain and/or reinforce the substantive inequality and violent structures which enable corporate abuse in conflict countries such as Afghanistan. Moreover, it also precludes alternative approaches to justice for such abuses, since the debate is now mainly articulated at a systemic and procedural level, whereby the tracking, monitoring and reporting throughout a company’s due diligence processes have taken priority over the substantive scope and content of the legal obligations, at the expenses of effective remedies. As I discuss in chapters four and five, various solutions which were initially considered in this research as possible entry points to prevent human rights abuses by companies and to counter the imbalances of IIL, would actually do very little to either mitigate adverse human rights impacts caused by extractive sector investors in conflict countries or to ‘rebalance’ IIL itself. In order to contextualise these two claims, I use the example of ­Afghanistan to analyse the impact of IIL-backed extractive sector investments on human rights. In November 2007, at the end of a bidding process marred by allegations of corruption,19 the Afghan Ministry of Mines granted a 30-year lease to a consortium which included the China Metallurgical Construction Company (MCC) and Jiangxi Copper Company Limited (JCL)20 for USD 3 billion for the exploitation of Aynak, one of the largest copper deposits in the world.21 Being the largest foreign investment in Afghanistan’s history, in 2014 the Aynak project was hailed by the international community as the first step towards a new

18 As evidenced by the work of the UN Office of the High Commissioner for Human Rights (OHCHR) on Access to Remedy, the present lack of legal clarity and certainty over the obligations of home states and of companies creates significant challenges when pursuing judicial remedies in domestic courts. See UN Human Rights Council, ‘Improving Accountability and Access to Remedy for Victims of Business-Related Human Rights Abuse’ (10 May 2016) UN Doc A/HRC/32/19, para 24: ‘Cross-border cases pose particular challenges that can undermine efforts to ensure accountability and access to remedy. The prevailing lack of clarity across jurisdictions about the roles and responsibilities of different interested States in cross-border cases create a significant risk that no action will be taken, leaving victims with no prospect of remedy. Against that background, various human rights treaty bodies have recommended that home States take steps to prevent businessrelated human rights abuses by business enterprises domiciled in their jurisdiction’ (references omitted). Similarly, in relation to the difficulties engendered by a lack of clarity over the applicability of human rights standards to companies, see J Zerk, ‘Business and Human Rights: Enhancing Accountability and Access to Remedy, Analysis of Written Submissions’ (September 2014) at www. ohchr.org/Documents/Issues/Business/DomesticLawRemedies/RemedyProject1.pdf, 15. 19 See the report by the advisor to the Afghan advisor to the Afghan Ministry of Mines and Petroleum at the time of the tender, JR Yeager, ‘The Aynak Copper Tender: Implications for Afghanistan and the West’ (Skyline Laboratories and Assayers, 2009) at www.cimicweb.org. 20 The consortium then set up an Afghanistan-based company called MCC-JCL Aynak Minerals (MJAM) to manage the extractive project. 21 According to official estimates by the Afghan Ministry of Mines and Petroleum, the deposits hold approximately six million tons of copper (5.52 million metric tons). See www.mom.gov.af/en.

6  Introduction future for aid-dependent Afghanistan.22 Swept away by what was unanimously depicted as a success story, media representatives, members of the Afghan government and of the international community at the time did not appear (in public at least) too concerned by the fact that Aynak is located approximately 40 kilometres to the South-East of the Afghan capital Kabul, in the province of Logar. This province is and has been, historically, a stronghold of the Taliban and of other anti-government elements (AGE) engaged in the ongoing armed conflict.23 Similarly, at the time commentators failed to report the concerns of the local population in relation to the impact of future mining activities on their lives, both in terms of potential displacement and, most importantly in droughtprone Logar, in terms of access to water.24 The above example of Aynak, to which I will return from time to time throughout this book, is emblematic of the dilemmas engendered by the arrival of foreign extractive companies – mining, oil, gas and energy companies – in the midst of armed conflict. It is not unusual for extractive companies to invest and operate where armed violence is on-going, mainly because untapped natural resources deposits are prevalently found in countries that are either in or emerging from armed conflict, or more generally in countries with fragile government structures in place, unable to exploit these resources themselves and maximise their extraction for the benefit of the country as a whole.25 This contextualisation is of fundamental importance to understand how armed conflict is often connected to natural resources exploitation, both in the way in which resources extraction may exacerbate violence, and in the way in which it may trigger interventions of various type, where state or non-state actors vie to control and personally profit from the revenues deriving from natural resources.26 For instance, resources extraction of precious metals, stones and minerals or of oil

22 See eg press statements by UNAMA, at www.unama.unmissions.org. 23 See eg A Jackson, ‘The Taliban’s Fight for Hearts and Minds’ (12 September 2018) at https://foreignpolicy.com/2018/09/12/the-talibans-fight-for-hearts-and-minds-aghanistan/. See also T Ruttig, ‘Flash from the past: Kabul security handed back to the Afghans in 2008’ (22 September 2018) at www.afghanistan-analysts.org/flash-from-the-past-kabul-security-handed-back-to-afghans-in2008/; and see A de Toledo Gomes and M Mitri Mikhael, ‘Terror or Terrorism? Al-Qaeda and the Islamic State in Comparative Perspective’ (2018) 12 Brazilian Political Science Review 1, at www. scielo.br/scielo.php?script=sci_arttext&pid=S1981-38212018000100202. 24 The initial exploration of the site also revealed a series of ancient Bhuddist monasteries and stupas of significant archeological and heritage value. The discovery of a major historical heritage site, called Mes Aynak, and the fact that the mine will nevertheless continue to be developed, have attracted international concern, not least in terms of protection of cultural heritage. This topic, however, is not discussed further in this book. For further information on Mes Aynak, see the ­Alliance for the Restoration of Cultural Heritage (ARCH) at www.archinternational.org/mes_ aynak.html. 25 P Muchlinski, ‘Social and Human Rights Implications of TNC Activities in the Extractive Industries’ (2009) 18 UNCTAD Transnational Corporations 125, 125. 26 I Bannon and P Collier, ‘Natural Resources and Conflict: What We Can Do’ in I Bannon and P  Collier, Natural Resources and Violent Conflict: Options and Actions (Washington DC, The World Bank, 2003) 7.

Focus of the Book  7 and natural gas may, in certain circumstances,27 be used by fighters to purchase weapons and therefore fuel the conflict.28 In these cases, control over resourcerich areas may compound already existing ethnic or religious violence and add a further dimension to already complex situations of armed conflict.29 More generally, conflict countries tend to be in a situation of flux, characterised by weak infrastructure and government structures, and repeated foreign intervention coupled with rampant impunity, all factors which render impossible an effective exploitation and equitable redistribution of resources.30 Extractive industries obviously follow the geographical location of natural resources, in spite of the high risks generated by the situation of armed conflict and instability in which these are discovered. This means that, from a business perspective, they are particularly exposed to heightened risks on investment, risks that they attempt to minimise through carefully structured investment contracts, backed by growing investment protection standards enshrined in international investment agreements (IIAs). In particular, once an extractive company has already invested in ensuring the extractive capacity of a project, disinvestment in light of a worsening of the security situation or of an escalation of the conflict is often considered to be financially untenable and therefore highly unlikely.31 Furthermore, non-investment in a conflict country is also often not seen as a viable option, as this may result in a competitor successfully obtaining exploitation rights over that same area.32 The home states of extractive companies are generally also very supportive of such large-scale investments, because of the high returns and contribution of the projects to the home economies. In conflict host countries, on the other hand, the incoming flow of foreign direct investment (FDI) for the exploitation of natural resources is often presented – as well as perceived – as a unique opportunity for stabilisation and development,33 an equation which is not always

27 See eg MC Cordonier Segger, ‘Resource of Conflict – Conflict over Resources’ (2011) 3 Gottingen Journal of International Law 11, 16. See also P Lujala et al, ‘Building or Spoiling the Peace? Lessons from the Management of High-Value Resources in Post-Conflict Settings’ in P Lujala and SA Rustad (eds), High-Value Resources and Post-Conflict Peacebuilding (Abingdon, Routledge, 2012). 28 Although the risks attached to the ‘resource curse’ are notorious, minerals are also known to successfully boost a country’s economy. See eg P Collier and B Goderis, ‘Commodity Prices, Growth and the Natural Resources Curse: Reconciling a Conundrum’ (2007) Report CSAE WPS/2007-2015, at www.economics.ox.ac.uk. 29 See eg VAB Davies and S Dessy, ‘The Political Economy of Government Revenues in PostConflict Resource-Rich Africa: Liberia and Sierra Leone’ (2012) NBER Working Paper No 18539; P Woodward, ‘Politics and Oil in Sudan’ in K Omeje (ed), Extractive Economies and Conflicts in the Global South: Multi-Regional Perspectives on Rentier Politics (Farnham, Ashgate, 2008). 30 Muchlinski (n 25) 126. 31 ibid. 32 ibid. 33 A Joubin-Bret et al, ‘International Investment Law and Development’, in MC Cordonier Segger et al, Sustainable Development in World Investment Law (The Hague, Kluwer Law ­International, 2011) 16.

8  Introduction automatically realised. As already evidenced by various commentators and further discussed throughout this book, the mere presence of natural resources cannot, in itself, trigger prosperity and economic stability for a conflict country,34 especially when appropriate systems are not in place to minimise the negative impact of extraction and thus prevent further destabilisation.35 In practice, the economic situation of conflict countries is usually very dire, as they tend to rely on aid in order to be able to function and to rebuild or set up from scratch the infrastructure necessary for the survival of the country. During and in the immediate aftermath of armed conflict, various sectors – from major road projects to the rebuilding of entire legal systems – are often entirely reliant on aid. The impact of aid policies and their success/failure in achieving development goals have been the object of various studies, with some commentators portraying aid as the only way to achieve development,36 and others criticising the intrinsically neocolonial nature of aid policies and the ways in which they reinforce structures of abuse.37 Discussion of the scope and nature of aid policies in conflict countries is a subject beyond the remit of this research: it is however important to note the aid dependence38 of most conflict countries, because this is what often pressures them to accept far-reaching, investor-friendly regulatory reforms. Moreover, in a situation of global economic downturn like the one experienced since 2007, aid-dependent countries find themselves desperate to attract FDI in an attempt to compensate for aid shortages and to alleviate domestic and international pressure to achieve some sort of economic and political autonomy. This economic-dependent context often leads to a host state that is overly eager to open up and liberalise its economy, and in turn to what Eslava and Buchely have described as the ‘liberal management of vulnerability’,39 that is a situation in which the conditions of local inhabitants become of secondary importance, and their vulnerability, rather than being something that needs overcoming,

34 ibid. 35 See eg UN Human Rights Council, ‘Business and Human Rights: Mapping International Standards of Responsibility and Accountability for Corporate Acts’ (19 February 2007) UN Doc A/HRC/4/35, para 1. 36 See eg JD Sachs, ‘The Development Challenge’ (2005) 84 Foreign Affairs 78; C Arndt et al, ‘Aid, Growth, and Development: Have We Come Full Circle?’ (2009) United Nations University, World Institute for Development Economics Research, UNU-WIDER Working Paper No 2009/05, at www. wider.unu.edu/publications. 37 See in general B Rajagopal, International Law from Below: Development, Social Movements and Third World Resistance (Cambridge, Cambridge University Press, 2003). See also L Eslava, Local Space, Global Life: The Everyday Operation of International Law and Development (Cambridge, Cambridge University Press, 2015). 38 Crucially, this aid dependence is not accidental: see C Tan, Governance Through Development: Poverty Reduction Strategies, International Law and the Disciplining of Third World States (Abingdon, Routledge, 2011) especially ch 7. 39 L Eslava and L Buchely, ‘Security and Development? A Story about Petty Crime, the Petty State and its Petty Law’ Revista de Estudio Sociales (2019, forthcoming, copy in file with author).

Focus of the Book  9 becomes something that needs to be efficiently administered.40 This ‘liberal management of vulnerability’ is apparent in Afghanistan, where significant structural and economic reforms – often oblivious to the actual needs of the Afghan people – have taken place since the aftermath of the 2001 intervention, mainly under the direction of the World Bank and of international donors.41 Afghanistan is not only a conflict host country which experiences the phenomenon outlined above; it is also ranked as a Least Developed Country (LDC). Thus, with aid and FDI identified as the two main financial sources for the development of both physical and institutional infrastructure during armed conflict42 and LDCs as ‘the most reliant upon aid among all developing countries, and the most lacking in FDI’,43 in countries like Afghanistan FDI tends to be promoted as a requisite form of incoming capital, indispensable in order to acquire a competitive advantage. Increasingly, therefore, a proportion of the aid assistance to conflict LDCs goes inevitably towards experts and consultants capable of supporting a particular LDC in devising new ways to increase its competitiveness in attracting FDI and, more generally, in creating an environment conducive to investment. Some commentators have referred to this phenomenon as a ‘race to the bottom’44 both in terms of the elimination of all barriers to investment and of a trading off in labour, social and environmental protections, in order to signal to foreign investors that the host country is committed to full market liberalisation, including of sensitive sectors of the economy which could benefit from some form of protection in favour of fragile, emerging local businesses. The ‘grand bargain’ of international investment treaties such as BITs, Ortino explains, is premised precisely on ‘a promise of protection of capital in return for the prospect of more capital in the future’.45 Thus, FDI is promoted as having the potential to unlock sustainable development and to contribute to a reduction of poverty, in particular in LDCs such as Afghanistan.46 This ‘potential’, however, does not automatically translate into concrete benefits, especially when the host country is involved in armed conflict. In its current form, the project of international investment law appears 40 E Povinelli, Economies of Abandonment: Social Belonging and Endurance in Late Liberalism (Durham NC, Duke University Press, 2011) quoted in Eslava and Buchely, ibid. 41 CG Wescott, ‘Evaluating World Bank Support to Building Capacity of the State and Its Accountability to Citizens in Afghanistan’ in A Awotona (ed), Rebuilding Afghanistan in Times of Crisis: A Global Response (Abingdon, Routledge, forthcoming 2019), copy on file with author. 42 N Turner et al, Post-Conflict Countries and Foreign Investment (Tokyo, United Nations University, 2008) 1. 43 ibid. 44 AT Guzman, ‘Explaining the Popularity of Bilateral Investment Treaties’ in K Sauvant and L Sachs (eds), The Effect of Treaties on Foreign Direct Investment (Oxford, Oxford University Press, 2009) 78. 45 F Ortino, ‘Refining the Content and Role of Investment “Rules” and “Standards”: A New Approach to International Investment Treaty Making’ (2013) 28 ICSID Review 152, 154. See also, in general, JW Salacuse, The Law of Investment Treaties (Oxford, Oxford University Press, 2010) 111. 46 Sauvant and Sachs (n 44), see especially part II, 109–460.

10  Introduction to be promoted in conflict host countries based on the premise that investment will bring benefits47 but, as already reiterated by various scholars, investment – if left unchecked – will not only fail to generate development, but risks exacerbating particularly volatile contexts, such as those of conflict countries.48 At the beginning of his mandate, the SRSG has himself warned that ‘there is no magic in the marketplace. Markets function efficiently and sustainably only when certain institutional parameters are in place. History demonstrates that without adequate underpinnings, markets will fail to deliver their full benefits and may even become unsustainable’.49 In March 2013, when discussing the future challenges of the business and human rights agenda, the former SRSG then identified business activities in conflict areas as requiring immediate action at international level. In particular, he stated that where human rights abuses occur in conflict areas or in other situations of heightened risk, plaintiffs may turn to the home country courts because local courts may be unable or unwilling to act. The international community has determined, and fair-minded observers everywhere would agree, that sovereignty can no longer serve as a shield behind which governments are allowed to commit or be complicit in the worst human rights violations. Surely the same must be true of the corporate form.50

As further examined in this book, however, access to home country courts remains controversial in theory and difficult in practice. And in many ways, the international legal order is framed in such a way as to ensure that the protection of foreign investors remains prioritised, vis-à-vis the protection and meaningful development of local populations in the host state. This book, therefore, locates itself at the centre of the political dilemma faced by Afghanistan and by many other conflict countries: the tension between the pressure to obtain economic independence – following a well-known ‘reconstruction model’51 characterised by market-liberalisation and systemic deregulation – and the need to maintain the necessary policy space to pursue public policies. The reforms implemented in Afghanistan, however, did not take into consideration this dilemma and were pursued whilst the various international human rights actors, already present in the country, turned a blind eye to

47 LE Peterson talks of a ‘generalized faith that the treaties will yield investment, which will, in turn, lead inexorably to development’. See LE Peterson, Bilateral Investment Treaties and Development Policy-Making (Geneva, International Institute for Sustainable Development, 2004) 4. 48 Turner et al (n 42) 2. 49 UN Doc A/HRC/4/35 (n 35) para 1. 50 JG Ruggie, ‘Business and Human Rights: The Next Chapter’, 7 March 2013, at www.cocacolacompany.com/opinions/business-and-human-rights-the-next-chapter. 51 See eg R Mills and Q Fan, ‘The Investment Climate in Post-Conflict Situations’ (2006) World Bank Policy Research Working Papers at https://elibrary.worldbank.org/doi/abs/10.1596/18139450-4055, where lessons learned are offered to create an enabling environment for investment through, inter alia, private sector development reforms.

Focus of the Book  11 the silent onslaught on claims for substantive equality and redistributive justice. As evidenced by Guttal: the hallmark of the ‘reconstruction model’ is neo-liberalism – an unregulated, market economy, liberal democracy, free flow of private capital, privatization, removal of domestic regulations and economic protections, and ‘good governance’, which in practice means that the fledgling state’s responsibilities are re-oriented towards facilitating and protecting free market conditions for creating wealth, much of which is expropriated by private sector actors from outside the country and/or consolidated by national elites.52

It is at the heart of this crucial dilemma between following a certain predetermined ‘reconstruction model’ and the need to retain political and regulatory independence that the elusive intersection between IIL and IHRL delineates itself, and this is what I attempt to chart in this book. Elaboration of the two claims advanced in this book requires engagement with complex legal questions. It is therefore necessary to set clear limitations to the scope of the topics that I could discuss in this book. There are six such limitations. First, as the focus of the book is on the right to water as affected by the intersection between IIL and IHRL in conflict situations, considerations of international humanitarian law (IHL) are of ancillary importance. This means that although IHL rules are relevant to the situation at hand, arguments made in this work are not IHL-based. Engagement with the debate on the nature of armed conflict and of the law applicable to international armed conflict (IAC) and to non-international armed conflict (NIAC) is therefore not directly relevant. Similarly, I do not discuss the law applicable to belligerent occupation. I recognise that it could and has been argued that Afghanistan offers ample scope for discussing any of the legal frameworks pertaining to IAC (including belligerent occupation), NIAC and possibly also to a potential transnational conflict.53 Engagement with this discussion would also require a detailed examination of the national and international political context of the ongoing conflict, its links to Afghanistan’s history and geopolitical positioning, and its place at the centre of the so-called ‘war on terror’.54 In this book, instead, I focus on whether

52 See S Guttal, ‘The Politics of Post-War/Post-Conflict Reconstruction’ (2005) 48 Development 73. 53 See eg M Milanovic and V Hadzi-Vidanovic, ‘A Taxonomy or Armed Conflict’ in N White and C Henderson (eds), Research Handbook on International Conflict and Security Law (­Cheltenham, Edward Elgar, 2012) 43; G Corn, ‘Making the Case for Conflict Bifurcation in Afghanistan: Transnational Armed Conflict, Al Qaida, and the Limits of the Associated Militia Concept’ (2009) 85 US Naval War College International Law Studies 181. 54 See in general T Ruttig, Islamists, Leftists – And a Void in the Center: Afghanistan’s ­Political Parties and Where They Come From 1902–2006 (Bonn, Konrad Adenauer Stiftung, 2006); A Giustozzi, Empires of Mud: Wars and Warlords of Afghanistan (New York NY, Columbia University Press, 2009); A Giustozzi, Koran, Kalshnikov and Laptop: The Rise of the Neo-Taliban Insurgency in Afghanistan (New York NY, Columbia University Press, 2007).

12  Introduction and how the right to water can be better safeguarded when foreign companies invest in the Afghan extractive sector, protected as they are by the provisions of international investment agreements. From a terminological point of view, throughout this book the terms ‘countries experiencing armed conflict’, ‘conflict country’, ‘conflicted country’55 and ‘conflict host country’ are used interchangeably to refer to Afghanistan and to describe its on-the-ground situation of armed conflict. It is also crucial to note that, although various commentators in the past two decades have depicted Afghanistan as a post-conflict country, in this book I hold the view that Afghanistan’s protracted armed conflict continued unabated after the 2001 intervention.56 Second, when considering the framework of ESC rights, my analysis concentrates on the substantive content of the right to water and discusses states’ obligations, including issues of home state obligations in relation to the extraterritorial conduct of private business actors. This means that the scope of this book can only allow a brief discussion of the limitations to and derogations from ESC rights and of aspects of the debate on justiciability of ESC rights (in particular who is accessing courts; what are the effects of being a rightsholder; and what are the wider effects of judgments). The abovementioned topics, however, are in part discussed in chapter three and referred to within the context of the notion of progressive realisation to the maximum of a state’s available resources and of the concept of the minimum core of ESC rights. Third, in this book I focus on the overall framework of investment protection granted through BITs and other IIAs and enforced through investment treaty arbitration, rather than examining the investment contracts entered into by Afghanistan with the relevant foreign investors for the exploitation of its natural resources. There are two main reasons for this: on the one hand, key investment contracts have already been examined and discussed at length in various reports.57 On the other hand, a focus on the more systemic fault-lines of the investment regime enables a broader analysis of the regulatory restructuring which often accompanies the signing of these investment contracts, followed (or preceded) by the granting of development aid and international assistance, not least in terms of military support. In my view it is important to highlight the external dynamics which may underpin the compromises struck by host conflict countries in the attempt to attract foreign investment. An understanding and acknowledgement of the implications of such compromises – such as the conflation of aid, security and foreign investment – are crucial in order to fully

55 I borrow this term from F Ní Aoláin et al (eds), On the Frontlines: Gender, War, and the Post-Conflict Process (Oxford, Oxford University Press, 2011). 56 This is a view shared by most humanitarian organisations operating in Afghanistan, including the International Committee of the Red Cross. See eg ICRC, ‘Conflict in Afghanistan I and II’ (2010) 92–93 International Review of the Red Cross 838. 57 See eg the various reports issued by Global Witness and the response by the Afghan Ministry of Mines and Petroleum, at www.globalwitness.org.

Structure of the Book  13 grasp the legal and practical impact that they have on the effective protection of ESC rights. Fourth, in the book I do not cover the debate on whether companies should be held directly accountable for human rights abuses, although I discuss ways in which the ‘respect’ pillar of the Framework could be strengthened and improved. While this is undoubtedly an important debate, in my view it is crucial to first clarify the exact scope of home states’ obligations under the International Covenant on Economic, Social and Cultural Rights (ICESCR) as this has ultimately a profound impact on the way in which companies are then to be made accountable for their violations. The ultimate purpose of this choice in my research is to try and close the existing gap, whereby companies are able to ‘blame’ home countries for not clearly regulating the business sector, whilst at the same time actively lobbying against new regulations and for the unclear status quo to be maintained. II.  STRUCTURE OF THE BOOK

In chapters one to three of this book I conduct a doctrinal analysis of IIL and IHRL (in particular ICESCR) provisions relevant to foreign investments in the extractive sector in conflict countries. Then in chapters four and five I look at the possible entry points through which these provisions can be used to operationalise the Protect, Respect and Remedy framework in conflicted Afghanistan. Thus, the research carried out in chapters one to four relies, inter alia, on Article 31(1) of the Vienna Convention on the Law of Treaties (VCLT),58 according to which a treaty shall be interpreted in accordance with its ordinary meaning, taking into consideration the context and its object and purpose. In order to identify the meaning of relevant ICESCR and IIL provisions, however, I do not only rely on a textual interpretation of relevant legal norms.59 A teleological approach therefore underpins my analysis in the first four chapters, as I consider it the most appropriate to capture the socio-economic dimension of the right to water.60 For the interpretation of ICESCR provisions I refer to the work of the Committee on Economic, Social and Cultural Rights (CESCR). Although the work of CESCR does not represent a legally binding interpretation of the Covenant, it can be a highly authoritative interpretative source, as also recently confirmed by the International Court of Justice (ICJ) in relation

58 UN, ‘Vienna Convention on the Law of Treaties’, 23 May 1969, entered into force 27 January 1980, 1155 United Nations Treaty Series 331 (hereinafter VCLT). Note that Arts 31–33 VCLT are considered of customary nature. 59 Throughout this book the term norm is used as synonymous with legal rules. 60 C Grewe, ‘Vergleich zwischen den Interpretationsmethoden europäischer Verfassungsgerichte und des Europäischen Gerischtshofes für Menschenrechte’ (2001) 61 Zeitschrift für ausländisches öffentliches Recht und Völkerrecht 459, 472.

14  Introduction to interpretations of the International Covenant on Civil and Political Rights (ICCPR) by the Human Rights Committee (HRC).61 The work of the CESCR, in particular its General Comments, has also been considered as falling under Article 31(3)(b) VCLT, and therefore representing ‘subsequent practice in the application of the treaty which establishes the agreement of the parties regarding its interpretation’.62 Although General Comments do not represent a direct expression of state practice, they have been deemed as an appropriate tool to reflect it, given the unique interaction that takes place between state parties and the CESCR during the drafting of the General Comments.63 General Comments, in fact, can guide state practice for the way in which they encourage state parties to uphold their duties and because of the way in which they are relied upon by national courts.64 In order to outline the normative content of the right to water, at times in this book I also refer to the work of UN human rights treaty-monitoring bodies other than the CESCR, as well as to decisions by regional human rights courts that have addressed the right to water. In my analysis I approach these documents and judicial decisions as subsidiary means to determine rules of law as envisaged in Article 38 of the statute of the International Court of Justice65 as reflecting customary international law.66 Where appropriate, I also refer to relevant judgments by national courts and to recent academic studies reviewing these judgments. It is of course crucial to bear in mind both the varied quality of the legal decision-making processes carried out in different countries and the fact that ESC rights case law remains unfortunately still limited: these judgments, nonetheless, can be important subsidiary means to determine rules of law that add further insight on the nature of a particular right. In chapter five I then turn to examining the Framework, and therefore rely primarily on the work of relevant UN Human Rights Council Special Procedures mandate holders. In particular, I refer inter alia to the reports of the UN Independent Expert on the Right to Water and Sanitation (later mandated as

61 The ICJ held that ‘great weight’ should be ascribed ‘to the interpretation adopted by this independent body [the HRC] that was established specifically to supervise the application of that treaty [ICCPR]’: see ICJ, Ahmadou Sadio Diallo (Republic of Guinea v Democratic Republic of the Congo) Merits, Judgment, ICJ Reports 2010, 369, para 66. By analogy, the same approach is appropriate in relation to the interpretation by other UN Treaty Bodies, including the CESCR. 62 VCLT (n 58) Art 31(3)(b). 63 See 31(1)(c) VCLT which is relevant in terms of identifying context for interpretation (‘any relevant rule’). 64 See generally IT Winkler and C Mahler, ‘Interpreting the Right to a Dignified Minimum Existence: A New Era in German Socio-Economic Rights Jurisprudence?’ (2013) 13 Human Rights Law Review 388. 65 Statute of the International Court of Justice at http://legal.un.org/avl/pdf/ha/sicj/icj_statute_ e.pdf. 66 See also Diallo Case (n 61) paras 66–68 and 77. See also more generally H Keller and G Ulfstein, UN Human Rights Treaty Bodies: Law and Legitimacy (Cambridge, Cambridge University Press, 2012).

Structure of the Book  15 UN Special Rapporteur on the Right to Water), of the UN Special Rapporteur on the Right to Food and of the SRSG for business and human rights and the Working Group on the issue of human rights and transnational corporations and other business enterprises (also referred to as the Working Group on Business and Human Rights (UNWG)). These reports offer valuable insight not only on the normative content of ESC rights and the obligations flowing from them but also on their applicability to conflict contexts. Throughout this research I also discuss the work of various commentators who have evaluated the work of the Special Procedures mandate holders, in the attempt to better understand the content of the relevant rights and of the Framework. With regard to the interpretation of the normative content of the various IIL protections, I refer throughout the book to the awards of international investment tribunals, although these do not constitute binding precedents for subsequent tribunals and, as such, often present contradictory outcomes. Despite these challenges, an overview of the published decisions by international investment tribunals is of value to highlight inherent contradictions and, where possible, to identify current trends in this area of law. The contrasting views of commentators are also taken into consideration when ascertaining whether and how international investment tribunals should take cognisance of the human rights impact of the claims before them. The debate on the relationship between IIL and IHRL is a complex one and, in many ways, one with a recent ‘pedigree’. As I mentioned above, many scholars have approached the study of this relationship as part of the wider debate on fragmentation of international law, and many have called for interpretative approaches by international investment tribunals aimed at preserving the unity of international law. This contextualisation of the debate poses obvious challenges which I discuss in detail throughout this book, not least the risk of presenting both IIL and IHRL as two unchangeable bodies of international law, incapable of mutating over time. In this debate the objectives of IIL and IHRL are also often taken for granted, as if there was only one way of perceiving the role that these legal projects should play within the wider international legal order. This research challenges the way in which scholars have approached the relationship between IIL and IHRL. In so doing it contributes to attempts aimed at identifying avenues of contestation that transcend certain preconceived notions of what these two legal bodies of international law are or ought to be.67 This is, by no means, an easy approach to the study of the relationship between IIL and IHRL. But it is, in my view, the only realistic approach to the practical application of relevant IIL and IHRL protections in conflict host countries. A rigid understanding of the two legal bodies would only preclude a discussion of the political implications of any available legal interpretation or of any



67 Lang,

World Trade After Neoliberalism (n 14).

16  Introduction ‘balancing’ exercise between investment protections and human rights protections. This aspect of the debate is analysed in particular depth in chapter four. Before turning to a description of the structure of this book, I would like to make one final observation concerning the choice of Afghanistan as an emblematic example for my study on extractive sector investment in conflict contexts. At the start of this research, this was certainly not an obvious choice and I was often met by a surprised audience when presenting my research. Since at least 2012, however, the fact that Afghanistan is a country extremely rich in natural resources has become common knowledge. Yet, the ways in which international law, not least through IIL, supports and enables the inflow of foreign direct investment in the extractive sector is not fully understood. Nor is there an active debate on how such investment may impact on the enjoyment of the right to water, or other ESC rights, in the areas affected by extractive activities. Today, when discussions take place on the future of Afghanistan, the focus of attention remains, for obvious reasons, on the armed conflict. This is the case for debates on security and on political stabilisation, as well as on human rights. In the meantime, however, the granting of licences for the exploration of Afghanistan’s natural resources continues unabated, in parallel to the transformation of the regulatory framework supporting the foreign investment inflow in the extractive sector.68 The significance of these changes will only become fully apparent with time, when IIL protections will be triggered by potential breaches by A ­ fghanistan and/or when the first impacts of extractive activities on water sources will become apparent. As of today, due to the continued escalation of the conflict and the waning interest of the international community, the future of Afghanistan remains uncertain. Most importantly, it remains to be seen whether there will be any political interest in debating the long-term future of Afghanistan’s resources, be it mineral or water resources. In my view, the latter debate is of crucial importance for any long-term understanding of Afghanistan’s stabilisation and future development, and it has geopolitical implications which reach far beyond the terrorist threat that triggered the invasion of Afghanistan in 2001. It is with this in mind that the present work was carried out, and as such it remains one of the few legal studies to look beyond the impact of the ongoing armed conflict on civilian lives.

68 If anything, an additional sector which is currently attracting international attention is that of renewable energy, equally problematic in light of the highly controversial investment disputes related to investments in this sector. See eg A Franklin, ‘Legitimate Expectations: Lessons from Recent Energy Arbitration Cases on Renewable Energy – Relationship of Fair and Equitable Treatment Standard to Indirect Expropriation’ (22 April 2018) at https://ssrn.com/abstract=3167034. See also F Dias Simoes, ‘Case Note – Charanne and Construction Investment v Spain: Legitimate Expectations and Investments in Renewable Energy’ (2017) 26 Review of European Community and International Environmental Law 174, 177–78. On renewable energy in Afghanistan, see eg A Fahimi and P Upham, ‘The Renewable Energy Sector in Afghanistan: Policy and Potential’ (2018) 7 Wires, Energy and Environment e280.

Structure of the Book  17 The book is divided into five chapters. In chapters one to four, I examine the legal relationship between IIL and IHRL in order first to provide a general background necessary to the understanding of the ways in which the two bodies of international law sometimes may clash. In these chapters I also aim at clarifying the context within which relevant IIL and IHRL provisions are deployed in conflict contexts. To achieve these aims, I use the following chapter structure. In chapter one I give an overview of the dilemma raised by the arrival of extractive companies in conflict host countries, in order to set the operational background that triggered this research. In chapter two I analyse the relevant legal framework of investment protection by focusing on the IIL standards which are most frequently invoked by international investment tribunals when they are called upon to balance so-called ‘investors’ rights’ against human rights. Similarly, in chapter three I analyse the relevant legal framework of human rights protection, with a particular focus on the right to water. The discussion in chapters two and three sets the basis for my first main claim, presented in chapter four, that a balancing between IIL and IHRL is neither possible nor desirable, and that scholarly efforts would perhaps be better channelled towards gaining a clearer understanding of the ideological and constitutive underpinnings of the two legal regimes, in order to better conceptualise the way in which they intersect and interact in practice. Building on the analyses carried out in chapters one to four, I then discuss the emergence of the Framework for business and human rights as a potentially valid framework for the protection of relevant IIL and IHRL provisions in conflict contexts. In chapter five I analyse the strengths and weaknesses of the Framework and offer an alternative reading of its normative content by suggesting that, without accepting the existence of a home state obligation to regulate the transnational activities of private business actors, remedies will continue to remain elusive for victims of corporate abuse. I then discuss this in the context of extractive sector investment in Afghanistan, to explain why such a development is of fundamental importance in practice. In the final pages of the book I then draw conclusions on the desirability and viability of pursuing a rebalancing of the relationship between IIL and IHRL, not least through the use of the Framework.

1 Extractive Sector Investment in Conflict Countries: The Situation in Afghanistan

I

n this chapter I problematise the activities of foreign extractive companies1 in conflict countries, especially in terms of their human rights impact within a context of heightened vulnerability and flux. An analysis of these dilemmas makes it possible to highlight the tension between, on the one hand, the need for a conflict country to ensure financial resources to stabilise and reconstruct its systems and infrastructures and, on the other hand, the need to ensure that natural resources extraction does not further exacerbate the situation in which the civilian population finds itself in the midst of armed conflict. Linked to the latter, there is also the need to maintain the necessary regulatory space to pursue public policies, as discussed in the Introduction. This tension, as I discuss further in chapter four, lies at the interface of the relationship between international investment law (IIL) and international human rights law (IHRL) and influences the way in which these two bodies of international law are deployed in the specific context of conflict areas. In this chapter I also explore how the potential for clash between relevant IIL and IHRL provisions is clearly reflected in a lack of terminological clarity when corporate actors, on the one hand, and human rights actors and/or victims of human rights abuses, on the other, use the term ‘protection’. Whilst conceptualising the latter term, I focus inter alia on the meaning of human rights protection in field operations and discuss in particular the essential role of preventative action in conflict contexts. I conclude the chapter by examining the situation in Afghanistan and outlining the practical challenges of human rights protection against corporate abuse once extractive sector foreign investments have started flowing into the country.

1 For clarity, in its common use in the industry sector the term ‘extractive companies’ encompasses mining, oil, gas and energy companies.

Extractive Companies in Conflict Countries  19 I.  EXTRACTIVE COMPANIES IN CONFLICT COUNTRIES: AN ISSUE OF HUMAN RIGHTS PROTECTION?

A.  The Human Rights Impact of Extractive Companies in Conflict Countries The activities of extractive companies are generally recognised as inherently complex as they may impact on various aspects of societal life,2 not least the economic, social and cultural rights (ESC rights) of local communities. With the arrival of extractive companies in conflict areas, this inherent complexity becomes even more apparent, as in these volatile contexts extractive activities may exacerbate already existing human rights problems. It is generally acknowledged that ‘armed violence provides the setting for the most egregious human rights abuses, and that abuses feed conflict’.3 The additional link between armed conflict and natural resources exploitation is also widely recognised, both in the way in which resources extraction may cause or exacerbate violence, and in the way in which it may undermine governance, where both state and non-state actors vie to control and personally profit from the revenues deriving from natural resources.4 Weak governance,5 lack of rule of law, corruption and crony capitalism are often perceived as typical of conflict contexts, whereby the effective exploitation of natural resources for the benefit of the host country’s population usually remains unattainable.6 In conflict contexts, however, extractive companies are perceived as having the potential of bringing benefits to the conflict host country in terms of local economic development, at least in the short term. The negative impacts of large-scale extractive projects, on the other hand, are also well known, particularly in conflict countries.7 Although these

2 J Wagner and K Armstrong, ‘Managing Environmental and Social Risks in International Oil and Gas Projects: Perspectives on Compliance’ (2010) 3(2) Journal of World Energy Law and ­Business 140, 140. 3 M Martin, ‘The Guiding Principles on Human Rights and Business: Implementation in Conflict-affected Countries’ LSE Working paper series, 29 October 2012, at www.eplo.org/civilsociety-dialogue-network.html. 4 I Bannon and P Collier, ‘Natural Resources and Conflict: What We Can Do’ in I Bannon and P Collier (eds), Natural Resources and Violent Conflict: Options and Actions (Washington DC, The World Bank, 2003) 7; and A Joubin-Bret et al, ‘International Investment Law and Development’ in MC Cordonier Segger et al, Sustainable Development in World Investment Law (The Hague, Kluwer Law International, 2011) 16. 5 The concept of weak/good governance, however, should be approached with caution, not least because of how the good governance agenda has been used as a tool to introduce far-­reaching economic reforms aimed at creating an enabling environment for FDI, see C Tan, ‘Reviving the Emperor’s Old Clothes: The Good Governance Agenda, Development and International Investment Law’ in S Schill et al (eds), International Investment Law and Development: Bridging the Gap (Cheltenham, Edward Elgar, 2015) 147–79, 156. See also M Sattorova, The Impact of Investment Treaty Law on Host States: Enabling Good Governance? (Oxford, Hart Publishing, 2018), especially ch 6. 6 Martin (n 3). See also P Muchlinski, ‘Social and Human Rights Implications of TNC Activities in the Extractive Industries’ (2009) 18 UNCTAD Transnational Corporations 125, 125. 7 Wagner and Armstrong (n 2) 143–44.

20  Extractive Sector Investment impacts may be unintended, they can have negative effects for already fragile and destabilised areas, as they may lead to further conflicts for access to and control over land and resources. Common impacts may include, inter alia, displacement of local communities; irreversible contamination of freshwater sources; damage to human and animal health, usually linked to environmental pollution; increased corruption and armed violence. Despite the severity of the potential impacts described above, conflict host governments often encourage or even exert pressure on extractive companies to aggressively develop natural resources deposits, even in disregard of the human rights consequences of such extraction activities.8 Although it has been widely documented that the mere presence of natural resources does not, in itself, engender prosperity and economic stability,9 conflict host countries often justify their deregulated approach to natural resources exploitation in the name of stabilisation and development.10 International donors and members of the international community, not infrequently, turn a blind eye to (or even actively encourage) unbridled investment, support aid projects aimed at stimulating foreign capital inflows and enthusiastically celebrate the granting of new extractive concessions as successful steps towards financial self-reliance. Proponents of market liberalisation essentially conceive of reforms towards a free market economy as a panacea, and the only viable alternative to aid dependence. They support regulatory and market restructuring aimed at attracting Foreign Direct Investment (FDI) and, more generally, at creating an environment ‘conducive’ to investment. With these ultimate aims in mind, a ‘race to the bottom’11 is often generated, both in terms of the elimination of all barriers to investment and of a trading off in human rights protections, in order to signal to foreign investors that the conflict host country is committed to full market liberalisation, including of sensitive economic sectors. Free market supporters also promote, in parallel, a liberal concept of peace,12 which posits that MNCs [multinational corporations] can play a constructive role in transforming armed conflict and building peace through their economic activities and corporate social responsibility (CSR). Backed up by the notion of market fundamentalism, the proponents of this theory call for corporate investment and engagement

8 ibid 144. 9 C Tan and J Faundez (eds), Natural Resources and Sustainable Development: International Economic Law Perspectives (Cheltenham, Edward Elgar, 2017) 2. 10 Joubin-Bret et al (n 4) 16. See also, more generally, C Tan, Governance through Development: Poverty Reduction Strategies, International Law and the Disciplining of Third World States (Abingdon, Routledge, 2011) especially ch 7. 11 AT Guzman, ‘Explaining the Popularity of Bilateral Investment Treaties’ in K Sauvant and L Sachs (eds), The Effect of Treaties on Foreign Direct Investment (Oxford, Oxford University Press, 2009) 78. 12 DB Subedi, ‘Pro-Peace Entrepreneur or Conflict Profiteer? Critical Perspective on the Private Sector and Peacebuilding in Nepal’ (2013) Peace and Change 181, 182.

Extractive Companies in Conflict Countries  21 in promoting stability by accelerating much-needed economic growth and generating peace dividends.13

Other commentators, on the other hand, are more sceptical of the good intentions of corporate actors and perceive them as potential ‘spoilers of peace’.14 According to this view, extractive companies are seen as often fuelling armed conflict15 because they benefit from a weakened state capacity and/or willingness to protect the interests of its people. In this way extractive companies may end up participating in war economies16 which revolve around the exploitation of natural resources and create ‘new opportunities for the elites of competing factions to pursue their economic agendas through trade, investment and migration ties, both legal and illegal, to neighboring states and to more distant, industrialized economies’.17 Whether extractive companies are presented as ‘pro-peace entrepreneurs’ or as predatory ‘conflict profiteers’18 depends on polarised views that do not always reflect the practical situation on the ground. In practice, extractive companies often play both positive and negative roles, and are usually placed in an intermediate position between the two extremes outlined above. Yet, in their relationship with host governments, they are mainly interested in securing a stable operational environment for their activities, and in order to do so they often lobby their home countries in order for them to sign international investment agreements (IIAs) with the relevant host conflict country, and elicit consent to investor-state arbitration.19 It is tenable, however, that corruption and co-option do sometimes come into the equation at this stage. At this juncture the role of IIL also becomes crucial to ensuring that foreign investments are

13 ibid 182. 14 ibid 183. 15 See for instance the role played by extractive companies in fuelling the resource wars in Angola, Democratic Republic of Congo and Sierra Leone. See eg C Cone, ‘An Analysis of the Economic Dimension of the Conflict in the Democratic Republic of Congo with Recommendations for Track One Diplomacy’ (2007) unpublished dissertation, at http://upetd.up.ac.za/thesis/available/ etd-04292008-140416/unrestricted/dissertation.pdf. 16 These are also known as ‘violent war economies’; see D Jung, ‘Introduction: Towards Global Civil War?’ in D Jung (ed), Shadow Globalization, Ethnic Conflicts and New Wars: A Political ­Economy of Intra-State War (Abingdon, Routledge, 2003) 2. 17 M Berdal and D M Malone (eds), Greed and Grievance: Economic Agendas in Civil Wars ­(Boulder CO, Lynne Rienner, 2000) 3. 18 Subedi (n 12) 184. 19 As noted by St John, BITs and investor-state arbitration are analytically distinct phenomena, since the first BITs did not even provide access to investor-state arbitration. Whilst the majority of the investor-state arbitration caseload occurred largely after 2000, all instrument of consent to arbitration are important. ‘It is the decentralization of consent that makes ISDS resilient. Even if, for instance, investor-state arbitration were removed from all European investment treaties, its survival would not be in doubt. Thousands of contracts, dozens of domestic laws, and hundreds of treaties would still be in force that provide investors with standing. In other words, ISDS is bigger than BITs’. T St John, The Rise of Investor-State Arbitration: Politics, Law and Unintended Consequences (Oxford, Oxford University Press, 2018) 8–9.

22  Extractive Sector Investment ‘protected’, or for a better term ‘insulated’, from political and legal instability that may threaten the profitability of foreign investment.20 Foreign investment, as outlined in the introductory chapter of this book, is frequently portrayed as bearing the potential to contribute to peace and stabilisation by unlocking sustainable development and contributing to poverty reduction.21 This ‘potential’, however, does not automatically translate into concrete benefits for the host countries:22 if left unchecked, investment risks exacerbating volatile contexts, such as those of conflict countries23 and entrenching power structures and systems which enable violence and perpetuate inequality. At a time when both home and host countries are often ready to trade off human rights protections in the attempt to establish a legal and regulatory framework capable of signalling to foreign investors that the host country is ready to grant priority to investment protection,24 it is important to understand the implications of this trend when extractive companies invest in conflict countries. The remainder of this chapter looks at the different meaning that the term ‘protection’ acquires when utilised in IHRL and in IIL discourses,25 in order to then consider the human rights impact of extractive activities in Afghanistan, in particular in relation to the protection of the right to water. B.  Conceptualising the Term ‘Protection’ The notion of ‘protection’ is used in IIL to indicate a foreign investor’s need to ensure the stability of the investment environment before investing in a conflict host country, as I explained in the previous sections of this chapter. The focus is on ensuring that the foreign investment is insulated by changes which may adversely affect its profitability. The term itself, therefore, mainly refers to the standards of investment protection that are usually enshrined in IIAs, and that

20 This is not to be confused with the financial product known as Political Risk Insurance (PRI) offered by both public and private providers. On the implications of PRI in the regulation and governance of natural resources sectors, see generally C Tan, ‘Risky Business: Political Risk Insurance and the Law and Governance of Natural Resources’ in Tan and Faundez (n 9) 28–49. 21 AT Guzman, ‘Explaining the Popularity of Bilateral Investment Treaties’ in Sauvant and Sachs (n 11) 78. 22 Peterson talks of a ‘generalized faith that the treaties will yield investment, which will, in turn, lead inexorably to development’: LE Peterson, Bilateral Investment Treaties and Development Policy-Making (Geneva, IISD, 2004) 4. 23 N Turner et al, Conflict-Countries and Foreign Investment (Tokyo, United Nations University, 2008) 2. See also UN Human Rights Council, ‘Business and Human Rights: Mapping International Standards of Responsibility and Accountability for Corporate Acts’ (19 February 2007) UN Doc A/HRC/4/35, para 1. 24 See generally Sauvant and Sachs (n 11). 25 A clearer understanding of the different meanings of ‘protection’ is important for the purposes of my analysis as it also mirrors the dual meaning of ‘risk’ to the business vs risk to the people within the Business and Human Rights discourse, as further discussed in ch 5.

Extractive Companies in Conflict Countries  23 are then invoked in investor-state arbitration,26 when the foreign investor seeks compensation for alleged violations of these standards. In IHRL, by contrast, the term is often used, inter alia, to outline the need to prevent certain harmful activities which may negatively impact on the enjoyment of human rights. Through this term it is also possible to highlight the specific needs of individuals or groups who might need particular attention. In IHRL there is no universally accepted definition of protection. There are, however, at least three ‘operational’ conceptualisations of the term on which I  rely in order to outline its inherently preventative nature. First, there is the understanding of protection derived from the International Covenant on Economic, Social and Cultural Rights (ICESCR) and related to the state parties’ obligations to respect, protect and fulfil these rights. Within this context, as I explain in chapter three, state parties must ensure that third parties do not interfere with the enjoyment of economic, social and cultural rights (ESC rights). As I argue in chapter five, this obligation to protect also encompasses an obligation to regulate private actors domiciled in a state’s territory and/or under its jurisdiction, including when they operate abroad,27 in order to prevent and, when they occur, remedy adverse human rights impacts. The second concept of protection relevant to this research is the one deployed in the Framework for business and human rights (Framework), discussed in more detail in chapter five.28 The Framework’s conceptualisation of the term protection mirrors the states’ duty to protect against human rights abuses by third parties enshrined in the ICESCR and in other human rights treaties. However, whilst the Framework acknowledges that states may be in breach of their international obligation to protect where they fail to prevent, investigate, punish and redress abuse by private actors, it does not interpret the obligation to protect as explicitly entailing a home state’s requirement to regulate the extraterritorial activities of companies registered in their territory and/or jurisdiction.29 26 The terms investor-state arbitration and investor-state dispute settlement (ISDS) are used interchangeably in the extant literature, and I also do so throughout this book. For the sake of clarity, however, investor-state arbitration is a type of ISDS, which is a broader term encompassing mediation and conciliation amongst other forms of dispute resolution. 27 In relation to this extraterritorial dimension, see also the position of the Committee on Economic Social and Cultural Rights and of the Committee on the Rights of the Child further discussed in chapter 3. See also UN Economic and Social Council, ‘General Comment No. 24 (2017) on State Obligations under the International Covenant on Economic, Social and Cultural Rights in the Context of Business Activities’ (10 August 2017) UN Doc No E/C.12/GC/24, paras 26–28 and 30–35. See also UN Committee on the Rights of the Child, ‘General Comment No. 16 (2013) on State Obligations Regarding the Impact of the Business Sector on Children’s Rights’ (17 April 2013) UN Doc No CRC/C/GC/16, paras 39–46 and 67. 28 As indicated in the introductory chapter of this book, I use the term Framework to refer both to the Protect, Respect and Remedy Framework endorsed by the Council in 2008 (individually referred to as the UN Framework) and the Guiding Principles for the operationalisation of the UN Framework adopted in 2011 (individually referred to as the Guiding Principles or UNGPs). 29 See UN Human Rights Council, ‘Guiding Principles on Business and Human Rights: ­Implementing the United Nations ‘Protect, Respect and Remedy’ Framework’ (21 March 2011) UN Doc A/HRC/17/31. See in particular Guiding Principle 2 and relevant commentary.

24  Extractive Sector Investment As its basis for regulation the Framework identifies ‘policy reasons’ aimed at clarifying home states’ expectations, rather than clear legal extraterritorial obligations (ETO). As I have argued elsewhere,30 the international law principle of due ­diligence clearly enables an understanding of states’ obligations which encompasses the obligation for home states to regulate the overseas activities of companies which they are in a position to regulate. As further discussed in chapter five, UNGP 7, 23(c) and 24, read jointly, can be understood as identifying heightened obligations of home states and heightened responsibilities of companies.31 I contend that these heightened obligations cannot but include, in high-risk situations such as that of Afghanistan, an obligation to regulate vested upon the home states. The third – and perhaps the most significant meaning of protection for the purposes of developing a preventative framework appropriate to the conflict context of Afghanistan – is the broader ‘field’ understanding of the notion, as elaborated by the International Committee of the Red Cross (ICRC),32 and reiterated by the Inter-Agency Standing Committee Task Force on Humanitarian Action and Human Rights (IASC).33 During a series of workshops which took place between 1996 and 2000, various humanitarian and human rights organisations met under the aegis of the ICRC and agreed on the following working definition of ‘protection’ in conflict settings: The concept of protection encompasses all activities aimed at ensuring full respect for the rights of the individual in accordance to the letter and the spirit of the relevant bodies of law, i.e. human rights law, international humanitarian law and refugee law.34

The ICRC definition further elaborates on the meaning of ‘protection activity’, defined as any activity which prevents or puts a stop to a specific pattern of abuse and/or alleviates its immediate effect (responsive action); restores people’s dignity and ensures adequate living conditions through reparation, restitution and rehabilitation (remedial action); fosters an environment conducive to respect for the rights of individuals in accordance with the relevant bodies of law (environment building).35 30 D Davitti, ‘Refining the Protect, Respect and Remedy Framework for Business and Human Rights and its Guiding Principles’ (2016) 16 Human Rights Law Review 55, 65–68. 31 Radu Mares, ‘Corporate and State Responsibilities in Conflict-Affected Areas’ (2014) 83 Nordic Journal of International Law 293, 311. See also D Davitti, ‘The Rise of Private Military and Security Companies in EU Migration Policies: Implications under the UNGP’ (forthcoming 2019) Business and Human Rights Journal. 32 ICRC, Strengthening Protection in War: A Search for Professional Standards (Geneva, ICRC, 2001) 20. 33 IASC, ‘Frequently Asked Questions on International Humanitarian, Human Rights and R ­ efugee Law in the Context of Armed Conflict’ (IASC/UN, 2004) 3. 34 ibid. 35 ICRC (n 32) 20. See also N Howen, ‘The Fundamental Protection Function of the Human Rights Field Operation’ in M O’Flaherty (ed) The Human Rights Field Operation: Law, Theory and Practice (Farnham, Ashgate, 2007) 36.

Extractive Companies in Conflict Countries  25 This definition, also commonly referred to as the ICRC protection framework or the ‘egg’ framework, is widely accepted by human rights and humanitarian field workers and promoted as a common starting point in understanding their role on the ground. The definition has also been elaborated upon by commentators and practitioners. Howen, for instance, in his work on the protection function of human rights field operations, explains how the UN Office of the High Commissioner for Human Rights (OHCHR) is increasingly accepting that protection is a core and distinctive part of its mandate and identity, including in the field, although OHCHR is still buffeted by intense political pressures and cross-currents pushing in different directions – towards increased and reduced human rights protection in the field.36

As discussed above, the political pressures to lower the threshold of what is acceptable in terms of potential human rights impacts for the sake of attracting and retaining foreign investment are particularly intense within the context of extractive sector investments in conflict countries. Because of the significance of these political pressures, it is important to remove any terminological ambiguity and have a clear working understanding of what human rights protection is and of the prevention measures that it entails. In conflict settings, human rights protection encompasses the idea of immediate action to be taken in order to help the victims and stop the perpetrators, but also to prevent violations from occurring in the first place. In other words, at its core, human rights protection in field operations must include action that seeks to prevent, stop or provide remedies and reparation for specific violations of human rights that are suffered by particular individuals (in some cases as members of a group) and that are carried out by perpetrators, whether known or unidentified.37

In his analysis of the ICRC framework, Howen describes the three dimensions of protection which characterise field work – responsive action, remedial action and environment-building – as interconnected, non-hierarchical and complementary activities.38 He also refers to them as a protection continuum,39 with responsive action at one end,40 being more immediate and politically sensitive, and environment-building at the other end,41 being more longer-term and entailing institutional capacity-building, human rights education and legal reform. Howen also stresses the need to fully understand that one type of activity cannot exclude the other, and that they are all necessary but different in the role

36 ibid 32. 37 ibid 36 (emphasis added). 38 ibid. 39 ibid 37. 40 In the ICRC definition: ‘any activity which prevents or put a stop to a specific pattern of abuse and/or alleviates its immediate effects’: (n 32) 20. 41 In the ICRC definition: ‘any activity which fosters an environment conducive to respect for the rights of individual in accordance with the relevant bodies of law’: ibid.

26  Extractive Sector Investment that they play in achieving protection.42 This clarification on the relationship between the various protection activities is important because many governments tend to exert political pressure on human rights field operations to focus more, for instance, on capacity building activities43 rather than on monitoring and reporting activities which are more likely to expose abusive patterns and demand immediate responses.44 In my view, the political dimension of human rights protection described above is particularly relevant to extractive sector investment in conflict areas, including to the specific context of Afghanistan, as I explain in the final section of this chapter. For this reason I contend that the ICRC framework is useful in clarifying that, within the context of corporate abuse, human rights protection activities must necessarily encompass both proactive actions aimed at preventing abuse as well as interventions aimed at stopping and alleviating the effects of specific human rights abuses. As I argue in chapter five, this double understanding of protection demands a clearer articulation of the home state’s obligation to regulate business conduct both at home and abroad, and to ensure remedy, including access to the courts of the home state. This ‘field’ understanding of protection, therefore, confirms the need for a stronger emphasis on prevention when outlining the normative content of the obligation to protect enshrined in the ICESCR and in the Framework, especially within the specific operational context of extractive sector investment in conflict countries. In sum, I submit that a strong focus on prevention is essential for the interpretation of the home state obligation to protect and can complement, reinforce and, where needed, recalibrate the conceptualisation of protection contained in the ICESCR45 and in the Framework for two reasons. First, this argument finds support in the conceptualisation of the ICRC framework, which is already rooted in relevant normative standards (ie, IHRL, international humanitarian law and international refugee law), and it is thus compatible with the understanding of protection flowing from the ICESCR. Second, the ICRC framework offers a tripartite mechanism (responsive action, remedial action and ­environment-building), whereby preventative protection activities are conceived

42 Howen (n 35) 37. 43 This overall focus on capacity building is part of the process of ‘good governance’ and ‘encasing’ discussed in the introductory chapter of this book, whereby post-conflict economic restructuring aims at creating an enabling environment for investment, made of structures and institutions capable of insulating investments from democratic processes and regulatory changes. As part of this restructuring, capacity building is key because the state is ‘central to the promotion of economic development, not as a primary provider of goods but rather as a “partner, catalyst and facilitator” of the market’. See Tan (n 5) 150–51. 44 Howen (n 35) 37–38: ‘The further one moves along the protection continuum towards capacity building, the greater is the political risk that a government or the UN itself, will use the existence of such assistance as an excuse to avoid accountability in international human rights political bodies and to reject tougher protection activities on the ground’. 45 See above the interpretation by the CESCR in General Comment 24 and in its concluding observations (n 27).

Extractive Companies in Conflict Countries  27 as part of a protection continuum which emphasises the centrality of the principles of impartiality and non-discrimination. This protection perspective, in other words, demands a focus on prevention. As evidenced in chapter five, there is a need to refocus on home state obligations, so as to ensure that enough prevalence and significance is devoted to the prevention of human rights abuse, especially through the regulation of the extraterritorial activities of companies. As briefly mentioned above, the reason why I believe it is necessary to emphasise the preventive dimension of protection is that most responses to corporate abuse tend to ignore the importance of preventing abuse, and increasingly focus on self-regulation and on improving extant risk assessment paradigms. The inherent dangers of these paradigms is that, in the name of principled pragmatism,46 they tend to refrain from engaging with the normative dimension of applicable international law, and imply the possibility of assessing the viability of an extractive project by balancing it against its human rights ‘risks’ to the investor, mainly considered in terms of financial loss and reputational damage to the company. Thus, the assessment of extractive sector investments in conflict countries from a meaningful protection/prevention perspective is the only way in which the human rights of the individuals affected by the extractive projects can be effectively taken into consideration, and appropriately respected, protected and fulfilled.47 However, as explained in the following section through the example of Afghanistan, there are practical challenges to be tackled to ensure the establishment and implementation of a protection framework against corporate abuse in conflict countries. As I will explain, these mainly relate to the complex political and policy dimensions of armed conflict; to the way in which the extractive sector resists the development of legally binding regulations, thus triggering a certain overreliance on self-regulation and soft-law mechanisms; and to a general reluctance from human rights actors on the ground to engage with the interplay between investment, business and human rights. The latter

46 John Ruggie introduced the concept of ‘principled pragmatism’ at the beginning of his mandate, to justify the fact that, although he took his mandate to be primarily evidence-based, it would also inevitably ‘entail making normative judgements. In the Special Representative’s case, the basis for those judgements might best be described as a principled form of pragmatism: an unflinching commitment to the principle of strengthening the promotion and protection of human rights as it relates to business, coupled with a pragmatic attachment to what works best in creating change where it matters most – in the daily lives of people’. See UN Economic and Social Council, ‘Interim report of the Special Representative of the Secretary-General on the issue of human rights and transnational corporations and other business enterprises’ (22 February 2006) UN Doc No E/CN.4/2006/97, para 81. He then further elaborated upon the concept in his 2010 report to the UN Human Rights Council. See UN Human Rights Council, ‘Business and Human Rights: Further steps toward the operationalization of the “protect, respect and remedy” framework’ (9 April 2010) UN Doc No A/HRC/14/27, paras 4–15. 47 This tripartite categorisation refers in particular to the human rights obligations of states, as further discussed in ch 3.

28  Extractive Sector Investment aspect reflects in part the inherent limitations of existing human rights frameworks, which I discuss in more detail in chapter three. II.  PRACTICAL CHALLENGES IN OPERATIONALISING HUMAN RIGHTS PROTECTION WHEN EXTRACTIVE COMPANIES INVEST IN CONFLICT COUNTRIES: THE SITUATION IN AFGHANISTAN

Ensuring human rights whilst armed conflict is still ongoing remains one of the most significant protection challenges. Lack of resources, extensive economic restructuring, fluctuating or politicised commitment of the international community, collapse of law and order are but some of the difficulties encountered whilst attempting to guarantee that human rights are respected, protected and fulfilled. Further obstacles arise when corporate actors (including extractive companies) invest in such uncertain contexts. In best-case scenarios, the conflict host government strives to demonstrate that it still exercises full control over its territory and that it is capable of maintaining security throughout the country. It is also usually eager to attract investment in order to engage in re-construction activities. To do this, it is often willing to relax the regulatory environment and enter into international investment agreements (IIAs), even when these may be particularly onerous or bear negative implications in the longer term.48 Its focus tends to be on the immediate benefits of incoming investments, and on the way in which these will boost the confidence of the international community in the stability achieved within the host country. In worst-case scenarios, the conflict host government is a predatory government, mostly interested in entrenching its own power and protecting its own vested interests, and interventions by foreign actors have aggravated and entrenched violent structures of containment and control. In such contexts, investments are therefore perceived as unique opportunities for the personal enrichment of government members and their cronies, whilst decisions are not dictated by what is in the best interest of the country and its population. Of course, there is a continuum which flows between these two extreme scenarios and it is perhaps appropriate to specify that most conflict countries would likely present elements common to both sets of circumstances and locate themselves somewhere along this continuum.

48 LN Skovgaard Poulsen, Bounded Rationality and Economic Diplomacy: The Politics of Investment Treaties in Developing Countries (Cambridge, Cambridge University Press, 2015) 134, where it is argued that ‘developing countries were primarily attracted to BITs because they were salient and easy instruments to adopt. Although they may not have been optimal to attract investment, they seemed good enough. Even this expectation was not based on any meticulous processing of information, however, but was instead driven by policy-makers wanting to believe the treaties worked … Similarly, instead of trying to optimize the content of the treaties in the competition to attract investment, policy-makers had a strong preference for easy and satisfactory solutions, which meant the European templates were perfect as simple default rules’ (original emphasis).

Practical Challenges in Operationalising Human Rights Protection  29 The example of Afghanistan, which I present below, is emblematic of conflict situations in which a host country is under intense pressure to demonstrate its independence and stability, whilst at the same time institutional and physical infrastructures are practically non-existent and corruption is endemic. With a poverty rate of 42 per cent and a further 20 per cent of the Afghan population living just above the poverty line,49 Afghanistan’s situation is further exacerbated by its protracted armed conflict which stretches over four decades. After the ousting of the Taliban from power in 2001 through armed intervention by the United States and the ‘Coalition of the willing’, Afghanistan continues to struggle between the resurgent neo-Taliban and a government which turns a blind eye to those benefiting from positions of influence and power within a general miasma of rampant crony capitalism in an overall climate of impunity.50 Despite being extremely rich in natural resources (mineral and non-mineral), Afghanistan still lacks the most basic infrastructure and essential public services, such as roads, water, sanitation and electricity.51 As a result of this, or at least so the claim goes, Afghanistan’s natural resources will remain unexplored and untouched, unless the government is successful in attracting foreign investment in the extractive sector. In 2008 Afghanistan adopted a poverty reduction strategy paper, the Afghan National Development Strategy (ANDS),52 which was aimed at implementing the Afghanistan Compact benchmarks.53 International donors and stakeholders accepted the ANDS, and confirmed its key terms in subsequent international donors’ meetings, agreeing to support the government in its implementation.54 Yet, numerous contradictions marred the implementation of the ANDS, partly because of the escalation of the armed conflict; and partly because the Afghan government lost international credibility in relation to its commitment towards fighting corruption, ensuring accountability for current and past abuses and protecting the rights of all its citizens, including women and ethnic minorities.55 Finally the situation was further exacerbated by a lack

49 Afghanistan has an estimated population of 34.12 million, with an approximately equal distribution between men and women and the majority of the population below the age of 24. See Afghanistan Demographics Profile 2018, at www.indexmundi.com/afghanistan/demographics_ profile.html. 50 See eg N Niland, ‘Impunitiy and Insurgency: A Deadly Combination in Afghanistan’ (2010) 880 International Review of the Red Cross 931, 934. 51 See eg The World Bank, ‘Poverty Status in Afghanistan: A Profile Based on National Risk and Vulnerability Assessment (NRVA) 2007/08’, July 2010 at www.worldbank.org. 52 See Islamic Republic of Afghanistan, ‘Afghanistan National Development Strategy 2008–2013: A Strategy for Security, Governance, Economic Growth and Poverty Reduction’, at www.undp.org. af/publications/KeyDocuments/ANDS_Full_Eng.pdf. 53 For the Compact and its benchmarks, see ‘Building on Success: The London Conference on Afghanistan, The Afghanistan Compact’, 31 January–1 February 2006, at www.nato.int/isaf/docu/ epub/pdf/afghanistan_compact.pdf. 54 See key documents of the Tokyo Conference on Afghanistan, eg ‘The Tokyo Declaration. Partnership for Self-Reliance in Afghanistan: From Transition to Transformation’, 8 July 2012. 55 See T Ruttig, ‘Einiges besser, nichts wirklich gut; Afghanistan nach 34 Jahren Krieg: eine Bilanz’, WeltTrends, Potsdam, January/February 2014, 27–39, at .

30  Extractive Sector Investment of consistency and clarity in the strategic approaches adopted, over time, by the various international actors involved in Afghanistan, all seemingly pursing different goals and agendas.56 Crucially, the ANDS, which was developed with the support of the UN Development Program (UNDP) for the period 2008–13, was also the principal review of Afghanistan’s investment policy. As such, the ANDS attempted to ensure that investment focused on ‘(1) agriculture and rural rehabilitation, (2) human capacity development, and (3) economic development and infrastructure, through high-priority programs chosen for contributions to job creation, broad geographic impact, and likelihood of attracting additional investment’.57 A further ‘five year strategic framework for achieving its overarching goal of self-reliance’,58 called the Afghanistan National Peace and Development Framework (ANPDF), was presented by the Afghan government in October 2016 at the Brussels Conference on Afghanistan, where a package of development aid for $3.8 billion per year was agreed with international donors and organisations.59 Against this backdrop, it is important to note that in 2016 Afghanistan also officially accessed the World Trade Organization (WTO),60 whilst in 2004 it had already entered into a Trade and Investment Framework Agreement (TIFA)61 with the United States, which has yet to materialise into further cooperation in the exploitation of Afghanistan’s natural resources by means of an IIA. ­Afghanistan is also already party to IIAs of various nature, including BITs with Germany, Turkey and Iran and the Afghanistan Pakistan Transit Trade Agreement of 2010.62 As already mentioned in the introduction to this book, experience of the impact of extractive projects in Least Developed Countries (LDCs) indicates that such activities can have far-reaching human rights consequences and

56 See A Donini, ‘Between a Rock and a Hard Place: Integration or Independence of Humanitarian Action?’ (2011) 93 International Review of the Red Cross 141; and A Donini, Humanitarian Agenda 2015: Principles Power and Perceptions – Afghanistan Case Study (Somerville, Feinstein International Center, 2006). 57 US Department of State, ‘Afghanistan: 2017 Investment Climate Statements Report’ (29 June 2017) at www.state.gov/e/eb/rls/othr/ics/2017/sca/270011.htm. 58 Afghanistan National Peace and Development Framework official website at http://policymof. gov.af/afghanistan-national-development-framework/. 59 ibid. 60 See Afghanistan’s official WTO member page at www.wto.org/english/thewto_e/countries_e/ afghanistan_e.htm. For a WTO-based account of the reforms implemented during the accession process, see H Rasaw, ‘Afghanistan’s Accession: Challenged by Conflict’ in A Kireyev and C Osakwe (eds), Trade Multilateralism in the Twenty-First Century: Building the Upper Floors of the Trading System Through the Accession Process (Cambridge, Cambridge University Press, 2017) 224–34. For an account of an earlier stage of the accession process, see generally M ­Kirkbride, Getting the Fundamentals Right: The Early Stages of Afghanistan’s WTO Accession Process (Oxford, Oxfam, 2007). 61 Full text of the US-Afghanistan TIFA 2004 at www.ustr.gov/sites/default/files/uploads/ agreements/tifa/asset_upload_file642_9850.pdf. 62 See further US Department of State (n 57) at www.state.gov/e/eb/rls/othr/ics/2017/sca/270011. htm.

Practical Challenges in Operationalising Human Rights Protection  31 s­ eriously undermine efforts towards peace and a meaningful development of the country. Whereas most of the international and media attention on Afghanistan currently revolves around the escalation of the armed conflict, the spread of Islamic State (IS) in certain regions of the country and the presidential elections in 2019, a substantive economic restructuring of the country has continued unabated away from the public eye since the armed intervention of 2001. As also mentioned in the introductory chapter, in 2008 Afghanistan agreed a 30-year lease for the exploitation of the Aynak site, one of the largest copper deposits in the world, following an allegedly flawed public tender.63 At the time the concession did not raise much public interest or attention: only a few members of the international community acknowledged the fact by welcoming the flow of foreign investment into the country. Local communities were not asked to consent to the mining project and were subsequently removed by force from the areas adjacent to the site.64 The full terms of the concession remained unavailable to the public until four years after it was signed, despite national and international demands for transparency.65 Similarly, in 2011 the Afghan Ministry of Mines opened a public call for tender for the exploitation of its largest iron-ore deposit in Hajigak, in central Afghanistan’s Bamyan province.66 By the end of 2011, the tender to develop three blocks of this huge iron-ore concession was won by the consortium Afghan Iron & Steel Company Limited (Afisco) led by India’s largest steel producer, Steel Authority of India Limited (SAIL), whereas the tender for a fourth block was won by the Canadian company Kilo Goldmines Ltd.67 Despite much ado about this successful tendering process, the contract was never signed as the Indian consortium eventually resolved to withdraw from the project.68 The Aynak and Hajigak concessions need to be understood against the context of the extant investment protections which Afghanistan has granted 63 The lease was awarded to the Metallurgical Corporation of China (MCC) which then created the Afghan-based entity MCC-JCL Aynak Minerals (MJAM). For allegations of corruption and bribery during the tender, see JR Yeager, ‘The Aynak Copper Tender: Implications for Afghanistan and the West’ (Skyline Laboratories and Assayers, 2009), at www.cimicweb.org. 64 S Lakhani, ‘Extractive Industries and Peacebuilding in Afghanistan: The Role of Social Accountability’ (Washington DC, United States Institute of Peace, 2013) 4–5. 65 The text of the concession agreement was eventually disclosed in October 2012. See G Bowley and M Rosenberg, ‘Mining Contract Details Disclosed in Afghanistan’ (14 October 2012) The New York Times at www.nytimes.com/2012/10/15/world/asia/afghan-minister-discloses-detailsof-mining-contracts.html. For an analysis of the agreement, see Global Witness, Copper Bottomed? Bolstering the Aynak Contract: Afghanistan’s First Major Mining Deal (Global Witness, 2012) 28–29, at www.globalwitness.org/copper_bottomed/index.html. See also Global Witness, Getting to Gold: How Afghanistan’s First Mining Contracts Can Support Transparency and Accountability in the Sector (Global Witness, 2012). 66 See the details released by the Afghan Ministry of Mines and Petroleum at www.mom.gov.af/en. 67 Total investment in the project, including infrastructure and power plant, was estimated to be around USD10.8 billions: ‘Consortium of Indian Steel Companies plan to complete prospecting Afghan Ore Blocks in 18 Months’ (10 June 2013) The Economic Times. 68 Z Jahanmai, ‘Ministry moves to start mining Hajigak’ (3 March 2018) Tolo News at www. tolonews.com/business/ministry-moves-%C2%A0start-mining%C2%A0hajigak.

32  Extractive Sector Investment through both the domestic and the international regulatory frameworks.69 The provisions contained in IIAs, in fact, are crucial to reinforce those enshrined in the concession agreements, and ultimately in ensuring that the investments by the extractive companies involved in developing the mineral deposits are enforceable through investor-state arbitration. The strength and scope of the principal guarantees generally enshrined in IIAs are analysed in detail in ­chapter two of this book. But at this point of our discussion on Afghanistan as an emblematic conflict country in which extractive companies are investing, it is worth emphasising that the wider structural configuration of these investments within IIL continues to remain undetected and it does not tend to be the object of any systematic scrutiny by civil society and by national or international organisations. As a result, the task of preventing the occurrence of corporate abuse becomes particularly difficult in the absence of relevant information and of an understanding of the potential repercussions of these IIAs. On the one hand, the fact that the concessions for the exploitation of Afghanistan’s natural resources are assigned in a far from transparent manner and that the terms of the relevant investment contracts are often kept confidential70 prevent an appropriate ex ante analysis of their impact on the local population. On the other hand, extant contracts and IIAs to which Afghanistan is a party may prevent the conflict host country from exercising its capacity to amend its regulatory systems in order to protect and strengthen human rights within the context of natural resources extraction.71 From a human rights protection perspective, the scenario that is unfolding in relation to the Afghan extractive sector raises obvious questions as to why no protection mechanism is currently being put in place to monitor the situation and systematically assess the impact both of the investment contracts and  – perhaps most importantly – of the overall system of IIL protection

69 Afghanistan has been a member state to the International Centre for Settlement of Investment Disputes) since 1966. In 2005 it adopted a new Private Investment Law in which investment is broadly defined as ‘currency and contributions in kind, including, without limitation, licenses, leases, machinery, equipment, and industrial and intellectual-property rights provided for the purpose of acquiring shares of stock or other ownership interests in a registered enterprise’. This law prohibits investment in nuclear power, gambling, narcotics and other intoxicating substances. In 2005 Afghanistan also became signatory to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention), and in 2007 adopted the Commercial Arbitration Law, in which it is established that Afghan courts must enforce any award or agreement resulting from arbitration or other dispute settlement mechanism. See US Department of State (n 57). 70 See eg ‘Joint Civil Society Letter: Four Core Objectives for Good Governance in ­Afghanistan’s Extractive Sector’ (11 June 2012) at www.globalwitness.org. On the importance of contract disclosure, see UN Human Rights Council, ‘Principles for Responsible Contracts: Integrating the Management of Human Rights Risks into State-Investor Contract Negotiations: Guidance for Negotiators’ (25 May 2011) at www.ohchr.org/Documents/Publications/Principles_ ResponsibleContracts_HR_PUB_15_1_EN.pdf. 71 L Cotula, ‘Investment Treaties, Natural Resources and Regulatory Space: Technical Issues and Political Choices in International Investment Law’ in Tan and Faundez (n 9) 8–27, 20.

Practical Challenges in Operationalising Human Rights Protection  33 within a context of ongoing armed conflict. In this book, I suggest three main challenges to the establishment of an effective protection mechanism against corporate abuse. The first challenge relates to a general tendency to rely on selfregulation and soft-law initiatives to address corporate human rights abuses. As evidenced in existing literature, self-regulation, codes of conduct and corporate social responsibility mechanisms have proven inappropriate to ensure state and/or corporate accountability,72 especially in conflict areas.73 The second challenge relates to the way in which human rights operations on the ground select the human rights to be prioritised in the country in which they are deployed. The approach adopted by human rights field actors in relation to corporate abuse is, at best, ambivalent and in part reflects different perceptions of what IHRL actually is and does, and its inherent limitations, as discussed in chapters three and five. The third challenge relates to the complexity of the Afghan political context and to the link between the protracted conflict and a long-term failure to ensure justice and accountability in Afghanistan. These three challenges are explained in turn below. A.  Corporate Abuse and ‘Soft-law’ Mechanisms The first challenge is mainly related to broader macro-level considerations pertaining to recent developments in the field of business and human rights,74 rather than to specific obstacles to human rights protection in Afghanistan. Yet, these considerations have wide-ranging implications on the way in which human rights policies are adopted (or not) in Afghanistan to tackle corporate abuse. As confirmed with the approval by the UN Human Rights Council of the Guiding Principles on Business and Human Rights in June 2011, when it comes to regulating corporate activities there is a tendency to rely on soft-law mechanisms and self-regulation,75 as if they were sufficient to ensure human rights ­protection.76 As a result, attempts to develop a ‘hard law’ framework ­applicable 72 R McCorquodale et al, ‘Human Rights Due Diligence in Law and Practice: Good Practices and Challenges for Business Enterprises’ (2017) 2 Business and Human Rights Journal 195, 221–24. See also K Salcito and M Wielga, ‘What does Human Rights Due Diligence for Business Relationships Really Look Like on the Ground?’ (2018) 3 Business and Human Rights Journal 113, 118. 73 See Guiding Principles 7 and 23(c) (n 29), further discussed in ch 5. See also UN Human Rights Council, ‘Business and Human Rights in Conflict-Affected Regions: Challenges and Options Towards State Responses’ (27 May 2011) UN Doc A/HRC/17/32, para 21. 74 For an analysis and critique of the business and human rights discourse, see ch 5. 75 See eg J Bray and A Crockett, ‘Responsible Risk-Taking in Conflict Affected Countries: The Need for Due Diligence and the Importance of Collective Approaches’ (2012) 94 International Review of the Red Cross 1069. 76 J Nolan, ‘The Corporate Responsibility to Respect Human Rights: Soft Law or Not Law’ in S Deva and D Bilchitz (eds), Human Rights Obligations of Business: Beyond the Corporate Responsibility to Respect? (Cambridge, Cambridge University Press, 2013); see also D Reed et al (eds), Business Regulation and Non-State Actors: Whose Standards? Whose Development? (Abingdon, Routledge, 2012) 19–37.

34  Extractive Sector Investment to corporate abuse occurring in both conflict and non-conflict countries are being met with systematic resistance by business actors and home states alike.77 This contrasts strongly with the legally binding structural approach embraced to strengthen investment protections, which are then enforceable through investor-state arbitration.78 In my view, as further evidenced in chapter five, the different way in which international law treats state and non-state actors reflects the way in which the public/private divide is still widely used as a way of explaining, and indeed justifying, limited state intervention in the private sphere.79 In the investment field the influence of the divide is two-fold. First, international investment arbitration is based on a private commercial arbitration model to solve disputes between private parties, which is increasingly being used to de facto bypass national courts when resolving disputes between states and corporate individuals.80 The mechanism of international investment arbitration is such that, uniquely in international law, only investors can initiate arbitration proceedings, demanding compensation from host states in the event of violations of investment protections. Investment tribunals, therefore, increasingly find themselves reviewing the regulatory conduct of sovereign states by interpreting the scope and reach of the investment protection standards enshrined in IIAs. As I describe in chapter two, such standards have developed and expanded over time, and are often presented as ‘neutral’ concepts, void of political content.81 The mechanism of investment arbitration, thus, appears to respond to the needs of corporate non-state actors, even when the breach by the state is to implement regulations that have a public purpose, for instance the protection of human rights. At the basis of investment protection tends to be the idea that the regulatory intervention of the state needs to be prevented or at least limited through compensation, as it may interfere with the profitability of the investment and therefore violate so-called investors’ rights. Second, at the same time as

77 See for instance the debate surrounding the negotiations of a binding treaty on business and human rights, and eg EU Member States threatening to abandon the negotiations, at www.businesshumanrights.org/en/binding-treaty/latest-news-on-proposed-binding-treaty. 78 For a more detailed analysis of investment protections see ch 2. For a historical overview on the treatment of alien property in international relations and international law, see M Maurer, The Empire Trap: The Rise and Fall of US Intervention to Protect American Property Overseas (Princeton NJ, Princeton University Press, 2013) especially ch 10 ‘Escaping by Design’. See also C Lipson, Standing Guard: Protecting Foreign Capital in the Nineteenth and Twentieth Centuries (Berkeley CA, University of California Press, 1985) 166–76. 79 See generally P Alston, ‘The “Not-a-Cat” Syndrome: Can the International Human Rights Regime Accommodate Non-State Actors?’ in P Alston (ed), Non-State Actors and Human Rights (Oxford, Oxford University Press, 2005). 80 M Koskenniemi, ‘It’s Not the Cases, It’s the System! Book Review Essay of M Sornarajah, Resistance and Change in the International Law on Foreign Investment (Cambridge University Press, 2015)’ (2017) 18 Journal of World Investment and Trade 343, 352. 81 See eg the claims of IIL as a tool for the depoliticisation of disputes in U Kriebaum, ‘Evaluating Social Benefits and Costs of Investment Treaties: Depoliticization of Investment Disputes’ (2018) 33 ICSID Review 14, 27–28.

Practical Challenges in Operationalising Human Rights Protection  35 strengthening their protection as investors, corporate actors continue to reject any type of legal obligation in relation to corporate human rights abuses, mainly by exploiting the gaps in IHRL and their status as non-state actors to resist any attempt to impose human rights obligations directly on them.82 With soft-law mechanisms perceived as the best tools to regulate the conduct of corporate actors, the public/private divide has served the purpose of both protecting and advancing corporate interests often by depoliticising the discussion and reinforcing existing imbalances of power.83 B.  Prioritising the Rights to be Protected The implications of the over-reliance on soft-law mechanisms to address corporate human rights abuses (described in the previous section) are far reaching in conflict areas, as it reinforces the assumption that private non-state actors have no legal obligations under international law and that host states are the only duty bearers. As a consequence, human rights protection policies at field level generally tend not to address corporate abuses: stronger emphasis is usually placed on collaboration with host state actors and the implementation of a good governance agenda.84 Protection activities are sometimes undertaken, however, when the severity of the abuse is such that can no longer be ignored,85 although these are often too little and too late. The soft-law approach to corporate abuse therefore tends to influence the second challenge that I describe in this section, that is to say, the way in which human rights actors prioritise their work on the ground. Human rights professionals deployed in conflict areas by international organisations or by national and international non-governmental organisations (NGOs) are generally reluctant to engage in monitoring and reporting of corporate abuse. Partly this is due to a lack of resources to dedicate to this specific area of expertise: in a situation where the type of abuse occurring is varied and sometimes overwhelming both in nature and scope, it is understandable that 82 A Clapham, Human Rights Obligations of Non-State Actors (Oxford, Oxford University Press, 2006) ch 6. See also J Ford, ‘Empty Rituals and Workable Models? Towards a Business and Human Rights Treaty’ (2017) 40 UNSW Law Journal 1223, 1231. See further J Ford, Regulating Business for Peace: The United Nations, the Private Sector, and Post-Conflict Recovery (Cambridge, Cambridge University Press, 2015) especially ch 8. See also T Evans and J Hancock, ‘Doing ­Something without Doing Anything: International Law and the Challenge of Globalisation’ (1998) 2 International Journal of Human Rights 1. 83 See S Pahuja and A Saunders, ‘Rival Worlds and the Place of the Corporation in International Law’ in J von Bernstorff and P Dann (eds), The Battle for International Law in the Decolonization Era (Oxford, Oxford University Press, forthcoming 2019). See N Des Rosiers, ‘Introduction’ in Law Commission of Canada (ed), New Perspectives on the Public-Private Divide (Vancouver, UBC Press, 2003) vii. 84 See Tan (n 5) and Sattorova (n 5). 85 J Ford and K Tienhaara, ‘Too Little, Too Late? International Oversight of Contract Negotiations in Post-Conflict Liberia’ Australian National University, Issues Paper 12, November 2009, 5–15 and 18–21.

36  Extractive Sector Investment professionals on the ground need to prioritise their work. Prioritisation decisions are often dictated by practical on-the-ground conditions, such as staff available in any given region, their technical skills and expertise, as well as the emergence of patterns of human rights abuse which may need an urgent response.86 The mandate of the organisations (in the case of international organisations) and the will of the donors (in the case of NGOs), however, also strongly influence this allocation of priorities.87 In Afghanistan the sustained escalation of the conflict has resulted in a significant focus on the impact of the armed conflict on civilians, both in terms of verification and documentation of civilian casualties and of the ways in which the conflict directly and indirectly affects human rights.88 Other conflictrelated abuses have also been prioritised over the years, such as conflict-related ­detention;89 the impact of the conflict on women’s rights;90 and ensuring justice for past abuses during negotiations between the belligerents.91 Discussing the future impact of an extractive project that has not even started can be perceived as a luxury by human rights field operations when staff and security constraints severely limit the feasibility of carrying out set tasks. Prioritisation often follows the tendency to favour engagement with civil and political rights, partly because there is a more established methodology and expertise in monitoring these rights in situations of armed conflict;92 and partly because the human rights professionals themselves do not feel fully competent in engaging with legal areas, such as IIL, which are perceived as too technical and unfamiliar.93 Local civil society and national human rights institutions (NHRIs), which have a fundamental role in ensuring local ownership of the human rights agenda,94 also often lack the capacity and/or ability to systematically monitor extractive activities, mobilise

86 See generally M O’Flaherty and D Davitti, ‘International Human Rights in Field Operations: A Fast Developing Human Rights Tool’, in S Sheeran and N Rodley (eds), Routledge Handbook of International Human Rights Law (Abingdon, Routledge, 2013); M O’Flahery and G Ulrich (eds), The Professional Identity of the Human Rights Field Officer (Farnham, Ashgate, 2010); and O’Flaherty (n 35). 87 For a brief insight on this see O’Flaherty and Davitti, ibid. 88 Since 2007, for instance, UNAMA has published two yearly human rights reports on the protection of civilians in armed conflict, see http://unama.unmissions.org/Default.aspx?tabid= 13941&language=en-US. 89 UNAMA, ‘Treatment of Conflict Related Detainees in Afghan Custody’, January 2013, at www. ohchr.org. 90 UNAMA, ‘A Long Way to Go: Implementation of EVAW Law’, December 2012, at www. ohchr.org. 91 See the leaked UN mapping report on conflict-related rights abuses, at www.flagrancy.net/ salvage/UNMappingReportAfghanistan.pdf; and on the never published Afghanistan Independent Human Rights Commission’s Conflict Mapping Report see P Gossman, ‘Afghanistan: The Past as a Prologue’, ICTJ 2012, at www.ictj.org. 92 Ford and Tienhaara (n 85). 93 See Ford, Regulating Business for Peace (n 82) ch 3. 94 Human Rights Law Centre University of Nottingham, ‘Guiding Principles for Human Rights Field Officers Working in Conflict and Post-conflict Environments’ (2009) at http://resourcecentre. savethechildren.se/sites/default/files/documents/6030.pdf.

Practical Challenges in Operationalising Human Rights Protection  37 local communities and engage in ensuring government accountability during the negotiations of concessions and relevant IIAs.95 The granting of major Afghan extractive concessions has, moreover, been hailed by the international community as one of the greatest achievements for the country, a reason for hope and a first solid step towards certain ­development.96 There has been, however, no proper discussion of the potential human rights impacts of these projects. Initial attempts to consider the effects of planned projects ex ante were met by resistance from foreign investors, home states, the Afghan government and, more generally, international donors.97 In my view, this is also due to the fact that the mainstream view of the international community is one of support of any initiative which might strengthen the Afghan government and potentially be held as an example of good practice. It partly reflects the assumption that business is, in any case, ‘good news’ and that conflict countries need business in order to achieve stability, development and ultimately independence from foreign aid and assistance.98 So, whilst the legal and regulatory framework for the exploitation of Afghanistan’s natural resources has been rapidly restructured without the necessary rigorous scrutiny, the international political establishment has predominantly focused on attempts to destabilise armed opposition groups (along the lines of a dividi et impera99 – divide and conquer strategy);100 provide a semblance of political legitimacy for the central government through flawed, yet internationally endorsed, presidential and parliamentary elections;101 and eventually turned to efforts to carry out peace negotiations at all costs, before pulling out (at least in part) in 2014. These negotiations, amidst the intensification of the conflict, are still ongoing at the moment of writing, whilst the country is preparing itself for the 2019 presidential elections. In spite of the escalating armed conflict, the country has been advertised as ‘open for business’. In response, investment in the Afghan extractive sector flew rapidly in the country in 2012 and 2013, enriching an entrenched political elite as well as the bottom lines of the foreign investors involved. The wider, burgeoning discourse on business and human rights seems 95 Despite the presence in Afghanistan of a Civil Society Natural Resources Monitoring Network (CSNRMN), of which national NGOs such as Integrity Watch Afghanistan and Afghanistan Watch are part, the country’s civil society organisations are very much dependent on international donors and support. For examples of good practice in natural resources monitoring, see www.watchafghanistan.org/2013-05-27/transparent-accountable-and-sustainable-governance-ofnatural-resources/. 96 See eg The World Bank positive assessment of the Aynak project at www.worldbank.org/en/ news/feature/2013/04/02/qa-aynak-mining-afghanistan. 97 See UNAMA internal reports and memos on the topic, June 2007, on file with author. 98 See various reports on The World Bank projects on Sustainable Development and Natural Resources in Afghanistan at www.worldbank.org/en/news/feature/2013/04/02/qa-aynak-miningafghanistan. 99 N Machiavelli, Dell’Arte della Guerra: Libro Sesto (Florence, Sansoni, 1971) 153. 100 See D Davitti, The Failure of the Justice Agenda: Disillusionment and Growing Instability (UNAMA, 2009), internal UNAMA report on file with author. 101 See generally E Afsah and AH Guhr, ‘Afghanistan: Building a State to Keep the Peace’ (2005) 9 Max Planck Yearbook of United Nations Law 373.

38  Extractive Sector Investment to have neglected, or in any case to have had no impact, on the lives of the approximately 7.3 million Afghans (27 per cent of the total population) who still lack access to an improved water resource.102 I contend that the allocation of human rights priorities at field level – emblematically characterised by a prevalent focus on civil and political rights and a tendency to neglect ESC rights103 – in part also reflects a certain dominant conception of the role and values that IHRL ought to embrace. Undoubtedly this reflection is also strongly linked to the highly contested ideological foundations of IHRL.104 Lang, for instance, describes the way in which the emergence of neoliberal thought in the 1970s, and its subsequent rise through the 1980s and early 1990s, encouraged a vigorous return to the classical liberal traditions of human rights thought, which favours civil and political rights and actively promotes a link between human rights and free-market reforms.105 The proponents of this link justify it through the deployment of four main arguments.106 First, the syllogism that global economic liberalisation and market reforms create prosperity and, therefore, pressure for democratic political reform and the strengthening of human rights. Second, the mantra that free-market reforms are essential to the achievement of poverty reduction and to the realisation of certain rights, such as the right to health and to an adequate standard of living. Third, ‘democratic rights’ are presented as conducive to economic development and as a precondition to the establishment of perfectly efficient markets. Within this argument, free-market reforms are seen as part and parcel of civil and political reforms: as with the case of contemporary Afghanistan, good governance agendas promote rule of law, anti-corruption and other state-building initiatives ‘as the core institutional underpinning of well-functioning markets’.107 Fourth, some commentators argue that the connection between neoliberal market reforms and human rights exist also in principle, as economic and political freedoms arguably complement and reinforce each other and should therefore be seen as two elements of the same political project.108

102 Centre for Policy and Human Development (CPHD), The Forgotten Front: Water Security and the Crisis in Sanitation (CPHD, 2011) 10, at http://re.indiaenvironmentportal.org.in/files/ Complete%20NHDR%202011%20final.pdf. 103 See O’Flaherty and Davitti (n 86). 104 See S Moyn, Not Enough: Human Rights in an Unequal World (Cambridge MA, Harvard University Press, 2018) especially ch 7 ‘Human Rights in the Neoliberal Maelstrom’. See also J Dehm, ‘Highlighting Inequalities in the Histories of Human Rights: Contestations over Justice, Needs and Rights in the 1970s’ (forthcoming 2019) Leiden Journal of International Law. See further A Lang, World Trade Law after Neoliberalism: Reimagining the Global Economic Order (Oxford, Oxford University Press, 2011) especially chs 2 and 3; and see A Anghie, Imperialism, Sovereignty and the Making of International Law (Cambridge, Cambridge University Press, 2005). 105 O’Flaherty and Davitti (n 86) 54–55. 106 ibid. 107 ibid 55. See also Tan (n 5) and Sattorova (n 5). 108 EU Petersmann, ‘Time for a United Nations “Global Compact” for Integrating Human Rights into the Law of Worldwide Organizations: Lessons from European Integration’ (2002) 13 European Journal of International Law 621, 630.

Practical Challenges in Operationalising Human Rights Protection  39 The dangers of this ‘merger and acquisition’ of human rights109 by neoliberal ideas are clear if we look at the failure of the democracy/human rights/ free-market package pursued in Afghanistan.110 As I explain in the final section of this chapter, this agenda failed to ensure justice and accountability in Afghanistan. It does, however, still sustain the gold rush to natural resources exploitation, whilst the country is far from ‘stabilised’ or ‘secured’. C.  A Complex Political Context The third challenge to the deployment of an effective human rights protection mechanism in Afghanistan relates to the deeply complex political situation on the ground. Almost 20 years after the Bonn Agreement the security situation has deteriorated considerably, leaving the vast majority of the Afghan population in a very precarious situation, both in terms of immediate security in the midst of armed conflict and in terms of survival in conditions of extreme poverty.111 For the purposes of this research, and in order to appreciate the risks related to unbridled investment in the Afghan extractive sector, it is crucial to understand that the current situation is the result of a long-term failure to ensure justice and accountability in Afghanistan.112 In Bonn at the end of 2001, under the aegis of the United Nations and with the support of the international community, various Afghan factions – many of which had previously fought against each other – agreed to share power for an interim period, whilst setting up a special commission to convene an Emergency Loya Jirga.113 The Emergency Loya Jirga (LJ) of June 2002, which had the aim of creating a ‘broad-based, multiethnic and fully representative’ Afghan government, appointed Hamid Karzai as interim president and paved the way for the establishment of a new state system, a new constitution and the holding of the first presidential elections in October 2004. Yet, as early as 2002 and 2003, there were warnings about the shortcomings, shortsightedness and lack of sustainability of the state-building approach agreed upon in Bonn.114 The provisions established in the Bonn Agreement for the LJ were aimed at sidelining warlords and known human rights abusers;115 however, both the 109 See generally P Alston, ‘Resisting the Merger and Acquisition of Human Rights by Trade Law: A Reply to Petersmann’ (2002) 13 European Journal of International Law 815. 110 See J Whyte, ‘Human Rights and the Collateral Damage of Neoliberalim’ (2017) 20 Theory & Event 137, 141. See also Moyn (n 104). 111 Niland (n 50). 112 See Davitti (n 107) and Niland (n 50). 113 A Donini, N Niland and K Wermester, Nation-Building Unraveled? Aid, Peace and Justice in Afghanistan (Boulder CO, Kumarian Press, 2003). 114 Human Rights Watch, ‘Afghanistan’s Bonn Agreement One Year Later: A catalogue of Missed Opportunities’, 4 December 2002, at www.hrw.org. 115 P Gossman and S Kouvo, Tell Us How This Ends: Transitional Justice and Prospects for Peace in Afghanistan (Kabul, Afghanistan Analysts Network, 2013).

40  Extractive Sector Investment UN and the US failed to ensure that these provisions were enforced. For the sake of political expediency, military commanders and their strongmen were allowed prominent roles at the LJ. Many delegates became fearful of speaking out and reports of threats and intimidation referred to the interim government were never investigated. No open debate or transparent voting for the transitional government took place as foreseen by the LJ procedures: it soon transpired that negotiations had already taken place elsewhere and that the LJ was merely going to approve decisions already made behind closed doors.116 The LJ process, thus, was effectively hijacked by well-known warlords and commanders who, in full breach of the LJ procedures, directly and indirectly intimidated and threatened other delegates. The former Special Representative of the SecretaryGeneral Lakdar Brahimi himself acknowledged as a serious failure of the Bonn process the fact that it was not inclusive or premised on a genuine and effective national reconciliation process.117 Further to outlining the shortcomings of the Bonn process, Brahimi went on to state that: National reconciliation is based on a sense of national unity and equality under the law that must take root for state institutions to become legitimate. It is based on four distinct but interlinked mechanisms: healing wounds of the survivors; some form of justice; historical accounting via truth-telling; and reparation for the material and psychological damage inflicted on the victims. This necessitates the construction of political and institutional processes that may include truth commissions, international or national justice mechanisms, methods of compensation or reparation, social and psychological counselling projects, education, dialogue processes and support for civil society grassroots initiatives.118

Eighteen years after Bonn, these political and institutional processes have yet to find shape in Afghanistan. The delay and lack of commitment in establishing the mechanisms outlined by Brahimi – who discussed the above shortcomings as lessons learned for Afghanistan – have contributed to further undermining the legitimacy of the Afghan government and the international community supporting it.119 The flawed genesis of the Bonn process produced a statebuilding system mired from the beginning in corruption, intimidation, coercion and blatant abuse of power. The failure to enforce the LJ procedures, which had envisaged the participation of a range of stakeholders but which would exclude past human rights abusers from the new administration, undermined subsequent state-building efforts.120 Alarmingly, it signalled to Afghans that

116 W Maley, ‘Looking Back at the Bonn Process’, in G Hayes and M Sedra (eds), Afghanistan: Transition Under Threat (Waterloo, Wilfrid Laurier University Press, 2008) 3–24. 117 L Brahimi, ‘State Building in Crisis and Post-Conflict Countries’, Contribution to the 7th Global Forum on Reinventing Government Building Trust in Government, 26–29 June 2007, Vienna, Austria. 118 ibid, 13, emphasis added. 119 Davitti (n 107). 120 ibid.

Practical Challenges in Operationalising Human Rights Protection  41 nothing much had changed and that the ‘new system’ promoted and supported by the international community and the UN, was a well-known system whereby the consolidation of old power structures and those responsible for abusing the Afghan population for more than two decades were those now returning to power.121 Whilst the serious shortcomings of the LJ set in motion a process that lacked credibility and transparency in the eyes of most Afghans, multiple programmes were initiated to establish functioning rule of law institutions within a formal legal system which should, in theory, have contributed to bringing impunity to an end.122 However, continued conflict, the waging of the ‘war on terror’, and the failure to take into consideration informal justice mechanisms already operating in the country further contributed to a ‘justice void’.123 Widespread corruption and the weakness of the rule of law institutions reinforced existing power structures, whereby warlords and abusive power-holders were, and continue to be, effectively above the law, not least because they are part of the government.124 In addition, the vast majority of the Afghan population is in a precarious situation, with no effective access to justice or means of redress against abuse. This is due, in part, to the absence of justice institutions outside of the main provincial capitals and to the fact that, where present, such institutions are directly influenced by local warlords and their armed militia.125 The decision to ignore the demand for justice of the Afghan population has enabled abusive power-holders, and the systems they maintain, to become ever more emboldened and entrenched.126 This in turn has undermined efforts to strengthen the ‘rule of law’ institutions as, for instance, it has inhibited the judiciary from operating independently and in line with national and international human rights standards.127 Apparent examples of this have been largely documented by human rights monitors, especially in relation to persisting cases of land grabbing and the impossibility, for Afghan citizens, to obtain restitution of their land and properties through the existing justice system.128 Each time that local administration officers fail to either stop or prosecute local warlords and/or power-holders, Afghans turn to alternative solutions to solve their problems,

121 ibid. 122 Niland (n 50). 123 ibid. 124 ibid and Davitti (n 107). 125 See the controversial Afghanistan Human Development Report 2007 titled ‘Bridging Modernity and Tradition: Rule of Law and the Search for Justice’ (UNDP/CPHD, 2007), especially chs 3 and 4. 126 ibid. 127 ibid. 128 K Savage et al, Corruption Perceptions and Risks in Humanitarian Assistance: An Afghanistan Case Study, Humanitarian Policy Group Working Paper, July 2007. For the notorious 2003 land grabbing by ‘Afghan elites’ in Sherpur, Kabul, see C Johnson and J Leslie, Afghanistan: The Mirage of Peace (London, Zed Books, 2004) 164–65.

42  Extractive Sector Investment following a survival instinct that has characterised the lives of many throughout the protracted armed conflict. Understanding the failure to pursue accountability – both in terms of the absence of appropriate, fair and independent rule of law institutions and the entrenched climate of overall impunity – is fundamental to appreciate the ­disillusionment of the Afghan population. Faced with the institutionalisation of abusive power structures brought about by the failed implementation of the Bonn Agreement, Afghans have lost trust in the state-building project advanced by the Afghan government and the international community.129 The UN and the international community have often been perceived as supporting a fundamentally flawed government, silent and indifferent vis-à-vis abuses, both past and present.130 Since 2001, the gap between those who have benefited from the escalation of violence (drug mafia, warlords and their allies) and those who struggle for daily survival, has widened at an alarming rate. The experience for many Afghans is of a system of governance that has proved to be predatory and brutal, particularly for the most vulnerable and those already at the margins of society.131 There is strong evidence to show that human rights abuses are neither accidental nor anecdotal, but ‘symptoms of deeper pathologies of power and are linked intimately to the social conditions that so often determine who will suffer abuse and who will be shielded from harm’.132 The ongoing conflict in Afghanistan not only kills, displaces and disrupts people’s lives;133 it also exacerbates already existing structural, historical and cultural conditions which render people particularly exposed to abuse. Protracted conflict, as is the case in Afghanistan, triggers mechanisms by which powerful warlords continue to benefit from warfare,134 and now from increased investment in the extractive sector. The civilian population, by contrast, is systematically abused, unable to seek and obtain redress, and too often impotent in influencing the decision-making processes that could bring a change to the status quo. By failing to rein in the warlords and hold them accountable for the abuses committed during the various stages of the conflict, the Bonn process has resulted in a continuation of the cycle of violence, whereby the conflict escalates and innocent civilians continue to be killed, abused and pushed to the margins of society.135

129 Davitti (n 107). 130 Ibid. 131 Oxfam, The Cost of War: Afghan Experiences of Conflict, 1978–2009 (Oxford, Oxfam, 2009). 132 P Farmer, Pathologies of Power: Health, Human Rights and the New War on the Poor (Berkeley CA, University of California Press, 2003). 133 Oxfam (n 131). 134 Gossman and Kouvo (n 115). 135 Niland (n 50). For a detailed account of the policies of co-option adopted since Bonn, see A Giustozzi, Empires of Mud: Wars and Warlords in Afghanistan (London, Hurst & Co, 2009) especially ch 5.

Practical Challenges in Operationalising Human Rights Protection  43 Inserting an additional layer of investment deregulation and market liberalisation within the context outlined so far has its apparent dangers. Corruption, for instance, has already found its way into the private sector, which instead of acting as an ‘engine of growth’, has fallen under the control of mafia-type political elites and international contractors.136 Economic reforms applied to Afghanistan throughout the past 18 years were based on the premise that economic growth alone would automatically trigger development. In practice however Afghanistan has seen the continuation of a policy of co-option of warlords and commanders137 to achieve a temporary appearance of ‘peace and stability’, sufficient to allow the withdrawal of most foreign troops in 2014. With the waning interest in additional negative news from the Afghan front, the exploitation of Afghanistan’s natural resources was blindly celebrated as a first firm step towards certain development and self-sustainability, although it risked being at the centre of renewed conflict fault-lines and internal power struggles.138 Everything is set to continue with ‘business as usual’, with foreign investments firmly insulated against any potential risk which might emerge.139 The protection challenges outlined so far are not only typical of the Afghan context. They are shared by many host conflict countries, in the vast majority of which investment in the extractive sector continues relentlessly, without the necessary engagement, or even supported, by the human rights community. The above analysis thus reveals the need for a shift in thinking and for challenging the way in which IHRL may serve a neoliberal agenda which does not necessarily foster human rights protection and long-term sustainable development. A more critical understanding of the economic restructuring currently taking place in Afghanistan is useful, therefore, to outline the inherent limitations of international human rights law, and of the human right to water more specifically (see chapter three), when attempting to protect access to water in the complex situation outlined so far, of both armed conflict and unbridled extractive investment. Acknowledgment of such limitations is not understood in this book as having, per se, a redemptive function. It is viewed, instead, as indispensable to avoiding the reproduction of proposals for change which, rather than solving the problem, simply reproduce, maintain it and/or offer ‘more of the same’.

136 M Waldman, Aid Effectiveness in Afghanistan (Kabul, ACBAR, 2008). 137 Giustozzi (n 135). 138 On the concerns expressed in relation, eg, to the Aynak Project, see The World Bank, ‘The Inspection Panel Report and Recommendation. Afghanistan: Sustainable Development of ­Natural Resources Project Additional Financing, and Sustainable Development of Natural Resources Project  II’, at http://siteresources.worldbank.org/EXTINSPECTIONPANEL/Resources/­ EligibilityReport_Afghanistan_SDNR_English.pdf. 139 For an example of how standards of investment protection are interpreted, see ch 2.

44  Extractive Sector Investment III.  PRELIMINARY CONCLUSIONS

In this chapter I have outlined the human rights impact of extractive activities in conflict contexts. In doing so, I have highlighted the tension between the need for a conflict host country to attract foreign investment whilst, at the same time, preserving its regulatory capacity to pursue public policies, including to respect, protect and fulfil the human rights of its population. Crucially, extractive activities risk exacerbating the already precarious political, economic and human rights situation in which the civilian population finds itself in the midst of an armed conflict. In this chapter I also clarified the different meanings that IIL and IHRL discourses confer upon the key term ‘protection’. I argued that the impact of extractive activities and of the ILL protections extended to them should be approached carefully in such a way as to ultimately prevent human rights abuse. In the final section of the chapter, I turned to the specific context of natural resources extraction in Afghanistan, identifying three major challenges to the establishment of an effective human-rights protection mechanism against corporate abuse. These are: a general tendency to use soft-law mechanisms to tackle corporate abuse; the way in which human rights field operations identify the rights to be prioritised; and ultimately the complex political context which characterises the protracted Afghan conflict. An understanding of these challenges is crucial to the analysis that I carry out in the following chapters, not least because the different meanings of the term ‘protection’ are clearly reflected in the ‘silo’ manner in which IIL standards of investment protection and IHRL provisions are deployed in conflict areas. In the next two chapters (chapters two and three) I analyse in detail the normative content of these standards and ­provisions.

2 The Relevant Legal Framework: Investment Protection in Conflict Settings

I

n this chapter I explore the legal framework of protection available to foreign investment under international investment law (IIL) in situations of armed conflict. I focus specifically on four standards of investment protection: in recent investment arbitration awards, these have been at the interface of the investment and human rights relationship. They are: first, fair and equitable treatment (FET); second, full protection and security (FPS); third, protections against expropriation; and finally, most-favoured nation (MFN) treatment. Given the scope of this research, I also consider special clauses that are sometimes included in investment treaties to extend or limit applicable protections during situations of armed conflict, the so-called ‘war clauses’. Although the overall focus of this research is on foreign investment in the extractive sector in conflict areas, some of the cases discussed in this chapter may not be directly related to the extractive industry or to situations of armed conflict. This is because in this chapter I outline the way in which the protection standards have developed through the reasoning of investment arbitrators, with the aim of understanding how the scope and reach of these standards have come to encroach on human rights protection.1 An investigation of these standards of investment protection is also a preliminary step to analyse the interplay with international human rights law (IHRL) in the remainder of this book. Part I of the chapter focuses on the nature and scope of IIL protection in situations of armed conflict: as I explain below, the objective of IIL is, in a way, to insulate foreign investment from the potential risk ensuing from political change which could negatively affect the regulatory environment within which the investment is structured.2 Crucial to the understanding of investment

1 See ch 4 for an analysis of the relationship between these two bodies of international law. 2 As discussed in the Introduction and in ch 1, Slobodian argues that international investment law was introduced to insulate the foreign investment from democratic processes which could lead to radical claims for redistributive justice and substantive equality. Q Slobodian, Globalists: The End of Empire and the Birth of Neoliberalism (Cambridge MA, Harvard University Press, 2018), especially ch 4, ‘A World of Rights’.

46  Investment Protection in Conflict Settings protection is the undefined and ever-evolving nature of the term ‘investment’ and the expanding approach adopted by investment arbitrators when defining the content and applicability of the various protection standards. For the purposes of my discussion on the interaction between IIL and international human rights law (IHRL), I discuss relevant investment awards to show that the definition of investment is increasingly left to the arbitrators who decide, on a case-by-case basis, what constitutes an investment. By doing this, they continuously re-shape the scope of their own jurisdiction and the contours of what it is legitimate to protect under IIL. In part II of this chapter I analyse the four standards of investment protection most relevant to this research project (FET, FPS, protections against expropriation and MFN) and war clauses: by looking at the way in which these standards and clauses have evolved through the interpretation of arbitral tribunals, I consider relevant awards which have been made available to the public. For this reason, I examine mainly (but not exclusively) the work of investment tribunals of the International Centre for Settlement of Investment Disputes (ICSID) as this has been made more accessible since the amendments to ICSID arbitration rules in April 2006.3 By mapping out the substantive investment standards most relevant to the protection of investment in situations of armed conflict, the analysis in this chapter paves the way for further discussion, in the following chapters, on how the state’s duty to protect foreign investors sometimes overlaps and clashes with its parallel duty to protect human rights from harm caused by extractive companies investing in conflict host countries. I.  FOREIGN INVESTMENT AND THE NEED FOR PROTECTION: INTERNATIONAL INVESTMENT LAW AND ARMED CONFLICT

From March to May 2011, when the uprising against the Qaddafi regime in Libya turned into an armed conflict supported by NATO bombings, international law firms circulated briefing notes to their corporate clients, providing advice on how to use international investment agreements (IIAs), and more generally investor-state arbitration, to hold Libya accountable for violations of treaty standards such as FTE and FPS.4 These legal updates explained

3 See in particular amendments to Arbitration Rule 48 (Publication of Awards), Arbitration Rule 37 (Amicus Briefs) and Arbitration Rule 32 (Open Hearings): ICSID Convention, Regulations and Rules, ICSID/15 April 2006, at https://icsid.worldbank.org/ICSID/ICSID/RulesMain.jsp. 4 See J Gallen, ‘Odious Debt and Jus Post-Bellum’ (2015) 16 The Journal of World Investment & Trade 666, 680–82. See also FB Schneider, ‘The International Convention on the Prevention of Odious Agreements: A Human Rights-Based Mechanism to Avoid Odious Debts’ (2015) 28 Leiden Journal of International Law 557, 563. See also M Lawry-White, ‘International Investment Arbitration in a Jus Post Bellum Framework’ 16 The Journal of World Investment & Trade 633, 652, discussing circumstances precluding wrongfulness.

Foreign Investment and the Need for Protection  47 that it was possible to initiate investment arbitration proceedings against the Libyan government because the Qaddafi regime had violated these standards ‘by engaging in a campaign of hostility and violence and by committing other acts and omissions that have resulted in an untenable, unstable, and unpredictable investment environment’.5 Any successor government, it was pointed out, would be responsible for the Qaddafi regime’s violations of international law under the ‘principle of the continuity of states’ and would therefore be bound to honour any damages granted to foreign investors by an international investment tribunal.6 The release of the briefings coincided with an escalation of the armed conflict as well as a rise in civilian casualties. Notwithstanding the ­maladroit timing of their release, the legal advice contained therein was essentially correct. Foreign investors are indeed able, owing to the protection granted to them under IIAs (or in investment contracts backed by investor-state arbitration provisions), to initiate investor-state arbitration proceedings even in the middle of an armed conflict or immediately thereafter. And arguably a successor government assumes all the rights and obligations of the previous government, as the state remains the same subject of international law, despite its change of regime.7 Several international claims under investment treaties have in fact been brought in relation to civil unrest and violence in some states affected by the Arab Spring.8 The likelihood is that they will result in large sums awarded in damages to the foreign investors, and in successor governments struggling to recover from the armed conflict whilst at the same time fulfilling these claims. Thus, given the significant guarantees that investors may obtain through investment treaties, including in situations of armed conflict, it is unsurprising

5 King & Spalding’s Client Alert, ‘Crisis in Libya: What Legal Options are Available to Oil and Gas Companies?’ 17 May 2011, at 3–4; see also Freshfields Bruckhaus Deringer, ‘Investments in Libya: potential claims under bilateral investment treaties and political risk insurance policies, Briefing of 10 March 2011, at www.freshfields.com. 6 See Gallen (n 4) 681. See also M Parish, Mirages of International Justice: The Elusive Pursuit of a Transnational Legal Order (Cheltenham, Edward Elgar, 2011), especially ch 5 ‘Protecting Foreign Capital Flows: Who Released the Genie?’. 7 See the Iran-US Claims Tribunal: ‘In spite of the change in head of State and the system of government in 1979, Iran remained the same subject of international law as before the Islamic Revolution. For when a Government is removed through a revolution, the State, as an international person, remains unchanged and the new Government generally assumes all the previous international rights and obligations of the State.’ The United States of America v The Islamic Republic of Iran, Case No B36 (3 December 1996) 32 Iran-US Claims Tribunal Reports 162 (1996) at 54. Yet, there remain uncertainties in the regime of state succession and its application to the context of investment law, see CJ Tams, ‘State Succession to Investment Treaties: Mapping the Issues’ (2016) 31 ICSID Review 314, 328–36. See also P Dumberry, ‘State Succession to State Contracts: A New Framework of Analysis for an Unexplored Question’ (2018) 19 Journal of Trade and Investment 595, 617. 8 See Damac Properties v Egypt and Indorama v Egypt, reported in J Bonnitcha, ‘Investment Treaties and Democratic Transition’, Society of International Economic Law, Working Paper No 2012/56, 10 July 2012, at 10.

48  Investment Protection in Conflict Settings that corporate lobby groups try to influence governments to negotiate substantive investment protections under these treaties. Undoubtedly, the decision to invest in a foreign country entails a long-term risk assessment for the investor, since it involves the disbursement of a significant amount of resources at the outset of the investment, in the hope of future returns. Because of its specific nature, the life span of foreign investment often stretches over decades. This long-term feature of foreign investment projects means that, understandably, investors will have to carefully consider the situation and conditions of the host country which they intend to enter. From a company’s perspective, however, this consideration is not merely based on business management criteria: it involves a targeted evaluation and choice of the most appropriate legal structure which is going to regulate the investment. The objective is to ensure the smooth implementation of the investment and, most importantly, to minimise potential risks that might arise during the life of the investment itself – and, where such risks materialise, to ensure that effective mechanisms for financial compensation are in place. This legal structure takes its shape and form within the texts of international investment agreements, which all tend to share some basic standards of protection. Due to this central role in shaping and structuring investment projects all around the world, IIL is even more crucial in conflict countries. Sudden changes in the political and legal shape of the country can alter the economic environment on which foreign investment relies to be profitable. The higher the uncertainty engendered by the armed conflict, the greater the need for investment protection, whereby investment treaties are often seen as a sort of de facto insurance against any unwanted change.9 Yet, as demonstrated in chapter one with the example of Afghanistan, foreign investors do not shy away from operating in countries where armed conflict is ongoing, especially when the host governments are willing to re-draft their national investment laws, offer favourable conditions in key sectors and crucially, as seen in the examples above, extend international protection through investment treaties,10 which crucially grant access to ­investor-state arbitration and ensure the transfer of funds.11

9 R Dolzer and C Schreuer, Principles of International Investment Law (Oxford, Oxford University Press, 2008) 4. 10 Although investment treaties may not explicitly refer to legal stability, their key role in ensuring the stability of the investment’s legal environment is widely acknowledged. See Dolzer and Schreuer, ibid; R Dolzer, ‘The Impact of International Investment Treaties on Domestic Administrative Law’ (2006) 37 International Law and Politics 952, 952; S Franck, ‘The Legitimacy Crisis in Investment Treaty Arbitration’ (2005) 73 Fordham Law Review 1521, 1525; LG&E Energy v Argentina ICSID Case No ARB/02/1, Award (25 July 2007) para 124; C Ignacio Suarez Anzorena and WK Perry, ‘The Rise of Bilateral Investment Treaties: Protecting Foreign Investments and Arbitration’ (2010) In House Defence Quarterly 58, 58. 11 J Bonnitcha et al, The Political Economy of the Investment Treaty Regime (Oxford, Oxford University Press, 2017) 3.

Foreign Investment and the Need for Protection  49 Arguably, foreign investors are also attracted by countries that would otherwise appear unstable because their legal framework is not yet sophisticated enough as to ‘interfere’ with their activities, for instance in terms of environmental protection and taxation.12 In these countries, newly signed investment treaties can be used to substantially freeze the existing legal environment, thus ensuring continued ‘low interference’ with foreign investment even if at the expense of post-conflict reconstruction efforts in the host country.13 It is also important to note that investment treaties with conflict host countries are often negotiated in conditions of apparent power-imbalance.14 As noted by ­Choudhury: Investment treaties, containing the investment arbitration mechanism, are generally negotiated by trade negotiators who are delegated the task by elected representatives or their delegates. However, negotiators may have different interests in concluding investment treaties than either elected representatives or the general public … In addition, because investment treaty negotiations involve a process of bargaining rather than seeking out the best solution to an issue, interests will only be protected as part of a ‘package deal’, which may result in the compromise of one interest over another.15

Before analysing the scope and content of the key standards of investment protection that are typically contained in investment treaties, in the section below I outline the ongoing debate on the meaning of the term ‘investment’. In the absence of an agreed-upon definition of this term, under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention) or in the various investment treaties signed by states, the current trend sees international investment arbitrators continuously redefining the notion of investment, progressively expanding its content and extending their own jurisdiction to arbitrate relevant disputes. As discussed below, this trend has far-reaching consequences of granting the protection of IIL to activities that the host state may not have envisaged when entering into the relevant investment treaty.

12 See generally C Schreuer, ‘The Protection of Investments in Armed Conflicts’, in F Baetens (ed), Investment Law Within International Law: Integrationist Perspectives (Abingdon, Routledge, 2013). 13 M Sornarajah, The International Law of Foreign Investment 4th edn (Cambridge, Cambridge University Press, 2017) especially ch 2. See also K Tienhaara, ‘Regulatory Chill in a Warming World: The Threat to Climate Policy Posed by Investor-State Dispute Settlement’ (2018) 7 Transnational Environmental Law 229, 232–39. See also K Tienhaara, ‘Regulatory Chill and the Threat of Arbitration: A View from Political Science’ in C Brown and K Miles (eds), Evolution in Investment Treaty Law and Arbitration (Cambridge, Cambridge University Press, 2011) at 615. 14 See D McNeil et al, ‘Political Origins of Health Inequities: Trade and Investment Agreements’ (2017) 398 The Lancet 760, 762. See also ‘Public Statement on the International Investment Regime’ of 31 August 2010, signed by various legal scholars, denouncing the system as untenable and calling for radical changes, at www.osgoode.yorku.ca/public-statement-international-investment-regime31-august-2010/. 15 B Choudhury, ‘Democratic Implications Arising from the Intersection of Investment Arbitration and Human Rights’ (2009) 46 Alberta Law Review 983, 1000.

50  Investment Protection in Conflict Settings A.  The Notion of Investment The content and scope of the term investment remain controversial among scholars and arbitrators alike, in that there is no standard definition which has been systematically enshrined in the main IIL instruments, such as the ICSID Convention16 and the various investment treaties signed by states. The former refers to ‘investments’ in Article 25(1) when describing the criteria to define its jurisdiction, yet it does not define the term itself. Various commentators have argued that the aim of this lacuna is to leave wider discretion and interpretative autonomy to investment arbitration tribunals so that they can redefine the term ‘investment’ on the basis of the specific facts and context of the case before them.17 Experts disagree on whether a closer look at the travaux preparatoires of the ICSID Convention would confirm this reasoning.18 In any event, in defining the notion of investment, the tribunals not only have to take into consideration the specific facts and context of the case, but also the express wish of the parties as per the relevant investment treaty (often a BIT). BITs usually include detailed definitions of the term investment, but in practice such express ­intentions – in particular when the BIT contains limitations to the d ­ efinition – have sometimes been disregarded by arbitrators. As I discuss in this section, this decision has been justified by the claim that when the parties to a BIT have agreed therein to submit cases to ICSID, it is possible to imply ‘a strong (but rebuttable) presumption that the case involved an investment’.19 By interpreting the term ‘investment’ as autonomous20 from the definition in BITs, investment tribunals have been able to extend their own jurisdiction: only economic activities or assets which constitute an investment are, in fact, subject to the jurisdiction of the ICSID Convention and its tribunals. The lack of a definition of investment in Article 25(1) of the ICSID Convention, and the tendency of the tribunals to apply their discretion in order to find jurisdiction, render the scope and content of the term investment – and therefore of the application of the ICSID Convention – extremely broad 16 Convention on the Settlement of Investment Disputes between States and Nationals of Other States, 18 March 1965, 575 UNTS 159 (1965). 17 See generally E Gaillard, ‘Identify or Define? Reflections on the Evolution of the Concept of Investment in ICSID Practice’ in C Binder et al, International Investment Law for the 21st Century: Essays in Honour of Christoph Schreuer (Oxford, Oxford University Press, 2009). 18 See generally JD Mortenson, ‘The Meaning of “Investment”: ICSID’s Travaux and the Domain of International Investment Law’ (2010) 51 Harvard International Law Journal 257; C Schreuer, The ICSID Convention: A Commentary (Cambridge, Cambridge University Press, 2001) 122. 19 Dolzer and Schreuer (n 9) 62. See CSOB v Slovak Republic, Decision on Jurisdiction (24 May 1999) 14 ICSID Review 251 (1999) para 66; Fedax v Venezuela, ICSID Case No ARB/96/3, Award on Jurisdiction (11 July 1997) para 21. 20 See discussion on ‘autonomous interpretation’ in Dolzer and Schreuer (n 9) 61. See also K Nakajima, ‘Parallel Universes of Investment Protection? A Divergent Finding on the Definition of Investment in the ICSID Arbitration on Greek Sovereign Debts’ (2017) 15 Law & Practice of International Courts and Tribunals 472, where the definition of investment in the Poštová banka v Greece award is compared to previous interpretations in the awards related to the Argentinian crisis. See in particular 480–85.

Foreign Investment and the Need for Protection  51 and potentially ever-expanding. From the perspective of this research, it is clear that this lack of terminological clarity carries the potential risk for host states to find themselves under the obligation to extend the standards of investment protection to transactions and/or activities that they had not initially contemplated, or even explicitly excluded, when entering into a BIT.21 The significance of terminological clarity is, moreover, relevant not only within the scope of the investment and human rights debate, but also in terms of inherent coherence of the IIL regime, as guarantees of predictability, consistency of interpretation and, therefore, applicability of investment protection are of importance for both investors and host states.22 In their attempts to define the notion of investment, investment tribunals have adopted two contrasting approaches: the objective approach (also called the ‘outer limits’ approach)23 and the subjective approach24 (or ‘treaty approach’).25 The former follows the reasoning of the autonomous definition described above, according to which if state parties have consented to arbitration the presumption is in favour of a finding of investment. Some objective criteria for the definition of investment can be found within the ICSID Convention to guide the arbitrators in their interpretation. The subjective approach, by contrast, understands the lack of definition in the ICSID Convention as a desire to enable state parties to define what constitutes an investment through the IIL instruments they sign. In defining investment, it seeks to ascertain the original intent of the two state parties to the BIT. Some commentators, however, find the subjective approach problematic because the investor, although it has not contributed to the definition of investment in the BIT, finds itself automatically bound by such definition when invoking the protections in the BIT.26 21 See Bonnitcha et al (n 11) at 51 discussing for instance portfolio investments. 22 On the obligations vested upon investment arbitrators to provide cogent reasons for their decisions, see IT Cate, ‘The Costs of Consistency: Precedent in Investment Treaty Arbitration’ (2013) 51 Columbia Journal of Transnational Law 418; A Roberts, ‘Power and Persuasion in Investment Treaty Interpretation: The Dual Role of States’ (2010) 104 American Journal of International Law 179, 202–07; and SW Schill, ‘From Sources to Discourse: Investment Treaty Jurisprudence as the New Custom? (2011) at www.biicl.org/files/5630_stephan_schill.pdf. See also D Schneiderman, ‘International Investment Law’s Unending Legitimation Project’ (2017–18) 49 Loyola University Chicago Law Journal 229, at 56 where Scheiderman discusses how the element of ‘contribution to development’ in Salini was used to legitimise the international investment regime. Similarly, at 57, he discusses the dissenting opinion in the Tokios award, where arbitrator Weil opposed jurisdiction on the basis that ‘round tripping’ would preclude the investor from pursuing an ICSID claim, and that deciding otherwise would put ICSID’s success at risk. Tokios Tokeles v Ukraine, ICSID Case No. ARB/02/18, Decision on Jurisdiction (29 Apr 2004); and Tokios Tokeles v Ukraine, ICSID Case No. ARB/02/18, Dissenting Opinion, 123 (29 Apr 2004) para 30. 23 M Hwang, ‘Recent Developments in Defining “Investment”’ (2010) 25 ICSID Review 21, 22; M Hwang and J Fong, ‘Definition of Investment: A Voice form the Eye of the Storm’ (2011) 1 Asian Journal of International Law 99, 102. 24 For further discussion of the objective/subjective distinction, see B Stern, ‘The Contours of the Notion of Protected Investment’ (2009) 24 ICSID Review 534. 25 ibid. See also B Stern, ‘Are There New Limits on Access to International Arbitration?’ (2010) 25 ICSID Review 26, 27. 26 J Paulsson, ‘Arbitration Without Privity’ (1995) 10 ICSID Review 232, 232.

52  Investment Protection in Conflict Settings The objective approach, in turn, has developed into two further subcategories: the criteria approach and the liberal approach.27 The former, first applied in the Fedax case,28 interprets Article 25(1) ICSID Convention as entailing four elements: a certain duration of the investment project; a regularity of profit and return; the assumption of risk; and a substantial commitment and/or significance to the development of the host state.29 The application of these criteria to identify the existence of an investment has become known as the Salini test, as the tribunal in that case further elaborated upon the four criteria30 and established that they were to be considered as interdependent.31 The tribunal in Joy Mining v Egypt32 went even further and established that the four criteria were jurisdictional requirements, without which an investment could not be found to exist. According to a strict interpretation of the criteria approach the tribunal, in addition to ascertaining the presence of the constitutive elements of an investment, needs to consider the contextual circumstances of the case. This means that even the co-presence of all constitutive elements might not be sufficient for a finding of an investment. By contrast, the liberal approach, adopted for instance in RSM v Grenada,33 departs from the Joy Mining case and returns to the Salini test, affirming that the criteria should be applied flexibly rather than be elevated to the status of jurisdictional requirements.34 The tribunal in Phoenix v The Czech Republic, for instance, adopted the objective approach in its liberal form, and established as follows: The Tribunal cannot agree with the general statement of the Claimant proffered during the Hearing to the effect that ‘it was the intent of the convention’s drafters to leave to the parties the discretion to leave define for themselves what disputes they were willing to submit to ICSID.’ There is nothing like a total discretion, even if the definition developed by ICSID case law is quite broad and encompassing. There are

27 Stern (n 24) 535–38 adopts the terminology ‘criteria approach’ and ‘liberal approach’. The sole arbitrator in MHS v Malaysia referred to them as the ‘typical characteristics’ approach and the ‘jurisdictional’ approach. Malaysian Historical Salvors Sdn Bhd (MHS) v Malaysia, ICSID Case No ARB/05/10, Award on Jurisdiction (17 May 2007) paras 69–148. 28 Fedax NV v Venezuela (n 19) para 43. See also Dolzer and Schreuer (n 9) 140. 29 ibid Fedax. To add to the terminological variation, the criteria were called ‘hallmarks’ by the arbitrators in the MHS v Malaysia case (n 27). 30 Salini Costruttori SpA and Italstrade SpA v Kingdom of Morocco, ICSID Case No ARB/00/4, Decision on Jurisdiction (23 July 2001) para 52. 31 See also Jan de Nul NV and Dredging International NV v Arab Republic of Egypt, ICSID Case No ABR/04/13, Decision on Jurisdiction (16 June 2006) para 91: ‘being understood that these elements may be closely interrelated, should be examined in their totality and will normally depend on the circumstances of each case.’ 32 Joy Mining Machinery Limited v The Arab Republic of Egypt, ICSID Case No ARB/03/11, Award on Jurisdiction (6 August 2004) 19 ICSID Review 486 (2004). 33 RSM Prod Corp v Grenada, ICSID Case No ARB/05/14, Award (13 March 2009) paras 240–41. 34 For a similar reasoning on flexibility see Toto Costruzioni Generali SpA v Republic of Lebanon, ICSID Case No ARB/07/12, Decision on Jurisdiction (11 September 2009) paras 51–53.

Foreign Investment and the Need for Protection  53 indeed some basic criteria and parties are not free to decide in BITs that anything – like a sale of goods or a dowry for example – is an investment.35

At the other end of the spectrum, the tribunals that have adopted the subjective approach have criticised the Salini test and, in ascertaining what constitutes an investment, have preferred to rely on the intention of the state parties as expressed in the relevant IIL instrument.36 Arbitrators who favour this approach consider the terms of the BIT to be an explicit expression of the parties’ consent,37 and therefore hold the view that ‘the parties may agree on a more precise or restrictive definition of their acceptance of the Centre’s jurisdiction but they may not choose to submit disputes to the Centre which are not related to an investment’.38 In Biwater v Tanzania39 for instance, the tribunal strongly denounced the strict implementation of the Salini test and reiterated the importance of taking into consideration the contextual circumstances of the case and the express definition of investment in the relevant BIT.40 The decision in Biwater was referred to in the MHS Annulment, when the ad hoc annulment committee argued that the BITs are the instruments used by the parties to give their consent to ICSID jurisdiction and that ‘[t]o ignore and depreciate the importance of the jurisdiction they bestow upon ICSID, and rather to embroider upon questionable interpretations of the term “investment” as found in Article 25(1) of the Convention, risks crippling the institution’.41 However, in a dissenting opinion attached to the MHS Annulment Judge Shahabuddeen argued that the term investment under Article 25(1) ICSID Convention represented an outer limit (or a maximum threshold) beyond which parties could not agree that certain assets and/or business activities constituted an investment. The absence of more precise boundaries for the definition of investment would otherwise undermine the meaningfulness of Article 25 ICSID Convention altogether.42 In his view, it was ‘difficult to see why a purely commercial entity, intended only for the enrichment of its owners and not connected with the economic development of the host State, is entitled to bring before ICSID a dispute concerning an investment in the host State’.43

35 Phoenix Action Ltd v Czech Republic, ICSID Case No ARB/06/5, Award (15 April 2009) para 82. 36 See I Glinavoz, ‘Brexit, the City and Options for ISDS’ (2018) 33 ICSID Review – Foreign Investment Law Journal 380, 389–91. 37 See eg Philippe Gruslin v Malaysia, Award, ICSID Case No ARB/99/3 (27 November 2000) para 13.6; Generation Ukraine Inc v Ukraine, ICSID Case No ARB/00/9, Award (16 September 2003) para 8.2. 38 CSOB v The Slovak Republic, ICSID Case No ARB/997/4, Decision on Objections to Jurisdiction (24 March 1999) para 68. 39 Biwater Gauff (Tanzania) Ltd v Tanzania, ICSID Case No ARB/05/22, Award (24 July 2008). 40 ibid para 316. 41 Malaysian Historical Salvors Sdn Bhd (MHS) v Malaysia, ICSID Case No ARB/05/10, Decision on the Application for Annulment (16 April 2009). 42 Malaysian Historical Salvors Sdn Bhd (MHS) v Malaysia, ICSID Case No ARB/05/10, Dissenting Opinion of Judge Mohamed Shahabuddeen (16 April 2009) paras 7–13. 43 ibid para 21.

54  Investment Protection in Conflict Settings What this definitional debate highlights, I think, is the inherent uncertainty of IIL.44 In my view it is also emblematic of a legal system beginning to show its intrinsic flaws and weaknesses. The construct of IIL has evolved and developed around one sole objective: the protection of so-called ‘­investors’ rights’, seemingly at the expense of legal consistency, transparency and systematisation of its own normative content. Does the need to maintain a certain flexibility of the investment regime and autonomy of the arbitral tribunal justify the resultant lack of certainty and coherence within the system?45 Or has the attempt to adjust the existing rules and principles, so as to repeatedly accommodate the expectation of the investors, overstretched the system to a point of non-return?46 Some investment law scholars have proposed potential solutions to the problem, suggesting that a ‘jurisprudence constante’ be introduced, in line with the French civil law system.47 This solution, however, would only partially resolve the issue of interpretation facing the ICSID system: a system of jurisprudence constante would consist of ‘a range of decisions that, constantly reaffirming the same interpretation of a principle or a provision of law, progressively make a general rule out of that interpretation’.48 Although it is granted that this would enable later tribunals to receive some guidance, whilst at the same time not having to follow previous non-binding decisions, it remains unclear how the legitimisation of an overbroad interpretation through tribunal repetition49 could effectively address the inherent inconsistency which appears to be at the core of the IIL system as a whole.50 Disagreement amongst arbitrators on the scope and content of fundamentally identical BIT clauses is not only related, however, to the interpretation of the notion of investment. Lack of judicial consistency also concerns substantive standards of investment protection. In particular, a similar unpredictability in the approaches adopted by investment tribunals can be traced in the way in which arbitrators have grappled with the issue of defining the concept of investors’ legitimate expectations as part of the FET standard. It is to the exploration of this key standard that I now turn.

44 M Sattorova, ‘Defining Investment under the ICSID Convention and BITs: Of Ordinary Meaning, Telos and Beyond’ (2012) 2 Asian Journal of International Law 267–90. 45 See generally G Van Harten, Investment Treaty Arbitration and Public Law (Oxford, Oxford University Press, 2007). 46 See LE Peterson, ‘Out of Order’ in M Waibel et al (eds), The Backlash against Investment Arbitration: Perceptions and Reality (The Hague, Kluwer Law International, 2010) 483–88. 47 See Gaillard (n 17) 403. See also B Legum, ‘Of Definitions and Disregard: An Editorial’ (2015) 30 ICSID Review 281, 281. 48 Gaillard (n 17) 403. 49 Sornarajah (n 13) 347. 50 For a detailed discussion of the shortcomings of IIL and its interplay with IHRL see ch 4.

Relevant Standards of Investment Protection  55 II.  RELEVANT STANDARDS OF INVESTMENT PROTECTION

A.  The Evolution of FET through the Doctrine of Legitimate Expectations As one of the most far-reaching standards of investment protection, FET has grown exponentially over the last decade,51 mainly thanks to its malleability in ensuring that foreign investors obtain a remedy for the damages incurred.52 Particular characteristics of FET are its ever-changing normative content and its flexibility when combined with other standards of investment protection, such as expropriation and non-discrimination:53 thanks to FET, compensation is often attainable even if the higher threshold of these standards cannot be reached.54 Yet, despite its centrality to investment protection, its normative content remains contested and unsettled in state practice.55 If we look at the recent development of the standard, its indeterminacy acquires particular significance.56 It was only in 2000, in fact, when the ­Metalclad57 tribunal outlined a broader interpretative approach to the standard, that FET clauses started being invoked and interpreted in such a way that FET gained the definition of ‘catch all’58 standard, or ‘gap filler’.59 Up until then, FET clauses were mainly interpreted as corresponding to the minimum standard of the treatment of aliens as contained in customary international law, which provides for states to extend full protection and security as well as fair and equitable treatment to aliens. The customary international law minimum standard usually refers to the 1926 definition in Neer, related to a US citizen, Paul Neer, who had been allegedly tortured and murdered in Mexico: [T]he treatment of an alien, in order to constitute an international delinquency should amount to an outrage, to bad faith, to wilful neglect of duty, or to an 51 Dolzer and Schreuer (n 9) 119. See also R Dolzer, ‘Fair and Equitable Treatment: A Key Standard in Investment Treaties’ (2005) 39 International Lawyer 87, 89; and I Tudor, The Fair and Equitable Treatment Standard in the International Law of Foreign Investment (Oxford, Oxford University Press, 2008). 52 K Yannaca-Small, ‘Fair and Equitable Treatment Standard: Recent Developments’ in A Reinisch (ed), Standards of Investment Protection (Oxford, Oxford University Press, 2008) 111. 53 FET is also known as ‘expropriation light’: ibid 112. 54 This inclusive and gap-filling nature of FET is well outlined by the tribunal in Sempra Energy v The Argentine Republic, ICSID Case No ARB/02/16, Award (28 September 2007) paras 300–01. 55 J Bonnitcha, Substantive Protection under Investment Treaties (Cambridge, Cambridge University Press, 2014) 144. See also S Schill, The Multilateralization of International Investment Law (Cambridge, Cambridge University Press, 2009) 263. 56 See eg CH Brower, ‘Structure, Legitimacy, and NAFTA’s Investment Chapter’ (2003) 36 ­Vanderbilt Journal of Transnational Law 37, at 63 where it is claimed that FET is ‘an intentionally vague term, designed to give adjudicators a quasi-legislative authority to articulate a variety of rules necessary to achieve a treaty’s object and purpose in particular disputes’. 57 Metalclad Corporation v Mexico (NAFTA Arbitration), ICSID Case No ARB(AF)/97/1, Award (30 August 2000) paras 74–101. 58 J Wouter et al, ‘International Investment Law: The Perpetual Search for Consensus’ (2012) Working Paper No 88, Leuven Centre for Global Governance Studies, 22–26. 59 Dolzer and Schreuer (n 9) 122.

56  Investment Protection in Conflict Settings i­nsufficiency of governmental action so far short of international standards that every reasonable and impartial man would readily recognize its insufficiency. Whether the insufficiency proceeds from the deficient execution of a reasonable law or from the fact that the laws of the country do not empower the authorities to measure up to international standards is immaterial.60

This definition would imply a high threshold in relation to the gravity of the act and the malicious intent of the state, before the minimum standard can be violated. A similar approach to the seriousness of the state’s action was adopted by the International Court of Justice (ICJ) in the ELSI case, which found that ‘arbitrariness is not so much something opposed to a rule of law, as something opposed to the rule of law … It is a wilful disregard of due process of law, an act which shocks, or at least surprises, a sense of judicial propriety’.61 Yet investors have since argued, and some arbitrators have agreed with them, that FET needs to be considered as an autonomous standard, which goes beyond the scope and reach of the minimum standard in customary international law. Thus, following these calls for FET autonomy, the Metalclad tribunal found a breach of FET provisions on the basis of a lack of transparency on the part of the state. The tribunal interpreted the FET standard as placing a duty upon the state to correct ‘any scope for misunderstanding or confusion’62 vis-à-vis the investor, thus ensuring transparency and stability in the way the state regulates the investment. This was the first time that transparency was mentioned as an element of FET and as such the tribunal referred to it in relation to the expectation that ‘all relevant legal requirements for the purpose of investing should be capable of being readily known to all investors’.63 Subsequent tribunals in the North American Free Trade Agreement (NAFTA) cases of Pope & Talbot64 and SD Myers65 rejected the view that a breach of the FET standard implied state conduct so serious as to go beyond the high threshold for impropriety set out in Neer.66

60 LFH Neer and Pauline Neer (USA) v United Mexican States (15 October 1926), reprinted in 4 United Nations Reports of International Arbitral Awards 60 (emphasis added). 61 Elettronica Sicula SpA (ELSI) (United States of America v Italy), International Court of Justice Reports, Judgment of 20 July 1989, para 128 (emphasis added). 62 Metalclad (n 57) para 76. 63 ibid. 64 Pope & Talbot Inc v Government of Canada, Merits Phase 2 (10 April 2001) 13 World Trade and Arbitration Materials 61, paras 108 and 118. 65 SD Meyers Inc v Canada, UNCITRAL (NAFTA), Partial Award (13 November 2000) 40 International Law Materials 1408, para 263. 66 Pope & Talbot (n 64) para 118. For an example of scholars supporting the view that FET should not be linked to customary law, see AC Blanford, ‘The History of Fair and Equitable Treatment before the Second World War’ (2017) 32 ICSID Review 287, 289, where two pre-Second World War basic stages of development of FET are identified: ‘the first stage, in which early arbitration treaties and publicists invoked “the general principles of justice and equity” to establish the limits of sovereign power’. And ‘the second stage, in which the United States derived the minimum standard from the general principles of justice and equity. The United States thus referred to the minimum standard as “just and equitable treatment” for decades before the Second World War, and it used

Relevant Standards of Investment Protection  57 The Pope & Talbot ­tribunal, for instance, instead based its decision on the definition of ‘fairness’ as outlined under the law of the NAFTA states. These decisions triggered an immediate reaction from the NAFTA states (Canada, the US and Mexico) which, in order to clarify their intention at the moment of entering into NAFTA, issued a binding interpretation,67 which established that: 1)  Article 1105(1) prescribes the customary international law minimum standard of treatment of aliens as the minimum standard of treatment to be afforded to investments and investors of another Party. 2)  The concepts of ‘fair and equitable treatment’ and ‘full protection and security’ do not require treatment in addition to or beyond that which is required by the customary international law minimum standard of treatment of aliens. 3)  A determination that there has been a breach of another provision of the NAFTA, or of a separate international agreement, does not establish that there has been a breach of Article 1105(1).68

This three-pronged approach to the interpretation of the scope and content of FET significantly constrained subsequent NAFTA tribunals, although some introduced a caveat to their acceptance of the binding interpretation, specifying that customary international law was to be understood as constantly developing, rather than ‘frozen in time’.69 As such, it was to be expected that the FET standard would also evolve over time, rather than remaining static to reflect the international legal reality prevalent at the moment of establishing NAFTA.70 Unsurprisingly, non-NAFTA investment tribunals, with few exceptions,71 have focussed on distinguishing the concept of FET from that of NAFTA awards, emphasising the specificities of FET clauses under other IIAs, in particular when these did not contain an explicit reference to international law. the same FET terminology when it proposed post-war treaties relating to the protection of foreign investments. In short, FET originally denoted what is known today as the minimum standard, and this standard was based on the general principles rather than on customary international law’. 67 North American Free Trade Agreement, Free Trade Commission, Notes of Interpretation of Certain Chapter 11 Provisions, 31 July 2001, at www.naftalaw.org. 68 ibid, para B. For a critique of this binding interpretation, see generally P Dumberry, ‘Denial of Justice under NAFTA Article 1105: A Review of 20 Years of Case Law’ (2014) 32 Association Suisse de l’Arbitrage (ASA) Bulletin 145. 69 See eg WM Reisman, ‘Canute Confronts the Tide: States versus Tribunals and the Evolution of the Minimum Standard in Customary International Law’ (2015) 30 ICSID Review 616, 630–33, where the article critiques the Glamis Gold tribunal for placing the burden of proof on the investor to show a change in custom when arguing that the Neer test is no longer applicable. Glamis Gold Ltd v The United States of America, UNCITRAL, Award (8 June 2009). See also K Yannaca-Small, ‘Fair and Equitable Treatment: A Key Standard in International Investment Law’ in OECD, International Investment Law: A Changing Landscape (2005) 11. 70 Mondev International Ltd v United States of America, ICSID Case No ARB/(AF)/99/2, Award (11 October 2002) para 125; and ADF Group Inc v United States (NAFTA Arbitration), ICSID Case No ARB (AF)/00/1, Final Award (9 January 2003) para 179. 71 Genin v Estonia, Award, 25 June 2001 (2002) 17 ICSID Review 395. At para 367 the tribunal interpreted a breach of the FET standard as including ‘acts showing a wilful neglect of duty, an insufficiency of action falling far below international standards, or even subject to bad faith’.

58  Investment Protection in Conflict Settings Thus, the Tecmed tribunal72 and its progeny interpreted FET clauses as establishing an autonomous standard which could go beyond the perceived strict remit of the customary minimum standard. The tribunals that followed this distinguishing approach often supported this autonomous interpretation of FET even when the investment treaty contained direct reference to international law or to the customary minimum standard. For instance, the tribunal in Azurix established that the reference to international law in the FET clause of the relevant treaty (to ensure that investors ‘in no case be accorded treatment less than that required by international law’), was to be interpreted as setting ‘a floor, not a ceiling, in order to avoid a possible interpretation of these standards below what is required by international law’.73 Amongst the various adjudicative decisions that espoused the autonomous interpretation of Tecmed and differentiated the wording and circumstances of the FET clauses from those of the NAFTA provisions, there are three interesting findings against Argentina which initially interpreted the express reference to international law in the relevant BITs as an invitation to take into consideration the dynamic, evolutionary and multifaceted nature of international law: the tribunals in Enron,74 Vivendi,75 and Sempra76 all emphasised the importance of interpreting FET within the specific circumstances of the case, thus demanding a more ‘contemporary’ and broader reading of any reference to international law which entails a treatment which goes beyond the provisions of customary law. This approach was clearly outlined by the Sempra tribunal: On many occasions the issue will not even be whether the fair and equitable treatment standard is different or more demanding than the customary standard, but only whether it is more specific, less generic and spelled out in a contemporary fashion so that its application is more appropriate to the case under consideration. This does not exclude the possibility that the fair and equitable treatment standard imposed

72 Tecnicas Medioambientales TECMED SA v Mexico, ICSID Case No ARB (AF)/00/2 (29 May 2003) para 155. See more generally R Islam, The Fair and Equitable Treatment (FET) Standard in International Arbitration: Developing Countries in Context (New York, Springer, 2018) 53–78, where Islam identifies three types of FET clauses: ‘(a) FET minus – which refers to those treaties where treaty framers have connected the definition of the standard to other concepts that define and appear to limit its scope. (b) Simple FET where the FET clause is formulated without any reference to international law, customary international law, or any other limitation, and (c)  FET plus  – which refers to treaties which combine the FET standard with an additional substantive ­obligation’ (original emphasis). 73 Azurix v Argentina, ICSID Case No ARB/01/02, Award (14 July 2006) para 361. 74 Enron Corporation and Ponderosa Assets, LP v Argentine Republic, ICSID Case No ARB/01/3, Award (22 May 2007) para 258: ‘in some circumstances, where the international minimum standard is sufficiently elaborate and clear, fair and equitable treatment might be equated with it. But in other vague circumstances, fair and equitable treatment may be more precise than its customary international law forefathers.’ 75 Compania de Aguas del Aconquija SA and Vivendi Universal v Argentine Republic, ICSID Case No ARB/97/3, Award (20 August 2007). 76 Sempra Energy v The Argentine Republic, ICSID Case No ARB/02/16 (28 September 2007).

Relevant Standards of Investment Protection  59 under a treaty can also eventually require a treatment additional to or beyond that of customary law.77

Thus, while some tribunals78 conceived of international law as a starting point from which it was possible to depart, rather than as a set customary minimum standard, others felt compelled to defer to customary international law and therefore interpreted FET within the boundaries of international law, ‘bearing in mind their ordinary meaning, the evolution of international law and the specific context in which they are used’.79 Other tribunals again contended that there was no substantive difference between the obligations enshrined in the minimum standard and those contained in the FET clauses of most BITs,80 thus de facto pushing for a widening of the contents of the customary law standard itself.81 As outlined so far, arguments aimed at undermining the role of the customary minimum standard in the interpretation of FET have become less tenable in light of the criticism received and of clear signs in state practice that adjudicative interpretations were not reflective of states’ intentions.82 In the meantime, however, the domestic law doctrine of legitimate expectations has been deployed in investment arbitration to gradually expand the boundaries of FET:83 despite being presented as a ‘neutral’ concept, the doctrine has been interpreted to imply a requirement to maintain a stable regulatory environment for the investment. This has had a far-reaching impact on the expansion of the FET standard, as further explained below. 77 ibid para 302. Note that in July and August 2010 the Enron and Sempra awards were annulled, although the annulment decisions were not based on the tribunal’s reasoning on FET. Enron Corporation and Ponderosa Assets, L.P. v Argentine Republic, ICSID Case No ARB/01/3, Decision on Annulment (31 July 2010) para 405; Sempra Energy v The Argentine Republic, ICSID Case No ARB/02/16, Decision on Annulment (29 June 2010). 78 See eg Vivendi (n 75) and Sempra (n 76). 79 Siemens AG v The Argentine Republic, ICSID Case No ARB/02/8, Award (6 February 2007); MCI Power Group LC and New Turbine, Inc v Ecuador, ICSID Case No ARB/03/6, Award (31 July 2007) para 369. 80 See eg Azurix (n 73) para 364; Saluka Investment BV (The Netherlands) v The Czech Republic, Partial Award (17 March 2006) para 291; Occidental Exploration and Production Company v ­Ecuador, London Court of International Arbitration Case No UN3467, Award (1 July 2004) 12 ICSID Reports 59; and CMS Gas Transmission Company v Argentina, Award (12 May 2005) 44 International Legal Materials 1205 (2005) paras 282–84. 81 Dolzer and Schreuer (n 9) at 128 (‘Insistence that FET is identical with customary international law may well have the effect of accelerating the development of customary international law through the rapidly expanding practice on FET clauses in treaties.’) See also T Dolzer and A von Walter, ‘Fair and Equitable Treatment: Lines of Jurisprudence on Customary Law’ in F Ortino et al (eds), Investment Treaty Law: Current Issues II (London, BIICL, 2007) 99. 82 See eg the binding interpretation by NAFTA states (n 67), the 2004 US and Canadian model BITs, and the Norwegian model BIT drafted in 2007 and eventually shelved in 2009. All link FET to the customary minimum standard. 83 T Zeyl, ‘Charting the Wrong Course: The Doctrine of Legitimate Expectations in Investment Treaty Law’ (2011) 49 Alberta Law Review 11. See also P Cameron, International Energy Investment Law: The Pursuit of Stability (Oxford, Oxford University Press, 2010) especially ch 8 on ‘FET and Legitimate Expectations: Argentina’.

60  Investment Protection in Conflict Settings i.  Interpreting Legitimate Expectations The NAFTA investment tribunal in the Metalclad award interpreted FET for the first time as requiring the state to ensure transparency and stability in its regulation of foreign investment,84 in order to avoid any ‘misunderstanding or confusion’.85 According to the tribunal the investor ‘was led to believe, and did believe, that the federal and state permits allowed for the construction and operation of the landfill’.86 This reference to the concept of reliance,87 which of course recalls wellestablished principles of contract law in certain domestic jurisdictions, laid the foundation of a new approach to FET: the doctrine of legitimate expectations, which soon became the standard’s ‘dominant element’.88 It was not until 2003, in the Tecmed award,89 that an investment tribunal explicitly recognised, albeit in more general terms, that FET entailed a duty to respect the legitimate expectations of the investor. Interpreting the scope of the FET clause in the relevant BIT, the tribunal established that the standard required the host state to provide to international investments treatment that does not affect the basic expectations that were taken into account by the foreign investor to make the investment. The foreign investor expects the host State to act in a consistent manner, free from ambiguity and totally transparently in its relations with the foreign investor, so that it may know beforehand any and all rules and regulations that will govern its investments, as well as the goals of the relevant policies and administrative practices or directives, to be able to plan its investment and comply with such regulations.90

The tribunal insisted on the importance of ensuring that the regulatory framework of the host state remained consistent and free from ambiguity,91 so as not to adversely affect foreign investments. The threshold set by this approach is very high, since any act of the host state which could be considered in any way contradictory or unclear could frustrate the legitimate expectations of the investors.92

84 Metalclad v Mexico (n 57) para 76. 85 ibid. For a similar approach see also Emilio Agustín Maffezini v Kingdom of Spain, ICSID Case No ARB/97/7, ICSID Case No ARB/97/7, Award (13 November 2000) para 83; and CME v Czech Republic, (UNCITRAL), Partial Award (13 September 2001) para 611. 86 Metalclad (n 57) para 85 (emphasis added). 87 See also CME v Czech Republic (n 85) where at para 611 the tribunal found that the breach of the FET standard was caused by the ‘evisceration of the arrangements in reliance upon which the foreign investor was induced to invest’. 88 Saluka (n 80) para 302. 89 Tecmed (n 72). 90 ibid para 154 (emphasis added). 91 ibid para 167. 92 ibid para 173. Compare this with the more restrictive view of the tribunal in Waste Management v Mexico (‘Number 2’), Final Award (20 April 2004) ICSID Case No ARB(AF)/00/3, para 98, where the tribunal stated that in ascertaining whether a breach of the FET standard had occurred, it was ‘relevant that the treatment is in breach of representations made by the host State which were reasonably relied on by the claimant’ (emphasis added).

Relevant Standards of Investment Protection  61 The first substantive invocation of ‘legitimate expectations’, however, was only in the 2006 Thunderbird award,93 where the tribunal considered that the concept of ‘legitimate expectations’ relates, within the context of the NAFTA framework, to a situation where a Contracting Party’s conduct creates reasonable and justifiable expectations on the part of an investor (or investment) to ac in reliance on said conduct, such that a failure by the NAFTA Party to honour those expectations could cause the investor (or investment) to suffer damages.94

It is possible to say that the vast majority of investment tribunals since ­Thunderbird have considered, in their determination of breaches of FET, whether a violation of the investor’s legitimate expectations has occurred. Many tribunals have since adopted the expansive interpretation of the Tecmed tribunal, consolidating the concepts of transparency and legal and regulatory stability as constitutive elements of FET.95 The consequences of such a requirement are apparent: any attempt by the host state to regulate to fulfil, for instance, its human rights obligations could be restrained by the duty to ensure that the FET-based expectations of the investor are fully met.96 These expectations, according to the developing interpretations of investment tribunals, may be based on the legal framework in place at the moment of the investment in the host state,97 since the investor would have relied on the existing legal and policy guarantees to structure and plan its activities. According to the doctrine of legitimate expectations, any subsequent regulatory change which adversely affects the investment may amount to a breach of FET.98 Although some tribunals,99 such as Thunderbird itself, established that the investor had to show reliance on an express promise by the host state in order 93 International Thunderbird Gaming Corporation v Mexico, UNCITRAL (NAFTA), Award (26 January 2006) para 166. 94 ibid, para 145 (emphasis added). 95 AK Ali and KD Tallent, ‘The Effects of BITs on the International Body of Investment Law: The Significance of Fair and Equitable Provisions’ in CA Rogers and RP Alford (eds), The Future of Investment Arbitration (Oxford, Oxford University Press, 2009) 214. 96 Van Harten (n 45); JD Taillant and J Bonnitcha, ‘International Investment Law and Human Rights’, in Sustainable Development in World Investment Law (The Hague, Kluwer Law International, 2009) 66–67. See also Z Douglas, ‘Nothing if Not Critical for Investment Treaty Arbitration: Occidental, Eureko, Methanex’ (2006) 22 Arbitration International 27, 28; Schill (n 55) 334. 97 See GAMI v Mexico, Award (15 November 2004) 44 International Law Materials (2005) para 93; SD Meyers v Canada, Second Partial Award (21 October 2002); Feldman v Mexico, Award (16 December 2002) 18 ICSID Review 388 (2003) para 128. 98 Mondev (n 70) para 156. For similar ‘freezing’ decisions, see also Waste Management, Inc v United Mexican States, Award, ICSID Case No ARB (AF)/00/3 (3 April 2004); Occidental (n 80); MTD Equity Sdn Bhd and MTD Chile SA v Republic of Chile, ICSID Case No ARB(AF)/00/1, Award (9 January 2003); CMS v Argentina (n 80); Enron (n 74); LG&E Energy Corp, LG&E Capital Corp, LG&E International Inc v The Argentine Republic, ICSID Case No ARN/02/1, Decision on Liability (3 October 2006). 99 Continental Casualty Company v The Argentine Republic, ICSID Case No ARB/03/9, Award (5 September 2008); Duke Energy Electroquil Partners v Republic of Ecuador, ICSID Case No ARB/04/19, Award (18 August 2008); ADF v United States (n 70); International Thunderbird Gaming Corporation v Mexico, UNCITRAL (NAFTA), Award (26 January 2006) para 147, at http://italaw.com/sites/default/files/case-documents/ita0431.pdf; CMS v Argentina (n 80) para 277;

62  Investment Protection in Conflict Settings to invoke the doctrine of legitimate expectations,100 they did not challenge the fact that investors were entitled to expect the host state to refrain from altering the existing regulatory framework.101 The concept of legitimate expectations, when interpreted as de facto entitling the investor to a regulatory freeze in the host state, is inherently problematic as it empowers investment tribunals to review the substance of a host state’s administrative decision.102 Legitimate expectations can therefore be understood by investment tribunals as substantive expectations which directly challenge the legality of sovereign acts of the host state. As contended by various commentators,103 the inherent legitimacy of investment treaty arbitration is called into question when tribunals grant substantive legitimate expectations to foreign investors:104 as I discuss in chapter four, there is already a widespread perception that investment tribunals are biased in favour of the investors. The arbitrators’ lack of tenure casts doubts on their adjudicatory independence, as the way in which they reach a decision may directly affect their chances of future reappointment.105 More importantly, however, from a broader and more systemic point of view, it remains concerning, and indeed controversial, that an investment tribunal is granted review powers over the content of administrative decisions by a democratically elected government, especially when, following a tribunal’s decision, public funds are then reallocated to the payment of damages to investors.106 This controversy, crucially, highlights the intensity of the political conflict at the heart of the claims examined by investment tribunals. As observed by Martti Koskenniemi: The main issue is really not about whether to decide in favour of investor interests or countervailing values. It is instead, whether to protect the autonomous power of domestic political communities or to let the conditions of local lives be decided in the (‘dis-embedded’) processes of economic globalization.107 Biwater  Gauff (n 39); Parkerings-Compagniet AS v Lithuania, ICSID Case No ARB/05/8, Final Award (11 September 2007) para 331. For an accurate discussion of the relevance of an investor’s conduct, see P Muchlinski, ‘Caveat Investor? The Relevance of the Conduct of the Investor under the Fair and Equitable Treatment Standard’ (2006) 55 International and Comparative Law Quarterly 527. 100 APG Pandya and S Moody, ‘Legitimate Expectations in Investment Treaty Arbitration: An Unclear Future?’ (2010) 18–19, at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1631507. 101 ibid. 102 ibid 3. 103 Van Harten (n 45) 5; Zeyl (n 83) 34–35. 104 Zeyl ibid. For the opposite view, see J Paulsson, ‘The Power of the State to Make Meaningful Promises to Foreigners’ (2010) 1 Journal of International Dispute Settlement 341. 105 M Sornarajah, ‘A Coming Crisis: Expansionary Trends in Investment Treaty Arbitration’ in KP  Sauvant (ed), Appeals Mechanism in International Investment Disputes (Oxford, Oxford University Press, 2008) 39–45. For a defence of arbitrators, see C Brower and S Schill, ‘Is Arbitration a Threat or a Boon to the Legitimacy of International Investment Law?’ (2009) 9 Chicago Journal of International Law 471. 106 Roberts (n 22) 182. 107 M Koskenniemi, ‘It’s Not the Cases, It’s the System! Book Review Essay of M Sornarajah, Resistance and Change in the International Law on Foreign Investment (Cambridge University Press, 2015)’ (2017) 18 Journal of World Investment and Trade 343, 352.

Relevant Standards of Investment Protection  63 Thus, reliance on the doctrine of legitimate expectations, in my view ‘­sanitises’108 the inherently political nature of the tribunals’ awards and ‘immunises’ the foreign investor from the political claims of the local communities, thus turning the debate into a predominantly technical one. As I have argued elsewhere,109 there are also two additional concerns in relation to the way in which the doctrine of legitimate expectations has been deployed in ­investor-state arbitration to stretch the boundaries of FET. The first is that despite its domestic administrative law roots, the doctrine does not enshrine the balance of power typical of its domestic counterparts; the second is that the way in which legitimate expectations are interpreted often leads to a regulatory freeze. In relation to my first concern, in domestic administrative law, when substantive expectations are granted, appropriate principles of restraint are also instituted to ensure that decisions by elected government representatives are not arbitrarily reviewed by private adjudicators.110 By contrast, by recognising and validating investors’ substantive expectations, IIL enables investment tribunals to evaluate investors’ rights against the human rights of the local communities affected by the investment project in a lopsided ‘balancing’ exercise. The second concern, as mentioned earlier in this chapter, relates to the way in which this approach to legitimate expectations triggers a regulatory freeze, thus impairing a host state’s ability to fulfil its national and international obligations. As mentioned above, in IIL the doctrine of legitimate expectations is usually deployed as a ‘neutral’ concept, to avoid the politicisation of the consequences of accepting the substantive nature of these expectations. Although a number of recent awards have rejected an expansive approach111 to investors’ expectations and warned against the risk of regulatory freeze,112 the doctrine of legitimate expectations, albeit in a restrained version, remains a constitutive element of FET. In skilfully deploying the principle of proportionality113 and the margin of appreciation doctrine114 when assessing a breach of FET, investment

108 On the philosophical concept of ‘legal immunisation’, apt to describe this contextualisation of investor-state arbitration, see R Esposito, Immunitas: The Protection and Negation of Life (Cambridge, Polity, 2011) 45–51. 109 D Davitti, ‘On the Meaning of International Investment Law and International Human Rights Law: The Alternative Narrative of Due Diligence’ (2012) Human Rights Law Review 421, 436. 110 Zeyl (n 83) 33–35. 111 Continental Casualty (n 99) para 258. 112 EDF (Services) Limited v Romania, ICSID Case No ARB/05/13, Award Merits (8 October 2009) paras 217–18. 113 V Vadi, Proportionality, Reasonableness and Standard of Review in International Investment Law and Arbitration (Cheltenham, Edward Edgar, 2018) especially ch 3: ‘A History of Success? Proportionality in International Investment Law and Arbitration’. See also NM Perrone, ‘UNCTAD’s World Investment Reports 1991–2015: 25 Years of Narratives Justifying and Balancing Foreign Investor Rights’ (2018) 19 Journal of World Investment and Trade 7, 34. 114 On the problematic assumptions underlying the margin of appreciation doctrine as applied by the European Court of Human Rights, see generally E Benvenisti, ‘The Margin of Appreciation, Subsidiarity and Global Challenges to Democracy’ (2018) 9 Journal of International Dispute Settlement 240. On the arguably limited relevance of this doctrine, see CE Foster, ‘Respecting Regulatory

64  Investment Protection in Conflict Settings tribunals render unintelligible the essentially political nature of the issues they adjudicate upon, and attempt to assuage any challenge to the legitimacy115 of their jurisdiction and of the doctrine itself, merely suggesting a more ‘controlled approach’116 to its interpretation.117 The way in which the FET standard will develop remains to be seen.118 Its scope in ensuring compensation for investors, however, is clearly unprecedented, especially through an expansive interpretation of the doctrine of legitimate expectations.119 The risks for host countries affected by, or emerging from, armed conflict are equally extraordinary, since the damages awarded by investment tribunals for breaches of an investor’s legitimate expectations under FET clauses can be comparable to the entire budget allocated by the host country for reconstruction purposes.120 As discussed in chapter four, FET should be repositioned as a mutual standard of conduct, rather than as a source of investors’ rights, thus enabling full consideration of the context of the host country.121 Such a re-conceptualisation of the standard entails an obligation of due diligence that states have pledged to each other with respect to investments when entering into the relevant investment treaty.122

Measures: Arbitral Method and Reasoning in the Philip Morris v Uruguay Tobacco Plain Packaging Case’ Review of European (2017) 26 Comparative and International Environmental Law 287, 291. See also PK Yang, ‘The Margin of Appreciation Debate over Novel Cigarette Packaging Regulations in Philip Morris v Uruguay: A Step toward a Balanced Standard of Review in Investment Disputes’ (2018) Brill Open Law 1, 16. 115 Whilst I return to this in ch 4, on the legitimacy debate and the justification of IIL, see SW Schill and V Djanic, ‘Wherefore Art Thou? Towards a Public Interest-Based Justification of International Investment Law’ (2018) 33 ICSID Review 29, 48–53. See also A Stone Sweet et al, ‘Arbitral Lawmaking and State Power: An Empirical Analysis of Investor-State Arbitration’ (2017) 8 Journal of International Dispute Settlement 579, 598–602. See further, more generally, SW Schill, ‘In Defense of International Investment Law’, in M Bungenberg et al (eds), European Yearbook of International Economic Law (Cham, Springer, 2016) 309–41. 116 EDF award (n 112) 20. See also M Sornarajah, ‘The Fair and Equitable Standard of Treatment: Whose Fairness? Whose Equity?’ in Ortino et al (n 81). 117 For four different interpretations of the doctrine of legitimate expectations, see Bonnitcha (n 55) 169ff. Similarly, M Potestà, ‘Legitimate Expectations in Investment Treaty Law: Understanding the Roots and the Limits of a Controversial Concept’ (2013) 28 ICSID Review 88, 100–19. 118 See the continued relevance of FET and of the legitimate expectations doctrine in recent investment arbitration awards concerning the renewable energy sector, rendered in 2018. See eg A Franklin, ‘Legitimate Expectations: Lessons from Recent Energy Arbitration Cases on Renewable Energy – Relationship of Fair and Equitable Treatment Standard to Indirect Expropriation’ (22 April 2018) at https://ssrn.com/abstract=3167034. See also F Dias Simoes, ‘Case Note – Charanne and Construction Investment v Spain: Legitimate Expectations and Investments in Renewable Energy’ (2017) 26 Review of European Community and International Environmental Law 174, 177–78. 119 See eg L Johnson, ‘A Fundamental Shift in Power: Permitting International Investors to Convert their Economic Expectations into Rights’ (2018) 65 UCLA Law Review Discourse 106, 120. See also A Goldstein, ‘By Force of Expectation: Colonization, Public Lands, and the Property of Relation’ (2018) 65 UCLA Law Review Discourse 124, 138. 120 See eg the cases mentioned in this chapter involving the Republic of Argentina: most of them originated as a consequence of the Argentinean financial crisis. 121 Davitti (n 109) 444–45. 122 See Separate Opinion of Arbitrator Professor Pedro Nikken in joint decision Suez, Sociedad General de Aguas de Barcelona SA v The Argentine Republic, ICSID Case No ARB/03/19,

Relevant Standards of Investment Protection  65 Although FET has been at the centre of attention in most recent arbitral awards, another standard is usually contained in the same clause which enshrines FET protections: the standard of full protection and security (FPS). As I explain in the next section, FPS has until recently remained in the shadow of FET, with some tribunals finding that there was no substantive difference between the two standards.123 Recently, however, the FPS standard has been invoked by investors in various circumstances, prompting a reconsideration of its normative content in ways that enhance investment protection. B.  Full Protection and Security From 1990 to 2004 only six leading cases relating to FPS were published, whereas between 2004 and 2009 the figure increased to 24.124 The events of the 2010–12 Arab Spring also prompted a return to discussions of the scope of this standard, which has the potential of providing investors with additional avenues for their claims, especially in context of armed conflict.125 The level of liability that this standard can impose is potentially very onerous, in particular for host states which have experienced the type of violence that FPS clauses envisage may adversely affect foreign investments. FPS clauses, like the other standards discussed so far, are usually formulated in broad language. Typically they refer to ‘full protection and security’, or ‘most constant protection and security’. Although the terms used may vary slightly, there is wide agreement that they can be used interchangeably, without substantive variance amongst the  various formulations.126 These clauses generally require the host state to take active measures to protect the investments from adverse effects, whereby the adverse effects may not only stem from acts of the state and its organs, but also from private parties.127 It is largely uncontroversial that unjustified acts of violence taken by state actors against foreign investors and their properties would result in a breach ­ ecision on Liability (30 July 2010) and AWG Group Ltd v The Argentine Republic, ICSID Case D No ARB/03/19, Decision on Liability (30 July 2012) paras 4, 19 and 20. 123 See eg Wena Hotels Ltd v Arab Republic of Egypt, ICSIS Case No ARB/98/4, Award (8 December 2000); Occidental (n 80) para 187; PSEG Global, Inc, The North American Coal Corporation, and Konya Ingin Electrik Uretim ve Ticaret Limited Sirketi v Turkey, ICSID Case No ARB/02/5, Award (19 January 2007). 124 M Malik, ‘The Full Protection and Security Standard Coms of Age: Yet Another Challenge for States in Investment Treaty Arbitration’ (2011) International Institute for Sustainable Development, Best Practices Series, at www.iisd.org. 125 ibid 1. See also C Schreuer, ‘Full Protection and Security’ (2010) Journal of International Dispute Settlement 1. 126 See Parkerings (n 99) para 354. See also G Cordero Moss, ‘Full Protection and Security’, in ­Reinisch (n 52) 133–36. 127 The term ‘private parties’ is understood as including non-state armed groups, demonstrators, etc. See in general GI Hernández, ‘The Interaction Between Investment Law and the Law of Armed Conflict in the Interpretation of Full Protection and Security Clauses’ in Baetens (n 12).

66  Investment Protection in Conflict Settings of the FPS standard when the investment is materially affected by these acts.128 It is also agreed that violence perpetrated by non-state actors may result in a breach of FPS,129 especially if the host state has not appropriately intervened to prevent harm against the investors. Investment tribunals have found, with few exceptions, that the standard of liability in relation to FPS is not a strict liability standard; thus, a host state is generally required to use due diligence in the protection of foreign investment.130 On the other hand, tribunals have disagreed over the significance of a host-state level of development in ascertaining the level of due diligence. In Pantechniki v Albania, for instance, the tribunal found that in cases of denial of justice it was not possible to take into account the specific circumstances of the host state, as this would result in a disincentive for improvement.131 In cases of public violence, however, it found that liability was directly dependent on a host state’s resources, since ‘[t]here is no issue of incentives or disincentives with regard to unforeseen breakdown of public order; it seems difficult to maintain that a government incurs international responsibility for failure to plan for unprecedented trouble of unprecedented magnitude in unprecedented places’.132 Tribunals have also disagreed over what this due diligence standard encompasses; that is to say, whether FPS is equivalent to the customary international law for the protection of aliens133 or whether it is to be understood as an autonomous standard which requires wider protections for investments. Discrepancies have also characterised tribunals’ reasoning on whether there is a substantive difference between FPS and FET,134 with various c­ ommentators

128 See eg the cases of Biwater (n 39), Asian Agricultural Products Ltd (AAPL) v Republic of Sri Lanka, ICSID Case No ARB/87/3, Award (21 June 1990), 4 ICSID Report 246 (1990); and American Manufacturing & Trading Inc (AMT) v Republic of Zaire, ICSID Case No ARB/93/1, Award (21 February 1997), 5 ICSID Reports 11. 129 See eg the cases of ELSI (n 61); Wena Hotels (n 123); Tecmed (n 72); Noble Ventures Inc v Romania, ICSID Case No ARB/01/11, Award (5 October 2005) International Investment Claims 179 (2005); and Pantechniki SA Contractors & Engineers v The Republic of Albania, ICSID Case No ARB/07/21, Award (30 July 2009). 130 HE Zeitler, ‘The Guarantee of “Full Protection and Security” in Investment Treaties Regarding Harm Caused by Private Actors’ (2005) 3 Stockholm International Arbitration Review 1–3; ELSI (n 61) para 108; AAPL v Sri Lanka (n 128) paras 45–53; Tecmed (n 72) para 177; Noble Ventures, ibid, para 164; Wena Hotels (n 123) para 84; Saluka (n 80) para 484; Plama Consortium Ltd v Bulgaria, ICSID Case No ARB/03/24, Decision on Jurisdiction (8 February 2005) para 181; Biwater (n 39) paras 725–26; and Rumeli Telekom AS and Telsim Mobil Telekomunikasyon Hizmetleri AS v Republic of Kazakhstan, ICSID Case No ARB/05/16, Award (28 July 2008) para 668. 131 Pantechniki (n 129) para 76. 132 ibid para 77. See also Parkerings (n 99) paras 360–61. 133 Noble Ventures (n 129) para 164. 134 For tribunals arguing that there is a substantive difference between FPS and FET see Azurix (n 73) para 40; Jan de Nul NV and Dredging International NV v Arab Republic of Egypt, ICSID Case No ARB/04/13 Award (6 November 2008) para 269; Siemens (n 79) para 302. See also E de Brabandere, ‘Fair and Equitable Treatment and (Full) Protection and Security in African Investment Treaties Between Generality and Contextual Specificity’ (2017) 18 Journal of World Investment and Trade 530, 536–37.

Relevant Standards of Investment Protection  67 concluding that the two standards are separate and autonomous from each other.135 The most significant arbitral inconsistency in relation to FPS, however, concerns the scope of the standard: whereas there is no doubt that the standard includes physical protection of investors and their property,136 the extension of FPS protection to legal security remains highly controversial.137 In some cases investment treaties may explicitly include legal security in FPS clauses.138 Generally speaking, however, legal security has to be inferred by the investment tribunals, in order to find a guarantee of regulatory stability. According to Wälde, the standard stretches beyond mere police protection powers aimed at achieving physical security and encompasses restrictions of a host state’s regulatory powers. He claims that the obligations flowing from FPS clauses include a duty to protect the normal ability of the investor’s business to function … a duty, enforceable by investment arbitration, to use the powers of government to ensure the foreign investment can function properly on a level playing field, unhindered and not harassed by the political and economic domestic powers that be.139

In a similar way, the tribunal in CME v Czech Republic interpreted the FPS standard as entailing ‘an obligation to ensure that neither by amendment of its law nor by actions of its administrative bodies is the agreed and approved security and protection of the foreign investor’s investment withdrawn or ­devalued’.140 Another tribunal, however, adjudicating on the same facts in the Lauder v The Czech Republic award, found that ‘[t]he Respondent’s only duty under the Treaty was to keep its judicial system available for the Claimant and any entities he controls to bring their claims’.141 The tribunal in Azurix v Argentina confirmed that whenever the terms ‘protection’ and ‘security’ are qualified by the adjective ‘full’, the FPS s­ tandard 135 See eg Schreuer (n 125); Zeitler (n 130); and R Dolzer and M Stevens, Bilateral Investment ­Treaties (The Hague, Kluwer Law International, 1995) at 60. 136 See Rumeli (n 130); Saluka (n 80); Eastern Sugar BV v The Czech Republic, Stockholm Chamber of Commerce Case No 088/2004, Partial Award (27 March 2007) paras 201–07. 137 In Saluka (n 80), the tribunal stated at para 483 that ‘the standard applies essentially when the foreign investment has been affected by civil strife and physical violence’. At para 484 it further stated that ‘The practice of arbitral tribunals seems to indicate, however, that the “full security and protection” clause is not meant to cover just any kind of impairment of an investor’s investment, but to protect more specifically the physical integrity of an investment against interference by use of force’. See also GK Foster, ‘Recovering “Protection and Security”: The Treaty Standard’s Obscure Origins, Forgotten Meaning, and the Key Current Significance’ (2012) 45 Vanderbilt Journal of Transnational Law 1095. In favour of extending the standard to include legal protection, see Dolzer and Schreuer (n 9) 151–52. 138 Siemens (n 79) paras 286 and 303. 139 TW Wälde, ‘Energy Charter Treaty-based Investment Arbitration: Controversial Issues’ (2004) 5 The Journal of World Investment & Trade 373, 391. 140 CME (n 85) para 613. 141 Ronald S Lauder v The Czech Republic, UNCITRAL Case No 0709, Final Award (3 September 2001) 9 ICSID Report 66 (2001) para 314.

68  Investment Protection in Conflict Settings goes ‘beyond protection and security ensured by the police. It is not only a matter of physical security; the stability afforded by a secure investment environment is as important from an investor’s point of view’.142 This reasoning was reiterated in Biwater Gauff v Tanzania: The Arbitral Tribunal adheres to the Azurix holding that when the terms ‘­ protection’ and ‘security’ are qualified by ‘full’, the content of the standard may extend to matters other than physical security. It implies a State’s guarantee of stability in a secure environment, both physical, commercial and legal. It would in the Arbitral Tribunal’s view be unduly artificial to confine the notion of ‘full security’ only to one aspect of security, particularly in light of the use of this term in a BIT, directed at the protection of commercial and financial investments.143

As outlined above in relation to FET, however, recent investment agreements signed by the United States and Canada, for instance, have pegged the interpretation of FPS and FET to the customary international law standard,144 and unequivocally explained that FPS ‘requires each Party to provide the level of police protection required under customary international law’.145 It will be interesting to see whether, in the wake of recent conflicts in the Arab world146 and beyond, investment tribunals will take these and similar states’ clarifications at face value or whether they will still attempt to distinguish them in the cases upon which they are called to adjudicate.147

142 Azurix (n 73) para 408. See also Siemens (n 79) para 303; and Vivendi (n 75) para 7.4.15 and 7.4.17. 143 Biwater (n 39) para 729. 144 See eg art 5 ‘Minimum Standard of Treatment’ of the new 2012 US Model BIT, specifying at 5(2) that the concepts of FET and FPS ‘do not require treatment in addition to or beyond that which is required by that standard, and do not create additional substantive rights’. 145 ibid art 5(2)(b). 146 See eg Indorama International Finance Limited v Egypt (2 December 2011) Notice of Arbitration, ICSID Case No ARB/11/32. 147 See also the Notices of Intent deposited against the United States of America for failure to take preventative measures vis-à-vis the Ponzi schemes set up by Stanford Financial Group: ­Guatemalan, Costa Rican and Dominican Victims of the Stanford Ponzi Scheme v The Government of the United States of America, Notice of Intent, 29 December 2012; Nationals of Peru Victimized by the Stanford Ponzi Scheme v The Government of the United States of America, Notice of Intent, 28  December 2012; Peruvian Victims of the Stanford Ponzi Scheme v The Government of the United States of America, Notice of Intent, 29 December 2012; Gregorio Anibal Sanabria Fleitas v The Government of the United States of America, Notice of Intent, 28 December 2012; and ­Mordehai Moor v The Government of the United States of America, Notice of Intent, 28 December 2012. For a detailed analysis of the ‘allegation that the United States failed within its territory to provide to foreign investments protection and security from damage inflicted on them by resident non-State actors’, see L Bastin, State Responsibility for Omissions: Establishing a Breach of the Full Protection and Security Obligations by Omissions (unpublished thesis, Oxford, Oxford University, 2017) at https://ora.ox.ac.uk/objects/uuid:9e027b10-b749-4e56-a663-d58682aea06e. See also JA Maupin, ‘Differentiating Among International Investment Disputes’ in Z Douglas et al (eds), The Foundations of International Investment Law: Bringing Theory into Practice (Oxford, Oxford University Press, 2014) 467, 472–74.

Relevant Standards of Investment Protection  69 C.  War Clauses In addition to traditional FPS protections, many investment treaties also contain clauses specifically referring to armed conflict, emergency, insurrection, civil strife or similar events. These clauses are usually structured so as to provide non-discrimination guarantees, that is to say to ensure that foreign investors are not treated less favourably than national counterparts (national treatment) or than third parties (most favoured nation treatment).148 Thus, these clauses do not create substantive obligations upon the host state, since they are related to the treatment granted to national investments or third parties’ investments in analogous circumstances. As explained by the tribunal in CMS v Argentina, these clauses provide a floor treatment for the investor in the context of the measures adopted in respect of the losses suffered in the emergency, not different from that applied to national or other foreign investors. The Article does not derogate from the Treaty rights but rather ensures that any measures directed at offsetting or minimizing losses will be applied in a non-discriminatory manner.149

Extended war clauses have also been introduced in some investment treaties, in order to cover not just the non-discrimination guarantees outlined above but also more substantive protections. They generally establish, in fact, that when the foreign investment is affected by destruction or requisition by state actors not dictated by a situation of necessity, these actions can be treated as expropriatory measures, thus arguably requiring restitution and/or prompt, adequate and effective compensation.150 Schreuer argues that the applicability of the concept of military necessity is only relevant in the case of destruction, whereby restitution or compensation would not be due in cases of collateral damage but owed if the host state’s military forces went beyond military necessity.151 He further argues, however, that requisition of foreign investment always requires restitution or compensation, even when covered by military necessity.152 This type of extended war clause was the subject of the tribunal’s interpretation in the case of AAPL v Sri Lanka.153 Article 4 of the Sri Lanka-UK BIT applicable to the award provided for restitution or compensation in case of ‘(a) requisition of their property by its forces or authorities, or (b) destruction of their property by its forces or authorities which was not caused in combat action or was not required by the necessity of the situation’. The tribunal was unable to 148 See eg art 7 of the Libya-Portugal BIT, quoted in Schreuer (n 8) at 10. 149 CMS v Argentina (n 80) para 375. 150 Schreuer (n 12) at 11. See also his examples of such extended war clauses in art 12 of the Energy Charter Treaty and art 15 of the Austria-Libya BIT. On expropriation, see s II.D in this chapter. 151 Schreuer (n 12) at 12. 152 ibid. 153 AAPL v Sri Lanka (n 128).

70  Investment Protection in Conflict Settings determine the issue of military necessity,154 but in any case it was also impossible to prove that the investment had been affected by the actions of the host state’s security forces,155 rather than by rebel forces. Furthermore the destruction had occurred during combat action, as envisaged in the second paragraph of the relevant clause in the BIT.156 The tribunal in AMT v Zaire157 adopted a similar reasoning, deciding that the uniformed soldiers who looted the investor’s property were not acting in their capacity of host state’s armed forces: their acts were not attributable to the host state and therefore did not amount to expropriation or requisition by the host state.158 D.  Protections Against Expropriation Expropriation is also extremely relevant to my analysis of the intersection between investment and human rights, as very often certain measures which the government justifies as necessary in terms of its compliance with national and/or international human rights law can be found to constitute indirect ­expropriation.159 Since instances of direct expropriation – the outright takeover of property by the host state – nowadays occur with less frequency,160 I focus in this section on what constitutes indirect expropriation under international law and in investment arbitration practice. Ascertaining what constitutes indirect expropriation, rather than a legitimate regulatory taking by the state, is a crucial issue in evaluating whether the expropriated investor is entitled to compensation. Moreover, as we shall see, when an indirect expropriation has indeed taken place investment tribunals will have to evaluate the legality of the expropriation, in order to establish the quantum of the compensation owed to the investor.161 The doctrine of expropriation is subject to continuous evolution and development. As is the case for the other substantive investment protections, there are very few certainties surrounding this doctrine, and numerous debates and disagreements over, for instance, relevant definitions, the limitations of the

154 ibid paras 63–64. 155 ibid paras 58–60. 156 ibid paras 61–62. 157 AMT v Zaire (n 128). 158 ibid paras 7.9. For general security exceptions and force majeure defences, see Schreuer (n 12) 14–17. 159 See eg Urbaser SA and Consorcio de Aguas Bilbao Bizkaia, Bilbao Biskaia Ur Partzuergoa v Argentine Republic (8 December 2016) Award, ICSID Case No ARB/07/26. See also J Wouters and N Hachez, ‘When Rules and Values Collide: How Can a Balanced Application of Investor Protection Provisions and Human Rights Be Ensured?’ (2009) 3 Human Rights and International Legal Discourse 301, 302. 160 AK Hoffmann, ‘Indirect Expropriation’ in Reinisch (n 52) 151. 161 A Reinisch, ‘Legality of Expropriations’ in Reinisch (n 52) 171–204. On this, see also the discussion on the Chorzów standard at the end of this section.

Relevant Standards of Investment Protection  71 protections against expropriation and the issue of compensation, in particular whether this is due by the state when expropriation is lawful. Before exploring the current discussions any further, it is important to note that expropriation is not prohibited under international law, as it is in fact understood as an expression of territorial sovereignty and as an exercise of state police powers.162 Yet, for it to be considered lawful, the expropriatory measure has to meet certain criteria. Three of these criteria are basically undisputed under international law: the expropriation must be for a public purpose; of a non-discriminatory or non-arbitrary nature; and compliant with due process of law.163 An additional criterion, which remains deeply controversial, refers to the need for the expropriatory measure to be accompanied by compensation, generally defined as ‘full, adequate and effective’ and predominantly ‘understood today to be equivalent to the market value of the expropriated investment’.164 I shall return to the controversial criterion of compensation at the end of this section, when discussing the debate on the legality of expropriation: first however I want to examine the controversy surrounding the definition of ‘indirect expropriation’. Indirect expropriation (or indirect taking) is often also referred to with other adjectives such as ‘creeping’, ‘de facto’, ‘regulatory’ or ‘consequential’.165 All of these terms, mostly used interchangeably,166 refer to a phenomenon whereby regulatory measures by the state result in a deprivation or limitation of the use, effective enjoyment, benefit and/or disposal of the property of the foreign investor,167 ‘or has the effect of destroying the value of the property’.168 The government action is understood as an act of substantial interference, to the extent that it has a negative impact on the investor’s enjoyment of the ­property.169 Some commentators have claimed that the interference by the state and its impact on the investment are sufficient elements for finding an indirect expropriation.170 This approach, known as ‘the sole effect doctrine’ was

162 Dolzer and Schreuer (n 9) 88. 163 Reinisch (n 161) 173. 164 Dolzer and Schreur (n 9) 91. See also my discussion below in relation to the Chorzów standard. 165 Hoffmann (n 160) 153. 166 Some tribunals, although establishing that they were dealing with cases of indirect expropriation, have operated a distinction between ‘creeping expropriation’ and ‘de facto expropriation’, whereby ‘creeping expropriation’ takes place ‘gradually and stealthily’. Both ‘may be carried out through a single action, through a series of action in a short period of time or through simultaneous actions’. See Tecmed (n 72) para 114. 167 See eg Hoffmann (n 160) 155; Dolzer and Schreuer (n 9) 94; and AP Newcombe, ‘The Boundaries of Regulatory Expropriation in International Law’ (2005) 20 ICSID Review 1, 6. 168 AP Newcombe, Regulatory Expropriation, Investment Protection and International Law: When is Government Regulation Expropriatory and When Should Compensation Be Paid? (Toronto, University of Toronto, 1999) at 2, at http://ita.law.uvic.ca/documents/RegulatoryExpropriation.pdf. 169 Hoffmann (n 160) 156. 170 R Dolzer, ‘Indirect Expropriations: New Developments?’ (2002) 11 New York University Environmental Law Journal 64, 79. See also Dolzer and Schreuer (n 9) 95.

72  Investment Protection in Conflict Settings first adopted by the Biloune tribunal,171 which found that the acts of the state were to be considered tantamount to ‘constructive expropriation’ unless the state was able to ‘establish by persuasive evidence sufficient justification’ for the events that caused ‘the irreparable cessation of work on the project’.172 The majority of tribunals, however, have identified that a certain ‘degree of interference’,173 by either act or omission of the state,174 is needed to establish that indirect expropriation had occurred. Tribunals have therefore relied on an element of ‘substantial deprivation’175 of an investor’s rights in order to find a regulatory measure tantamount to indirect expropriation. The tribunal in Metalclad, for instance, went a step further and established that the deprivation of a partial nature (‘in whole or in significant part’)176 was also sufficient to a finding of indirect expropriation. Similarly, tribunals have considered whether interference has to be of a permanent nature in order to be considered indirect expropriation. Whereas the Tecmed tribunal found that only ‘irreversible and permanent’177 measures could constitute an indirect expropriation, the SD Myers tribunal expanded its consideration to encompass circumstances in which ‘it would be appropriate to view a deprivation as amounting to an expropriation, even it were partial or temporary’.178 Subsequent awards which considered the duration of the interference failed to shed additional light on the matter, and only added to the lack of coherence in the case law by adopting seemingly arbitrary criteria in establishing what duration would be sufficient for a finding

171 Biloune and Marine Drive Complex Ltd v Ghana Investments Centre and the Government of Ghana, UNCITRAL Award on Jurisdiction and Liability (27 October 1989) 95 International Legal Materials 183 (1989). 172 ibid para 209. 173 Hoffmann (n 160) 158. 174 Metalclad (n 57) paras 106–07; CME (n 85) paras 591ff. Note however the contrasting decision in Mr Eudoro Armando Olguin v Republic of Paraguay, ICSID Case No ARB/98/5, Award (26 July 2001) para 84. 175 Pope & Talbot v Canada (n 64) para 102: ‘While it may sometimes be uncertain whether a particular interference with business activities amounts to a conclusion that the property has been “taken” from the owner … under international law, expropriation requires a “substantial ­deprivation”.’ See also Starrett Housing Corp v Iran, Iran-US Claims Tribunal, 19 December 1983, 4 Iran-US Claims Tribunal Reports 122, 154, where the tribunal found that the state interfered with the investment ‘to such an extent that these rights are rendered so useless that they must be deemed to have been expropriated’; Tippetts, Abbett, McCarthy, Stratton v TAMS-AFFA, Consulting Engineers of Iran, Iran-US Claims Tribunal (22 June 1984) 6 Iran-US Claims Tribunal Reports 219, 225, where it was found that deprivation should be ‘not merely ephemeral’; CME (n 85) para 606; SD Meyers (n 65) para 283; Tecmed (n 72) para 115; Generation Ukraine Inc v Ukraine, ICSID Case No ARB/00/9, Award (16 September 2003) para 20.32; CMS v Argentina (n 80) paras 262–63; Telenor Mobile Communications AS v Hungary, ICSID Case No ARB/04/15, Award (13 September 2006) para 64. 176 Metalclad (n 57) para 103. See also SD Meyers (n 65) para 283; and Iurii Bogdanov, AgurdinoInvest Ltd and Agurdino-Chimia JSC v Republic of Moldova, Stockholm Chamber of Commerce, Award (22 September 2005) para 17. 177 Tecmed (n 72) para 116. 178 SD Meyers v Canada (n 65) para 283.

Relevant Standards of Investment Protection  73 of expropriation.179 Predictably, this has been justified once again by the fact that a tribunal will have to consider the specific circumstances of the case on a one-to-one basis.180 The element of intention of the state has also proven controversial in investment arbitration, with the ‘sole effect doctrine’ at one extreme end of the spectrum contending that, ‘no matter how laudable and beneficial to society as a whole’, the purpose of state is irrelevant because its regulatory measures are ‘similar to any other expropriatory measures that a state may take in order to implement its policies’.181 At the other end of the spectrum, there is an alternative view, based on the police powers doctrine, which favours an approach that takes into consideration ‘the context of the government measure, including its purpose and the proportionality between the harm to the investor and the benefit to the public’.182 Some tribunals have avoided the question of intention by simply stating that it is not for the tribunal to establish the motivations behind the expropriation,183 whereas others (embracing the ‘sole effect doctrine’)184 have claimed that ‘intention is less important than the effects of the measures on the owner of the assets or on the benefits arising from such assets affected by the measures’,185 although ‘intent will weigh in favour of showing a measure to be expropriatory’.186 The CCL tribunal,187 on the other hand, refused to find that indirect expropriation had occurred because it could not find evidence of a state’s intention to expropriate.188 Inhabiting an intermediate position along the ‘intention spectrum’ described above, some tribunals have taken into consideration the proportionality principle, as mainly developed by the European Court of Human Rights (ECtHR),189

179 See eg Wena Hotels (n 123) para 9; Consortium RFCC v The Kingdom of Morocco, ICSID Case No ARB/00/6, Award (22 December 2003) para 68; Middle East Cement Shipping and Handling Co. SA v Arab Republic of Egypt, ICSID Case No ARB/99/6, Award (12 April 2002) para 107; LG&E v Argentina (n 98) para 193. 180 Hoffmann (n 160) 160. 181 Compania de Desarrollo de Santa Elena SA v Republic of Costa Rica, ICSID Case No ARB/96/1, Award (17 February 2000) para 72. 182 SR Ratner, ‘Regulatory Takings in Institutional Context: Beyond the Fear of Fragmented International Law’ (2008) 102 American Journal of International Law 475, 482. 183 See eg Biloune v Ghana (n 171). 184 Azurix (n 73) para 309; Siemens (n 79) para 270, relying on the wording of the relevant BIT, which did not refer to the intention of the state; Starrett Housing v Iran (n 175) para 154; Tippetts (n 175) paras 225–26; Phillips Petrolem Co v Iran, Iran-US Claims Tribunal, 29 June 1989, 21 Iran-US Claims Tribunal Reports 79, para 97. 185 Tecmed (n 72) para 116. 186 Compania de Aguas del Aconquija SA and Vivendi Universal v Argentine Republic (Vivendi II), ICSDI Case No ARB/97/3, Award (20 August 2007) para 7.5.20. 187 CCL v Republic of Kazakhstan, Stockholm Chamber of Commerce Case No 122/2001, Final Award (1 January 2004) 1 Stockholm Investment Arbitration Report 123 (2005) 173. 188 See discussion of states’ intentions in Hoffmann (n 160) 161–62; Dolzer and Schreuer (n 9) 101–14. 189 See for instance James & Others v United Kingdom, 8793/79 ECtHR 21 February 1986, para 50: ‘Not only must a measure depriving a person of his property pursue, on the fact as well as in

74  Investment Protection in Conflict Settings as a means to assess the state’s justification for its regulatory actions. The proportionality principle consists of three elements:190 first, suitability of the measure, which has to be appropriate and just191 when compared to the objective it wishes to achieve (this requires a causal link between the measure and the objective);192 second, necessity of the measure, whilst taking into consideration alternative options, ie ‘less restrictive but equally effective measures’;193 third, proportionality stricto sensu,194 ensuring that the measures are not excessive vis-à-vis the public purpose that they intend to achieve. According to the ECtHR, the proportionality principle demands taking into consideration the lack of participation by non-nationals in electing the government which is responsible for implementing the relevant regulatory measures, as well as their lack of participation in consultations related to the adoption of the measures ­themselves.195 As a consequence, ‘there may well be a legitimate reason for requiring nationals to bear a greater burden in the public interest than non-nationals’.196 Directly transposing such proportionality considerations to the context of investor-state arbitration, however, is not a neutral and apolitical decision, and as such it raises a number of questions, not least in terms of legitimacy, which have been amply discussed in the literature.197 The ECtHR-inspired proportionality test was first applied by the Tecmed tribunal which confirmed the need to identify a ‘relationship of proportionality between the charge or weight imposed on the foreign investor and the aim sought to be realised by any expropriatory measure’.198 After considering the negative impact of the regulatory measures on the investment, it went on to consider whether such actions or measures are proportional to the public interest presumably protected thereby and to the protection legally granted to investments, taking into principle, a legitimate aim “in the public interest”, but there must also be a reasonable relationship of proportionality between the means employed and the aim sought to be realised.’ See also ECtHR, Matos e Silva, Lda, and Others v Portugal, Judgment, 16 September 1996, 92, p 19; ECtHR, Mellacher and others v Austria, Judgment, 19 December 1989, 48, para 24; ECtHR, Pressos Compania Naviera and Others v Belgium, Judgment, 20 November 1995, 38, para 19. See also Vadi (n 113) especially ch 4 ‘Reasonableness in Investment Treaty Arbitration’. 190 See discussion of these elements in J Krommendijk and J Morijn, ‘Proportional by What Measure(s)? Balancing Investor Interests and Human Rights by Way of Applying the Proportionality Principle in Investor-State Arbitration’ in PM Dupuy, F Francioni and EU Petersmann (eds), Human Rights and International Investment Law and Arbitration (Oxford, Oxford University Press, 2009) 438. 191 H Xiuli, ‘The Application of the Principle of Proportionality in Tecmed v Mexico’ (2007) 6 Chinese Journal of International Law 635, 636. 192 M Andenas and S Zleptnig, ‘Proportionality and Balancing in WTO Law: A Comparative Perspective’ (2007) 20 Cambridge Review of International Affairs 74. 193 ibid 75; Hoffmann (n 160) 164, discussing the Tecmed case. 194 Krommendijk and Morijn (n 190) 438. 195 James & Others v United Kingdom (n 168) para 64. 196 ibid. 197 See eg Vadi (n 113). See also NM Perrone, ‘UNCTAD’s World Investment Reports 1991–2015: 25 Years of Narratives Justifying and Balancing Foreign Investor Rights’ (2018) 19 Journal of World Investment and Trade 7, 34. 198 Tecmed (n 72) para 122.

Relevant Standards of Investment Protection  75 account that the significance of such impact has a key role upon deciding the proportionality. Although the analysis starts at the due deference owing to the State when defining the issues that affect its public policy or the interests of society as a whole, as well as the actions that will be implemented to protect such values, such situation does not prevent the Arbitral Tribunal, without thereby questioning such due reference, from examining the actions of the State … to determine whether such measures are reasonable with respect to their goals, the deprivation of economic rights and the legitimate expectations of who suffered the deprivation.199

At least some elements of the proportionality test seem to take us back to the concepts of reasonableness and investors’ legitimate expectation discussed in the previous section on FET, in particular when the tribunal suggests that the needs or interests of the state and its police powers can be ‘weighed against the deprivation or neutralisation of the economic or commercial value of the Claimant’s investment’.200 The proportionality test has been adopted, implicitly or explicitly, by various subsequent tribunals,201 which have applied the three constitutive elements of the principle to assess the regulatory actions of the state. Some commentators have identified a trend, from the NAFTA decision in Methanex onwards, indicating ‘a return to a more conservative interpretation of what actions constitute an illegal expropriation’,202 and a certain deference to the sovereignty of states in regulating, for instance, matters of environmental and social concern.203 Greater emphasis seems to have been placed on the principle of proportionality in ascertaining the legality of the expropriation, for instance by the Azurix204 and LG&E205 tribunals, which confirmed the role of the principle vis-à-vis the issue of legality and therefore in establishing whether certain regulatory measures should give rise to compensation. This latter statement seems to imply that whenever a public purpose measure is proportional, compensation will not be necessarily due. In contemporary 199 Tecmed (n 72) paras 118–22 (emphasis added). 200 Tecmed (n 72) para 139. It is interesting to note, as pointed out by Hoffmann (n 160), that the proportionality test recalls the defence of necessity, available to the state ‘to safeguard an essential interest against a grave and imminent peril’, as per art 25 of the International Law Commission Report of the International Law Commission, International Law Commission Articles on Responsibility of States for Internationally Wrongful Acts, 56th Session, Supplement No 10, UN Doc A/56/10 (Nov 2001). 201 Azurix (n 73) para 312; LG&E v Argentina (n 98) para 195; Biwater (n 39) paras 434–519; Continental (n 88) paras 189–232. 202 J Waincymer, ‘Balancing Property Rights and Human Rights in Expropriation’ in Dupuy et al (n 169) 300. 203 See Bonnitcha (n 55) s 5.5.1 of the book, where he proposes a taxonomy of expropriation cases, including the Methanex approach, entailing a police power carve-out. Accordingly, the tribunal in Methanex held that ‘a non-discriminatory regulation for a public purpose, which is enacted in accordance with due process, and which affects, inter alios a foreign investor or investment is not deemed expropriatory and compensable unless specific commitments had been given by the regulating government … to refrain from such regulation’: Methanex v United States (19 August 2005) 44 International Law Materials 1345, part IV, ch D, para 7. 204 Azurix (n 73) para 312. 205 LG&E v Argentina (n 98) para 195.

76  Investment Protection in Conflict Settings investment law and arbitration this statement is far from uncontroversial: it is at the centre of a very heated debate between those who claim that any type of expropriation should always result in compensation, and those who contend that regulatory measures, taken in accordance with international law requirements, do not constitute expropriation and should not therefore trigger compensation. As mentioned earlier, the fact that compensation may or may not be one of the international law requirements for the finding of an indirect expropriation is part and parcel of the legality/compensation controversy. Whereas some authors argue that the element of compensation for expropriation used to be accepted as customary international law,206 others have pointed to an at least partial mood-shift in state practice since the 1970s.207 This uncertainty in customary international law is reflected in an increased tendency from states to expressly refer to the element of compensation in their investment treaties,208 although such treaties also increasingly contain exclusion clauses, clearly showing deference to the state’s power to regulate over matter of public interest.209 In 2004 the United Nations Conference on Trade and Development (UNCTAD) qualified its position on the status of customary international law pertaining to investment, specifying for example that compensation was ‘widely accepted in principle’, yet no universal agreement could be found regarding the way in which compensation should be assessed.210 In a 2012 follow-up document on expropriation, UNCTAD then clarified its position as follows: International law is clear on two points. First, States have a legitimate right to expropriate foreign property as long as the requirements of legality are met (non-payment of compensation alone should not indicate illegality of the expropriation, at least with respect to indirect takings). Second, States have a legitimate right to regulate in the public interest without paying any kind of compensation. The clash occurs when regulation leads to a total or near-total destruction of an investment. Expropriation and regulation are different in nature. The former focuses on the taking of an investment; it is a targeted act. The latter is part of the common and normal functioning of the State where impairment to an investment can be a side effect. Expropriation is always compensable, whereas regulation is not. Drawing a line between the two is not easy but is of paramount importance.211 206 Reinisch (n 52) 173. 207 See, within the context of the North-South debate and efforts to establish a New International Economic Order, various UN General Assembly resolutions of the early 1970s, including UNGA Res 3171 (XXVIII), Resolution on Permanent Sovereignty over Natural Resources, UN GAOR, 287th Session, UN Doc A/RES/3171 (XXVIII) (1973). For an overview of expropriation patterns, see C Hajzler, ‘Expropriation of Foreign Direct Investments: Sectoral Patterns from 1993 to 2006’ (2012) 148 Review of World Economics 119–49. 208 See US Model BIT 2004, incorporating the Restatement (Third) of the Foreign Relations Law of the United States, American Law Institute (ed), para 712 (1987). See also German Model BIT 2004. For further examples, see Reinisch (n 52) 176–78. 209 Waincymer (n 202) 300. 210 UNCTAD, International Investment Agreements: Key Issues (2004) 235. 211 UNCTAD, Expropriation: A Sequel (2012) UNCTAD Series on Issues in International Investment Agreements II, 139; at http://unctad.org/en/docs/unctaddiaeia2011d7_en.pdf.

Relevant Standards of Investment Protection  77 The above statement seems to rule out completely the sole effect doctrine and the fact that compensation must be paid in every case. An analysis of investment arbitration awards which adjudicated on the matter reveals, however, a different picture: some tribunals,212 like the one in the Santa Elena case, completely disregard the nature of the measures adopted by the state and conclude that ‘where property is expropriated, even for environmental purposes – whether domestic or international – the state’s obligation to pay compensation remains’.213 This finding widely reflects the contents of the Hull Rule, according to which ‘no government is entitled to expropriate private property, for whatever purpose, without provision of prompt, adequate and effective payment therefore’.214 The Hull Rule, however, tends to be considered as reflecting the dominant view of industrialised and developed countries,215 thus ignoring the view of Third World countries216 on the matter. As explained by Waincymer, ‘[d]eveloping countries have not readily conceded that customary international law provides for the same limitations on expropriation as are asserted by Western lawyers’.217 Accordingly, various Third World countries have adopted the Calvo Doctrine,218 according to which the same treatment should apply to foreign and domestic investors, and matters regarding compensation for expropriation should be determined by national courts.219 Under the Calvo Doctrine, investors ‘are only 212 See eg American International Group Inc et al v Islamic Republic of Iran, et al, 4 Iran-US Claims Tribunal Reports 96 (1981) 105; Benvenuti & Bonfant v Congo, ICSID Case No ARB/77/2, Award (8 August 1980) 1 ICSID Reports 330, 357 (1993); AMCO Asia Corporation v Republic of Indonesia, ICSID Case No ARB/81/1, Award (20 November 1984) 1 ICSID Reports 413 (1993) 467. 213 Santa Elena (n 181) para 71. 214 C Hull, US Secretary of State, reproduced in Hackworth (1942) 3 Digest of International Law 658–59, para 288. 215 RJ Bubb and S Rose-Ackerman, ‘BITs and Bargains: Strategic Aspects of Bilateral and Multilateral Regulation of Foreign Investment’ (2007) 27 International Review of Law and Economics 291, 294. 216 The term ‘third world’ is not intended in this work to carry a pejorative connotation and is used interchangeably with the term ‘developing countries’ and with the terms ‘north’ and ‘south’, whilst recognising the negative connotations of the latter terminology. In line with many Third World Approaches to International Law (TWAIL) scholars, the term ‘third world’ is used in an emancipatory manner. In the words of Celine Tan ‘many scholars and activists from the developing countries have retained its usage as a continuing form of resistance to hegemonic attempts to disperse the collective voice and organising unity of third world states and third world peoples  … The term has particular resonance for third world legal scholars for whom the uniformity in application of international law has had the effect of aggregating the structural iniquities which continue to characterise the developing world’s engagement with the international legal order’. As argued by Chimni and referred to by Tan, the category of the ‘third world’ is ‘crucial to organizing and offering collective resistance to hegemonic policies’ and ‘reflects a level of unity imagined and constituted in ways which would enable resistance to a range of practices which systematically disadvantage and subordinate an otherwise diverse group of people’. See C Tan, Governance Through Development: Poverty Reduction Strategies, International Law and the Disciplining of Third World States (Abingdon, Routledge, 2011) xv. See also her analysis in ch 2. 217 Waincymer (n 202) 292–93. 218 C Calvo, Derecho Internacional Teórico y Práctico de Europa y América (Paris, D’Amyot, 1868). 219 JP Scarfi, The Hidden History of International Law in the Americas: Empire and Legal Networks (Oxford, Oxford University Press, 2017) 69–70. See also AV Freeman, ‘Recent Aspects

78  Investment Protection in Conflict Settings entitled to compensation upon expropriation to the extent that the domestic law of the host state provides for compensation’.220 The Hull Rule position that any expropriation triggers compensation221 was endorsed, inter alia, by the tribunals in Feldmand and in Pope & Talbot. The tribunal in the latter case warned against the risk that the proportionality test might invite states to justify all their measures as in the public interest, thus covering up creeping expropriation: ‘a blanket exception for regulatory measures would create a gaping loophole in international protection against ­expropriation.’222 On the other hand, the more recent tribunal in Continental Casualty found that the measures adopted by Argentina during its financial crisis met the requirements of the proportionality test, in that they were in part inevitable, or unavoidable, in part indispensable and in any case material or decisive in order to react positively to the crisis, to prevent the complete break-down of the financial system, the implosion of the economy and the growing threat to the fabric of Argentinean society and generally to assist in overcoming the crisis.223

The tribunal further found that there was ‘undoubtedly a genuine relationship of end and means in this respect’;224 and that the measures were ‘reasonable and proportionate’ as well as ‘limited to the economic and the financial aspects of the economic crisis’.225 In finding that no unlawful expropriation had taken place, the tribunal explained that there are limitations to the use of property in the public interest that fall within typical government regulations of property entailing mostly inevitable limitations imposed in order to ensure the rights of others or of the general public (being ultimately beneficial also to the property affected). These restrictions do not impede the basic, typical use of a given asset and do not impose an unreasonable burden on the owner as compared with other similarly situated property owners. These restrictions are not therefore considered a form of expropriation and do not require indemnification, provided however that they do not affect property in an intolerable, discriminatory or disproportionate manner.226

of the Calvo Doctrine and the Challenge to International Law’ (1946) 40 American Journal of International Law 121; UNGA Res 3171 (XXVIII) (17 December 1973); UNGA Res 3281 (XXIX) (9 December 1974). 220 Bubb and Rose-Ackerman (n 215) 294. See also Sornarajah (n 13) 38. 221 For a discussion of the historical specificity of the Hull rule within the socio-political context of the post-Mexican revolution period, see D Davitti, ‘1917 and its Implications for the Law of Expropriation’, in K Greenman et al, Revolutions in International Law: The Legacies of 1917 (Cambridge, Cambridge University Press, forthcoming 2019). 222 Pope & Talbot v Canada (n 64) para 99. 223 Continental (n 88) para 197. 224 ibid para 232. 225 ibid. 226 ibid para 276.

Relevant Standards of Investment Protection  79 As explained above, this approach is far from uncontroversial and it remains to be seen which direction tribunals will take in the future.227 Undoubtedly this will also depend on the development of other investment standards, as a relaxation in the interpretation of indirect expropriation and MFN, for instance, has often reflected an expansion of protections afforded under FET. Proportionality is perceived by many as the way forward for the interpretation of international investment law standards.228 Some scholars invoke the doctrine of proportionality as the ultimate tool to reconcile IIL with IHRL and legitimise the IIL regime itself.229 In my view, whilst the doctrine of proportionality can certainly inform interpretation and create space for a certain amount of consideration of environmental and human rights concerns, one cannot but wonder whether its deployment in investor-state arbitration is appropriate230 and in any case sufficient to redress the inherent limitations of IIL. I shall return to this question in chapter four, but first I would like to conclude my analysis of the guarantees against expropriation by considering their implications in terms of reparation sought – an aspect that once again reveals a certain over-reliance on the principle of proportionality. As I have argued elsewhere,231 international investment tribunals mostly calculate damages for unlawful expropriation, and increasingly also for breaches of FET, relying on the criteria elaborated in the Chorzów Factory case.232 The latter is in fact considered to be the primary case establishing the 227 Proportionality has featured strongly in the reasoning of awards that have recently received broad public attention, such as Philip Morris Brands Sàrl, Philip Morris Products SA and Abal Hermanos SA v Oriental Republic of Uruguay, ICSID Case No ARB/10/7, Award (8 July 2016) paras  305–06 and 409–20; Philip Morris Asia Limited v The Commonwealth of Australia (17  December 2015) Final Award on Jurisdiction and Admissibility, PCA Case No 2012-12 paras 106 and 389. In  Philip Morris v Uruguay the tribunal also considered the relevance of the ‘margin of appreciation’. Compare this with the discussion on ‘reasonableness’ of expectation in the equally controversial Eli Lilly and Company v The Government of Canada, ICSID Case No UNCT/14/2 (16 March 2017) Final Award. See also L Diependaele et al, ‘Eli Lilly v Canada: The Uncomfortable Liaison between Intellectual Property and International Investment Law’ (2017) 7 Queen Mary Journal of Intellectual Property 283, 295. 228 See eg B Kingsbury and SW Schill, ‘Public Law Concepts to Balance Investors’ Rights with State Regulatory Actions in the Public Interest: The Concept of Proportionality’ in SW Schill, International Investment Law and Comparative Public Law (Oxford, Oxford University Press, 2010) 75; A Stone Sweet and J Mathews, ‘Proportionality Balancing and Global Constitutionalism’ (2008) 47 Columbia Journal of Transnational Law 73; A Stone Sweet, ‘Investor-State Arbitration: Proportionality’s New Frontier’ (2010) 4 Law and Ethics of Human Rights 47. 229 See eg EM Leonhardsen, ‘Looking for Legitimacy: Exploring Proportionality Analysis in Investment Treaty Arbitration’ (2012) 3 Journal of International Dispute Settlement 95; and SW Schill ‘Cross-Regime Harmonization through Proportionality Analysis: The Case of International Investment Law, the Law of State Immunity and Human Rights’ (2012) 27 ICSID Review 87. 230 See in general C Henckels, ‘Indirect Expropriation and the Right to Regulate: Revisiting Proportionality Analysis and the Standard of Review in Investor-State Arbitration’ (2012) 15 Journal of International Economic Law 223. 231 See Davitti (n 221). 232 Case concerning the Factory at Chorzów (Indemnities) Germany v Poland, PCIJ Rep Series A No 12, Order on Interim Protection (21 November 21), at www.worldcourts.com/pcij/eng/ decisions/1927.11.21_chorzow.htm.

80  Investment Protection in Conflict Settings standard of payment of compensation for unlawful expropriation.233 According to the Chorzów standard, foreign investors suffering unlawful expropriation are entitled to either restitution or, alternatively, restitutionary damages beyond the fair market value of the property (fair market value being the standard of compensation for lawful expropriation). The Permanent Court of International Justice (PCIJ) held in Chorzów Factory that, in the context of unlawful dispossession, reparation must, as far as possible, wipe out all the consequences of the illegal act and re-establish the situation which would, in all probability, have existed if that act had not been committed. Restitution in kind, or, if this is not possible, payment of a sum corresponding to the value which a restitution in kind would bear; the award, if need be, of damages for loss sustained which would not be covered by restitution in kind or payment in place of it – such are the principles which would serve to determine the amount of compensation due for an act contrary to international law.234

Foreign investors seeking to recover heightened damages in investor-state arbitration thus rely on the Chorzów standard to argue that ‘compensation must be calculated not at the time of the wrongful act, but at the time of the award to reflect the possible rise of the value of the affected property after the wrongful act’.235 Yet, a closer analysis of the Chorzów Factory case and of its historically contingent circumstances, reveals that this automatic application of heightened damages to claims in investor-state arbitration cannot be so easily justified. The case, brought by Germany against Poland before the PCIJ in 1926, related to the unlawful taking of a factory in Chorzów, within the context of the conflict between the two states over Upper Silesia soon after the end of World War I. Historically Upper Silesia was a Polish territory, which however became part of Germany in the late eighteenth century. The strategic and political importance of the region was linked to its rich mineral deposits, of crucial importance for powering the coal, steel and chemical industries concentrated in the so-called ‘industrial triangle’, where Chorzów and its many factories were also located. The continued functioning of the ‘industrial triangle’ and, therefore, control over Chorzów were crucial for Germany, not only to ensure its economic recovery after World War I, but also for it to be able to pay reparations.236 The dispute over Upper Silesia was also of critical geopolitical significance. Whilst France supported Poland in its efforts to see a weakened Germany, Great Britain was concerned that Germany would be unable to pay its reparations and, more

233 For a discussion of protection against expropriation, see s II.D below. 234 Chorzów Factory (n 232) 47. 235 REM Goodman and Y Parkhomenko, ‘Does the Chorzów Factory Standard Apply in Investment Arbitration? A Contextual Reappraisal’ ICSID Review 32 (2017) 304–25, 305. 236 ibid, 305. As explained by Goodman and Parkhomenko, Germany’s reparation amounted to a total sum of 269 billion gold marks, equivalent to approximately £23.6 billion as at 2005, which Germany paid off on 3 October 2010.

Relevant Standards of Investment Protection  81 gravely, that it would be unable to resist the rise of Bolshevism.237 In light of these concerns and with the support of US President Woodrow Wilson, Great Britain proposed a plebiscite in Upper Silesia, (which was eventually endorsed by the text of the Treaty of Versailles) for its inhabitants ‘to indicate by a vote whether they wish[ed] to be attached to Germany or to Poland’.238 Before the plebiscite took place on 20 March 1921, there were two violent Polish uprisings, followed by a third one in May 1921, after the results of the plebiscite, when the International Plebiscite Commission issued conflicting recommendations, with France supporting Poland’s claims, and Great  ­Britain and Italy assigning the ‘industrial triangle’ to Germany. The uprising in May 1921 reached a critical level when the Polish Silesians controlled most of Upper Silesia, and the Principal Allied and Associated Powers, considering that the conflict ‘threaten[ed] to disturb international peace and security’ within the meaning of Article 11(2) of the Covenant of the League of Nations, requested the urgent intervention of the Council of the League of Nations to resolve the German-Polish dispute in Upper Silesia.239 The Council’s recommendation was to divide the industrial region, whilst ensuring ‘the continuity of the economic and social existence of Upper Silesia’ including ‘to recognize and respect, in the territory which shall be allotted to them, rights of all kinds – in particular, concessions and privileges acquired at the date of the partition by individuals, companies or other legal entities’.240 According to the recommendation, Poland also had to wait for a period of 15 years before exercising its rights under Articles 92 and 297 of the Treaty of Versailles, which enabled it to liquidate and expropriate German property in the area under its control, which crucially included Chorzów.241 Despite both countries’ discontent, a dictated agreement was signed and ratified by the end of May 1922, and the Geneva Convention on Upper Silesia thus entered into force on 15 June 1922.242 The 15-year moratorium on liquidation and expropriation, however, was immediately challenged by Poland, which liquidated one of the largest nitrate factories in Europe in Chorzów. A series of cases emerged at the PCIJ from the claims brought by Germany against Poland’s actions, the most relevant of which established that Poland had breached the Geneva Convention

237 ibid, 306. 238 Treaty of Versailles (signed 1919, entered into force 1920) art 88, as referenced in ibid. 239 Goodman and Parkhomenko (n 235) 307. 240 ‘Recommendation of the Council of the League forwarded to the Supreme Council of the Principal Allied Powers on October 12th, 1921’ (December 1921) LNOJ 1230, as referenced in ibid at 308. 241 According to Arts 6 and 24 of the Geneva Convention 1922, Poland would regain these rights for a limited period of two years. The only exception to the 15 years moratorium on liquidation and expropriation was obtaining the specific permission to the Upper Silesian Mixed Commission, without which any expropriatory measure of German property by Poland would be a prohibited measure. See Goodman and Parkhomenko (n 235) 309. 242 ibid.

82  Investment Protection in Conflict Settings on Upper Silesia.243 In the Chorzów Factory case, as I mentioned above, the PCIJ dealt with the nature, amount and method of compensation, thus formulating the well-known principle of full reparation.244 For the specific purposes of our discussion, it is important to highlight the exceptional nature of the decision in Chorzów Factory: the principle of full reparation established in the case is strictly linked to the politically sensitive interests protected by the Geneva Convention on Upper Silesia, to the threat to international peace and security that the tensions in the region caused and to the gravity of the conduct by Poland. This specific historical context of the Chorzów Factory case, however, is systematically overlooked by international investment tribunals when they rely on the Chorzów standard to grant heightened compensation to foreign investors. As cogently argued by Goodman and Parkhomenko, since the interests protected by the Geneva Convention on Upper Silesia were very different from the interests protected in international investment agreements, the heightened Chorzów standard of compensation ‘may not be lightly transposed into the context of investment arbitration’.245 The PCIJ, in fact, in its reasoning distinguished between two different wrongful acts: expropriation without compensation where a State has the right to expropriate, as in the case of modern investment protection treaties, and a seizure of property that cannot be expropriated even against compensation. While failure to pay compensation may still be a wrongful act, it is not inherently unlawful compared to illegality of a higher magnitude. It is based on the distinction between different levels of illegality, that the Court also distinguished between different levels of damages.246

Thus, when a state fails to pay compensation for an expropriated property, reparations should not exceed the value of the property at the moment of the expropriation, since heightened compensation as per the Chorzów standard is only applicable in case of grave conduct in inter-state matters, in circumstances analogous to the facts of the Chorzów Factory case itself.247 A state’s treatment

243 Case Concerning Certain German Interests in Polish Upper Silesia (Merits), PCIJ, Judgment (25 May 1926) PCIJ Rep Series A No 7. 244 Chorzów Factory case (n 232). 245 Goodman and Parkhomenko (n 235) 322. 246 ibid. See Chorzów Factory case (n 232) at 47: ‘It follows that the compensation due to the German Government is not necessarily limited to the value of the undertaking at the moment of dispossession, plus interest to the day of payment. This limitation would only be admissible if the Polish Government had had the right to expropriate, and if the wrongful act consisted merely in not having paid to the two Companies the just price of what was expropriated’. 247 See J Crawford, ‘Similarity of Issues in Disputes Arising under the Same or Similarly Drafted Investment Treaties’ in Y Banifatemi (ed), Precedent in International Arbitration (New York, Juris Publishing and International Arbitration Institute, 2008) 99–100: ‘[t]he Permanent Court in ­Chorzów Factory itself distinguished between the principles of quantification of damages applicable in inter-state matters and those applicable in cases between States and private parties; of course Chorzów fell in the first category not the second’.

Relevant Standards of Investment Protection  83 of a foreign investor, it is quite uncontroversial to argue, rarely threatens international peace and security. Notably for our discussion, reliance on heightened damages à la C ­ horzów in investor-state arbitration is not limited to claims for expropriation. As mentioned earlier in this section, the Chorzów standard is also increasingly invoked for breaches of non-expropriation standards of protection, in particular of the FET standard. As evidenced by Diane Desierto,248 this blanket application of the Chorzów standard to reparations in investment-state arbitration is highly problematic. It raises various legal issues, for instance in terms of propriety of the form of reparation sought; and issues of causation between the wrongful conduct and the injury resulting from such breach.249 Crucially, Desierto argues, investment tribunals do not tend to explain how they apply the principle of proportionality, including when they decide on the applicability of the Chorzów standard. Proportionality, understood as an international legal principle ‘inherent to the concept of reparations under the international law of responsibility’ should explicitly guide their decision-making: [p]roportionality in the law of inter-State claims behooves an international tribunal to examine the relative situations of the injured State, as well as the offending State, applying ‘equitable considerations’ as necessary to ensure that reparations are not oppressive or punitive. Proportionality also mandates that the injured State establish strict causation between the offending State’s internationally wrongful acts and the ensuring damage incurred by the injured State flowing from such acts. Finally, proportionality is also reflected in the valuation measure chosen to estimate the ‘financial assessable damage’ to the injured State, which does not always equate to the fair market value of the asserted economic loss.250

Flowing from the above, it transpires that the automatic application of the Chorzów standard to reparations for breaches of non-expropriation standards cannot be easily justified, especially in the absence of a careful justification of the way in which the principle of proportionality is deployed in the decisionmaking process.251 In the remainder of this chapter I turn to the discussion of another key standard of investment protection, the MFN standard, often used by investors to open the doors of international investment arbitration even in situations where these would be otherwise closed.252

248 D Desierto, ‘The Outer Limits of Adequate Reparations for Breaches of Non-Expropriation Investment Treaty Provisions: Choice and Proportionality in Chorzów’ (2017) Columbia Journal of Translational Law 395–456. 249 See Avena and Other Mexican Nationals (Mexico v United States), Judgment (31 March 2004) ICJ Rep 12, paras 119, 121–22, as discussed in Desierto, ibid, at 402. 250 Desierto (n 248) 413–14. 251 For a more detailed discussion of the inapplicability of the Chorzów standard in investor-state arbitration, see s III of Desierto’s article (n 248). 252 Reinisch (n 52) 59. See also S Vesel, ‘Clearing a Path Through a Tangled Jurisprudence: MostFavored-Nation Clauses and Dispute Settlement Provisions in Bilateral Investment Treaties’ (2007) 32 Yale Journal of International Law 125.

84  Investment Protection in Conflict Settings E.  Most-favoured Nation Treatment MFN clauses are mainly aimed at preventing – or remedying in case of breach – cases of discrimination against foreign investors. This standard ensures that investors are granted a treatment ‘not less favourable than the one accorded to third party’s investors’. In investment treaties MFN clauses are often combined with national treatment (NT) standard clauses, aimed at ensuring a treatment ‘not less favourable than the one accorded to national investors’. MFN clauses tend to be systematically included in BITs as the standard is not required under customary international law on the treatment of aliens.253 This means that MFN is a relative standard which, instead of specifying the treatment to be accorded to the investors, establishes an obligation on the host state not to discriminate against them. The scope of this non-discrimination standard is therefore directly dependent on the specific circumstances of the investment and on the conduct of the host state towards third parties.254 This specific treatment, in fact, becomes relevant only when the host state grants particular benefits to a third party, without granting them at the same time to the foreign investors protected under the MFN clause. The MFN standard is particularly relevant to my analysis because of its unique fluidity and endless potential for interaction with other standards of investment protection which can be, and have been, imported into a treaty via this clause. Existing case law, as I explore in this section, points towards the dynamic nature of the standard which in practice ‘constitutes a prior consent to extend favours extended to third parties to the contracting parties of a basic treaty’.255 The content and scope of the MFN standard are potentially very farreaching, because it may encompass – unless specifically restricted – both past and future treaties, thus fundamentally contravening the principle of reciprocity between state parties to a treaty. Many politicians and commentators have criticised the MFN standard for opening the door to ‘free rider effects’,256 whereby one of the parties benefits from the improvements made by the other party, without being forced to grant mutual protections. The only inherent limitation of MFN treatment seems to be the ejusdem generis principle, according to which the MFN clause only applies ‘in like circumstances’ or ‘in like situations’.257 Arguably it is only in limited circumstances that the facts and context of a case, of a specific clause and/or of a treaty would be such as to trigger the ejusdem generis rule. Furthermore, this principle can be bypassed by arguments based on

253 Dolzer and Schreuer (n 9) 186. 254 ibid. 255 ibid. 256 Reinisch (n 52) 66. 257 Z Douglas, ‘The MFN Clause in Investment Arbitration: Treaty Interpretation Off the Rails’ (2011) 2 Journal of International Dispute Settlement 97, 103–12.

Relevant Standards of Investment Protection  85 a literal interpretation258 of the treaty as a whole, rather than the specific clause, and on the assumption that treaties dealing with the protection of investments should be considered automatically ‘alike’, and therefore compatible with the ejusdem generis principle.259 Some authors contend that, so far, the MFN clause has been used in such a way as to introduce additional investor protections into the treaties which are tantamount to ‘regime change’260 in relation to the sovereignty of the state in establishing the specific subject matter and scope of the negotiated investment treaty. Whereas the applicability of the MFN clause to substantive guarantees has been largely accepted by tribunals,261 the invocation of MFN treatment has proven particularly controversial in relation to the applicability of the clause to the definition of investment262 (so as to adopt broader definitions contained in agreements with third parties) as well as to procedural aspects, in particular dispute settlement provisions.263 In relation to the latter, by invoking a breach of MFN treatment an investor can attempt to avoid certain limitations to investorstate arbitration, even when these are expressly included in the treaty, by virtue of the fact that the host state may have consented to investor-state arbitration in another treaty with a third party. The main case on the scope of MFN treatment in relation to dispute settlement is Maffezini,264 based on the requirement in the Argentina-Spain BIT that the parties should refer the case to domestic courts for 18 months before resorting to international arbitration. The investor invoked a breach of MFN treatment, on the basis of the fact that the Chile-Spain BIT did not require presentation of the case in this manner before instituting arbitration proceedings. The tribunal, in considering the applicability of the MFN clause to dispute settlement provisions, took the view that ‘there are good reasons to conclude that today dispute settlement arrangements are inextricably related to the protection of foreign investors’,265 thereby concluding that: the Claimant has convincingly demonstrated that the most favored nation clause included in the Argentine-Spain BIT embraces the dispute settlement provisions of this treaty. Therefore, relying on the more favourable arrangements contained

258 ibid. For the opposing view, see SW Schill, ‘Allocating Adjudicatory Authority: Most-FavoredNation Clauses as a Basis of Jurisdiction: A Reply to Zachary Douglas’ (2011) 2 Journal of International Dispute Settlement 353. 259 Dolzer and Schreuer (n 9) 191. 260 ibid. 261 Dolzer and Schreuer (n 9) 253. 262 See discussion in s I.A in this chapter on the notion of investment. 263 Reinisch (n 52) 59. See also M Paparinskis, ‘MFN Clauses and International Dispute Settlement: Moving Beyond Maffezini and Plama?’ (2011) 26 ICSID Review 14. 264 Emilio Augustín Maffezini v Kingdom of Spain, ICSID Case No ARB/97/7, Decision on Jurisdiction (25 January 2000) 5 ICSID Reports 396 (2002) paras 38–64. 265 ibid para 54. See also paras 38–46 for an analysis of the applicability of MFN clauses to dispute settlement.

86  Investment Protection in Conflict Settings in the Chile-Spain BIT and the legal policy adopted by Spain with regard to the treatment of its own investors abroad, the Tribunal concludes that Claimant had the right to submit the instant dispute to arbitration without first accessing the Spanish courts.

Despite its far-reaching finding, the tribunal warned against the risk of ‘treatyshopping’ and specified that the protections extended by the MFN clauses could not be used to circumvent express limitations introduced in the treaty by the parties in order to account for ‘public policy considerations that the contracting parties might have envisaged as fundamental conditions for their acceptance of the agreement in question’.266 Subsequent cases indicate a split in the approach adopted by the arbitral tribunals, with some endorsing the findings in Maffezini267 and others refusing to apply the MFN clause to procedural guarantees, including dispute settlement, mainly interpreting this ‘expansion’ as contrary to the intentions of the contracting parties.268 Among this latter category of cases, the tribunal in Plama found that consent to arbitration could not be imported into a treaty through a broad interpretation of the MFN clause.269 It also explained that the significance of investment treaty arbitration ‘does not take away the basic prerequisite for arbitration: an agreement of the parties to arbitrate. It is a well-established principle, both in domestic and international law, that such an agreement should be clear and unambiguous’.270 Similarly, it stated that an MFN provision in a basic treaty does not incorporate by reference dispute settlement provisions in whole or in part set forth in another treaty, unless the MFN provision in the basic treaty leaves no doubt that the Contracting Parties intended to incorporate them.271

The decision in Plama was endorsed by the Telenor tribunal,272 which reiterated that MFN clauses were only applicable to substantive rights and not to procedural matters. An analysis of more recent awards on the applicability of MFN treatment to dispute settlement provisions reveals that the issue remains highly controversial

266 ibid para 62. 267 See for instance ADF v United States (n 70) para 193; MTD v Republic of Chile (n 98) para 103; Tecmed (n 72) para 69; Siemens AG v The Argentine Republic, ICSID Case No ARB/02/8, Decision on Jurisdiction (3 August 2004) paras 32–110; Gas Natural SDG v Argentina, ICSID Case No ARB/03/10, Decision on Preliminary Questions on Jurisdiction (17 June 2005) paras 24–31, 41–49; Camuzzi International SA v Argentina, ICSID Case No. ARB/03/2, Decision on Objections to Jurisdiction (11 May 2005) para 121; National Grid plc v The Argentine Republic (UNCITRAL), Decision on Jurisdiction (20 June 2006) paras 53–94; AWG Group Ltd v The Argentine Republic (UNCITRAL), Decision on Jurisdiction (3 August 2006) paras 52–68. 268 See for instance Salini (n 30); Plama (n 130); Telenor (n 175). 269 Plama (n 130) paras 183, 184, 227. 270 Plama (n 130) para 198. 271 Plama (n 130) para 223. 272 Telenor (n 175) paras 90–100.

Relevant Standards of Investment Protection  87 and that investment tribunals continue to strive for consistency.273 As explained by Stephan Schill,274 the topic has generated a heated debate amongst both scholars and investment arbitrators alike, mainly because the applicability of MFN clauses to dispute settlement reflects foreign investors’ interests to expedite and broaden their access to investor-state arbitration through options offered by the host state in other investment treaties. Respondent states, on the other hand, wish to limit the jurisdiction of the investment tribunals and reduce the risk of being found in breach of a standard of investment protection.275 Indeed, as highlighted by the tribunal in Renta,276 although numerous tribunals have grappled with the jurisdictional implications of MFN, ‘a jurisprudence constante of general applicability is not yet firmly established’.277 The most relevant recent awards on the subject (Impregilo,278 Hochtief,279 ICS Inspection,280 Daimler Financial Services281 and Teinver282) do however suggest a clear divide in the views of the adjudicating arbitrators,283 with at least four of the cases284 accompanied by strong dissenting opinions which shed light on the main reasoning behind the disagreement.285 All of the cases mentioned above present a situation 273 For an alternative view on a ‘new generation’ of BITs which may pave the way for a wider consensus and more consistent state practice, see J Wouters et al, ‘International Investment Law: The Perpetual Search for Consensus’ (2012) Working Paper No 88, Leuven Centre for Global Governance Studies. 274 SW Schill, ‘Maffezini v Plama: Reflections on the Jurisprudential Schism in the Application of Most-Favored-Nation Clauses to Matters of Dispute Settlement’, in M Kinnear et al (eds), Building International Investment Law: The First 50 Years of ICSID (Alphen aan den Rijn, Wolters Kluwer, 2016) 251, 253. 275 ibid. 276 Renta 4 SVSA et al v The Russian Federation, Arbitration V (024/2007) Arbitration Institute of the Stockholm Chamber of Commerce, Award on Preliminary Objections (20 March 2009). 277 ibid para 94. 278 Impregilo SpA v Argentine Republic, ICSID Case No ARB/07/17, Award (21 June 2011). 279 Hochtief AG v The Argentine Republic, ICSID Case No ARB/07/31, Decision on Jurisdiction (24 October 2011). 280 ICS Inspection and Control Services Limited (United Kingdom) v The Argentine Republic, UNCITRAL, PCA, Case No 2010-9, Award on Jurisdiction (10 February 2012). 281 Daimler Financial Services AG v Argentine Republic, ICSID Case No ARB/05/1, Award (22 August 2012). 282 Teinver SA, Transportes de Cercanías SA and Autobuses Urbanos del Sur SA v The Argentine Republic, ICSID Case No ARB/09/1, Decision on Jurisdiction (21 December 2012). 283 Sornarajah interprets this divide as a response to the neoliberal tenets which lie at the basis of international investment arbitration, and which have been developed through law firms and academic chairs in order to consolidate the protection of property, the promotion of private power and market fundamentalism. He refers to the divide as ‘schisms’ that are ‘the results of deep-seated ideological conflicts rather than the result of differences in terminology in the different treaties or the dominance of the field by commercial arbitrators who did not understand the implications of the public law features of the contracts they were dealing with’. See M Sornarajah, ‘Evolution or Revolution in International Investment Arbitration? The Descent into Normlessness’, in C Brown and K Miles (eds), Evolution in Investment Law and Arbitration (Cambridge, Cambridge University Press, 2011) 648–49. 284 Impregilo (n 278), Hochtief (n 279), Daimler Financial Services (n 281) and Teinver (n 282). 285 See also the position expressed by Uruguay in relation to the non-applicability of the MFN clause to jurisdiction: Philip Morris Brands Sàrl, Philip Morris Products SA and Abal Hermanos SA v Oriental Republic of Uruguay, ICSID Case No ARB/10/7, Uruguay’s Reply on Jurisdiction (20 April 2012) paras 86–173.

88  Investment Protection in Conflict Settings similar to the one in Maffezini, in that the host state claimed that the investor failed to observe a BIT requirement to bring a claim before the domestic courts for 18 months before being able to initiate arbitration proceedings. In all of the cases the investors claimed that they were able to circumvent the pre-arbitration requirement by accessing a more favourable dispute resolution clause in a third party’s BIT through the MFN clause in the basic treaty. In Impregilo the majority (of Judge Charles Brower and Judge Hans Danelius) followed the Maffezini approach by finding that the MFN clause ­operated in such a way as to enable the tribunal to gain jurisdiction over the claim through the operation of this clause. In doing so the majority referred to the specific wording of the MFN clause in the basic treaty, which was applicable to ‘investments … to the income and activities related to such investments and to all other matters regulated by this Agreement’.286 It thus held that such a clause was broad enough to include dispute settlement provisions. The Impregilo award is significant because of the dissent lodged by Professor Brigitte Stern, an experienced and well-respected expert in international investment law. In her dissent, Stern not only disagrees with the majority’s view in Impregilo, but also strongly criticises the general Maffezini287 approach to MFN as a gateway to dispute settlement provisions, ‘based on the presumption that dispute-­resolution provisions do invariably fall within the scope of an MFN provision in a BIT, unless the contrary is plainly demonstrated’.288 In disagreeing with the result arrived at in the Maffezini case and its progeny, Stern emphasises that the high number of former awards in favour of a jurisdictional application of the MFN clause is mainly due to ‘the repeated involvement of some of the arbitrators’, rather than to convincing arguments adduced to support such an approach.289 Crucially, Stern draws a fundamental distinction between substantive matters and procedural matters, or in her own words, between ‘substantial rights’, that is to say ‘the rights that grant a certain treatment either to the foreign investor or/and to the foreign investment’290 and ‘fundamental conditions for access to the rights’.291 On the basis of this distinction she contends that ‘an MFN clause can only concern the rights that an investor can enjoy, it cannot modify the fundamental conditions for the enjoyment of such rights, in other words, the insuperable conditions of access to the rights granted in the BIT’.292 Furthermore, she reiterates the fundamental importance under international law of a

286 Impregilo (n 278) para 96 (emphasis added). 287 Maffezini, Decision on Jurisdiction (n 264). 288 Impregilo SpA v Argentine Republic, ICSID Case No ARB/07/17, Concurring and dissenting opinion by Professor Brigitte Stern (21 June 2011) para 14. 289 ibid para 5. 290 ibid para 25. 291 ibid para 47. 292 ibid.

Relevant Standards of Investment Protection  89 state’s consent to an arbitration mechanism which enables investors to directly sue the state in an international arbitration tribunal: It has to be clarified here that the consent to arbitration is a different consent than the one given by the State to another State when it ratifies a treaty, and that the necessity of this supplementary consent is explained by the structure of international law. It is indeed not because a State has given its consent to another State to grant some substantive rights to the investor of that State that it automatically flows from such a consent that the State also gives its consent to the foreign investors to allow the latter to sue the State directly in an international arbitration. For such a right to come into existence, a specific consent had to be given inside the treaty, and the State can shape this consent as it sees fit, in providing for the basic conditions under which such an ‘offer to arbitrate’ is made to the foreign investors.293

An MFN clause, therefore, cannot operate to change the qualifying conditions in the basic treaty (ratione personae, ratione materiae, ratione temporis and ratione voluntatis) as they are all pre-conditions for the enjoyment of treaty rights.294 In Stern’s view, enabling an MFN clause to alter a dispute resolution provision undermines state’s consent and is therefore a cause of ‘very profound concern’.295 The majority in the Hochtief tribunal included, once again, Judge Brower and Professor Vaughan Lowe. As in Impregilo, the MFN clause was interpreted as extending the jurisdiction of the tribunal. The Protocol to the BIT explained that the term ‘activity’ included ‘the management, utilization, use and enjoyment of an investment’. The majority held that dispute settlement represented an aspect of management of the investment, and that it therefore fell within the scope of the MFN clause. The majority explained, in response to Stern’s argument in her dissent in Impregilo, that there is no established criterion to distinguish for this purpose between a ‘right’ and ‘treatment in relation to the exercise of a right’. But there are several indications that the 18-month pre-arbitration litigation requirement should be regarded as a matter of the treatment of investors in exercising their rights in relation to dispute settlement and not as the subject of a distinct right.296

In other words, the pre-arbitration litigation requirement was to be considered as ‘a provision going to the admissibility of the claim rather than to the jurisdiction of the Tribunal’.297 Judge Thomas, QC, lodged a dissenting opinion, in which he strongly disagreed with this latter statement and explained that the pre-arbitration litigation requirement was to be considered as both mandatory and jurisdictional in nature.298 He expressed concern about the majority’s use

293 ibid

para 53. paras 64, 67, 70, 78 and 79. 295 ibid para 101. 296 Hochtief (n 279) para 83. 297 ibid para 96. 298 Hochtief (n 279) Separate and Dissenting Opinion of J Christopher Thomas, para 31. 294 ibid

90  Investment Protection in Conflict Settings of the MFN clause to allow the investor to ‘displace the conditions stipulated in the basic treaty’ for initiating an international claim (ie, the 18-month prearbitration requirement),299 and thus ‘create’ jurisdiction.300 Referring to Stern’s distinction between rights and fundamental conditions for access to the rights, he claimed: ‘[s]eeking the application of a particular rule of treatment in the Treaty in order to create jurisdiction seems to me to be putting the cart before the horse’.301 The tribunal in ICS Inspection rejected the Maffezini approach and unanimously decided that the MFN clause could not extend to dispute resolution and could not be used to circumvent the 18-month pre-arbitration requirement, which it deemed to be a jurisdictional matter, rather than an admissibility one.302 The tribunal in this case explained that for an MFN clause to be applicable to dispute resolution: the MFN clause must constitute more than a mere prohibition of discrimination between investors based on their provenance: the MFN clause must also be in itself a manifestation of consent to the arbitration of investment disputes according to the rules that the MFN provision might attract from other comparator treaties.303

In August 2012, the three-member tribunal in Daimler Financial Services included again Judge Brower, who however this time was in the minority. Professor Dupuy and co-arbitrator Bello Janeiro, in the majority, rejected the investor’s claim that the 18-month pre-arbitration requirement was a mere procedural directive rather than a true jurisdictional prerequisite.304 They therefore declined jurisdiction over the claim, as they held that a state’s consent to arbitration ‘cannot be presumed or artificially constructed by the arbitrator: it can only result from the demonstrated expression of the states’ will’.305 Professor Dupuy also advanced the argument that the MFN guarantees enshrined in the basic treaty (the 1991 Germany-Argentina BIT) were territorially limited by the wording of the clause ‘in its territory’.306 As international arbitration takes place outside of the territory of the host state, he considered it to be outside of the remit of the MFN clause.307 Unsurprisingly given his previous stance in Impregilo and Hochtief, Judge Brower issued a dissenting opinion in which he criticised the majority’s argument that a demonstrated expression of state consent to arbitration was necessary in order for MFN guarantees to extend to dispute settlement. In his view, 299 ibid paras 22 and 81. 300 ibid para 81. 301 ibid. 302 ICS Inspection and Control Services Limited (United Kingdom) v The Argentine Republic, UNCITRAL, PCA, Case No 2010-9, Award on Jurisdiction (10 February 2012) paras 252–62. 303 ibid para 278 (emphasis added). 304 Daimler (n 281) para 184. 305 ibid para 176. 306 ibid paras 225–31. 307 ibid.

Relevant Standards of Investment Protection  91 by requiring ‘affirmative evidence’ of consent, the majority’s interpretation was overly restrictive and ‘in violation of the very interpretive principles the Award purports to accept’.308 He argued that consent to arbitrate, although it could not be presumed, could indeed be implied or inferred, without requiring affirmative evidence of consent.309 He also considered that, according to the basic treaty, the MFN clause was applicable to ‘activities in connection with investments’, whereby the term ‘activity’ included the ‘management, use, enjoyment, and disposal of an investment’. In his view, this wording ‘necessarily entail[ed] the defense and exercise of legal rights via dispute settlement mechanism’.310 Another 2012 award on the jurisdictional applicability of the MFN clause, the Teinver award, holds significance because the presiding arbitrator, Judge Bürgenthal, also arbitrated in the original Maffezini award. His views, 12 years after that initial decision on MFN, enable a ‘circular’ analysis of arbitral practice and development on the matter. Judge Bürgenthal acknowledged the criticism that Maffezini has received over the years and accepted that arbitral decisions were ‘bounded by important limits arising from public policy considerations’.311 Yet he focused on what he considered a very broad wording of the relevant BIT and on the fact that the MFN clauses contained a list of exceptions which did not include dispute settlement. He stressed that the tribunal was ‘cognizant of the concerns articulated by numerous tribunals that the reach of the MFN clause not extend beyond appropriate limits’,312 but found that the investors were not seeking to replace the provisions on the agreed arbitral forum/rules, nor to broaden the scope of legal issues subject to arbitration. In their view, the investors’ request was ‘merely’ aimed at bypassing certain procedural requirements, ‘namely the negotiation and local court requirements, [which] may be bypassed in favor of the more procedurally limited dispute settlement provisions of the Australia-Argentina BIT’.313 Arbitrator Hossain, in the minority, filed a dissenting opinion in which he distanced himself from the majority’s approach, referring in particular to the Berschader award,314 in which a similar MFN clause to the one in the basic treaty had been interpreted as not extending to jurisdictional matters.315 Moreover, in rejecting the majority’s view that by circumventing the 18-month pre-arbitration requirement the investors were ‘merely’ seeking to bypass a procedural hurdle,

308 Daimler Financial Services AG v Argentine Republic, ICSID Case No ARB/05/1, Dissenting Opinion of Judge Charles N Brower, para 3. 309 ibid paras 3–11. 310 ibid para 22. 311 Teinver (n 282) para 179. 312 ibid para 181. 313 ibid para 182. 314 Vladimir Berschader and Moise Berschader v Russia, SCC Case No 080/2004, BLEU-USSR BIT, Sjovall P, Lebedev & Weiler (21 April 2006). 315 Teinver (n 282) Separate Opinion of Dr Kamal Hossain, para 12.

92  Investment Protection in Conflict Settings rather than modifying the content of the agreement, he referred repeatedly to Stern’s dissenting opinion in Impregilo, and to her argument that a state’s consent to arbitration cannot be bypassed through the operation of the MFN clause, unless the state has explicitly consented to such a functioning of the clause.316 Over the last decade or so, in order to at least partially remedy the uncertainty caused by these contradictory findings, states have started to expressly limit the scope of MFN clauses in their investment treaties, often specifically mentioning the intention to avoid Maffezini-like interpretations, thus explicitly excluding the application of MFN clauses to dispute settlement.317 Commentators seem, however, to disagree on the best approach to be adopted on the matter. Some claim that, in the absence of a clear indication in the BIT, the MFN clause does not apply to dispute settlement; others claim that procedural provisions contained in treaties with third parties should be imported via the MFN clause unless the parties have expressly indicated in the treaty that this should not be the case. The latter commentators contend that there is no convincing reason for distinguishing between substantive standards and dispute settlement. As a matter of treaty interpretation, it is difficult to understand why a broadly formulated MFN clause that refers to ‘treatment’ should apply only to issues of substance, but not to questions of dispute settlement.318

Other commentators find these ‘expansive’ arguments advocating for a broader scope of MFN clauses rather weak and unconvincing.319 Van Harten, for instance, has criticised the ‘expansive’ approach320 discussed above by describing investment treaties as top-down in nature – as they adopt a negative list approach, as compared to the bottom-up (or positive list) approach of the General Agreement on Trade in Services (GATS) of the World Trade Organization. Van Harten outlines how a bottom-up approach allows states to limit their obligations to apply the protection standards only to specific areas of economic activity, expressly consented to in the agreement. Adopting a bottom-up approach, in the absence of express consent, the presumption is that the agreement does not apply. In top-down agreements, on the other hand, consent is always implied and the presumption is that the agreement will therefore apply to any investment activity unless specifically excluded.321 The top-down (or negative list) approach, as shown above, has been adopted by some arbitrators in extending the applicability of the MFN standard to 316 ibid paras 17–18. 317 See eg the Canadian Model BIT (2004) (Foreign Investment Protection Agreement), Annex III, art 4, as discussed in Reinisch (n 52) 81. See also other IIAs discussed at 82–83. 318 Dolzer and Schreuer (n 9) 257. See also E Gaillard, ‘Chronique des sentences arbitrales’ 132 Journal du Droit International (2005) 135, 163; E Gaillard, ‘Establishing Jurisdiction through a Most-Favoured Nation Clause’ (2005) New York Law Journal 3. 319 AR Ziegler, ‘Most-Favoured-Nation (MFN) Treatment’ in Reinisch (n 52) 78, 86. 320 Van Harten (n 45) 75. 321 ibid.

Preliminary Conclusions  93 dispute settlement provisions, especially in the absence of an express indication that this should not be the case. This approach has triggered, especially in the context of NAFTA, detailed submissions by states to clarify their intentions when entering into the agreements. Such submissions have rejected the expansive and top-down approach adopted by investment tribunals, and shed light on the willingness by states to retain some sort of control over the subject matter of their consent.322 The way in which IIL will develop through arbitration, in relation to the application of MFN to dispute settlement, as well as to the application of the proportionality principle and the expansion of all the other standards, remains to be seen. Certainly, the fact that some states have amended their investment treaties or ensured that the new ones include specific clauses aimed at informing, directing, and therefore restricting, the interpretation by tribunals of the protections afforded by the relevant treaties323 seems to reflect a certain discontent with the system as it is at the moment. As I discuss in chapters three and four, however, these changes, although necessary to clarify the intention of the parties, cannot result in an automatic protection of human rights in the context of investment. III.  PRELIMINARY CONCLUSIONS

In this chapter I have highlighted that the key protection mechanism of IIL is investor-state arbitration, which, uniquely in international law, enables private individuals to take state parties to arbitration, when arguably in breach of their investment obligations. It is through investment arbitration that the standards of investment protection truly come to life, through arbitrators’ interpretations of their scope and normative content. Of these standards, FET has become by far the most used, far-reaching and all-encompassing investment protection tool; a ‘gap filler’ to ensure that investors, one way or the other, obtain compensation. Tribunals’ interpretations of which investors’ ‘legitimate expectation’ should be protected by FET have become crucial to the expansion of this protection standard, whilst controversial awards have seen the interests of investors counterposed to those of local populations and, most importantly, have endangered the autonomous power of domestic political communities, whose lives have been decided in processes dictated by the exigencies of economic globalisation.324 In the specific context of armed conflict, the FPS standard (the companion clause to FET) is also of particular interest, especially when investment



322 ibid

126–27. (n 160) 167; Krommendijk and Morijn (n 190) 437; Wouters and Hachez (n 159) 334. 324 Koskenniemi (n 107). 323 Hoffmann

94  Investment Protection in Conflict Settings t­ribunals are ready to read it as encompassing protections which go beyond physical security and include guarantees of legal stability. In situations of armed conflict, however, the tensions already inherent in some of the interpretations of the normative content of the key standards of investment protection are further exacerbated, due to the delicate context in which the host state may be and also because of the significant consequences that such interpretations may bring. As I have explained in this chapter, generally speaking, IIL sets out to protect foreign investments and to ensure that host states do not renege on their obligations, undertaken in investment treaties, to safeguard and promote a ‘suitable’ investment environment. Some investment tribunals have interpreted these objectives as requiring a freezing of a host state’s regulatory structure. It is at this juncture that IHRL and IIL begin to encroach upon one another, when the state’s duties enshrined in one body of law conflict with the obligations laid down by the other body of law. I discuss the tensions between IHRL and IIL in chapter four: before doing so, I turn to IHRL and in particular to states’ o ­ bligations in relation to the right to water.

3 The Relevant Legal Framework of Human Rights Protection: ESC Rights and the Right to Water

I

n this chapter I analyse the legal framework of human rights protection relevant to this research by outlining the legal foundations and the normative content of the right to water.1 In doing so I outline the controversies that led to a framing of the right to water as capable of accommodating, rather than contrasting, free-market demands for the privatisation, commodification and commercialisation of water.2 I then focus on states’ obligations, both territorial and extraterritorial, flowing from this right. I begin by explaining the reasons for selecting this right and its relevance to the Afghan context. Then I examine the controversial content of the right and its legal foundations since, as we will see, the right to water is primarily a component of the right to an adequate standard of living, enshrined in Article 11(1) of the International Covenant on Economic, Social and Cultural Rights (ICESCR). This analysis of the legal foundations aims at dispelling some wrong assumptions regarding the non-legal nature of the right to water,3 and contributes to my discussion on the obligations pertaining to this right, which is the primary focus of this chapter. Next, I examine the tripartite nature of state parties’ obligations – to respect,

1 Throughout this book I sometimes refer to the right to water as including both the right to water and the right to sanitation; I do this in order to reflect the approach in existing international documents and materials. However, I agree with the argument first advanced by the Independent Expert on the Right to Water and Sanitation that the right to sanitation should be considered as a distinct right, and as such as an independent component of the right to an adequate standard of living. See UN Human Rights Council, ‘Report of the Independent Expert on the Issue of Human Rights Obligations Related to Safe Drinking Water and Sanitation’ (2009) UN Doc A/HRC/12/24, especially paras 55–59. 2 J Wills, Contesting World Order: Socioeconomic Rights and Global Justice Movements (Cambridge, Cambridge University Press, 2017) 210–32. 3 For an insight in the debate, see eg S Tully, ‘A Human Right to Access Water? A Critique of General Comment No 15’ (2005) 23 Netherlands Quarterly of Human Rights 35; see also a critique of Tully in M Langford, ‘Ambition that Overleaps Itself? A Response to Stephen Tully’s Critique of the General Comment on the Right to Water’ (2006) 26 Netherlands Quarterly of Human Rights 433.

96  Protection of ESC Rights and the Right to Water protect and fulfil4 economic, social and cultural rights (ESC rights) – and discuss the specific obligations flowing from Article 2(1) ICESCR in an attempt to give content to the notion of progressive realisation, in light of the obligations of immediate effect by which state parties are bound. I focus on the obligations of immediate effect that are most relevant to this work, ie minimum core obligations. I then outline both core and non-core obligations pertaining to the right to water by elucidating its normative content and I explain the concept of maximum available resources, analysed through the lens of international assistance and cooperation. This latter analysis is vital for a clarification of states’ extraterritorial obligations (ETO) and lays the grounds for further discussion on the intersection between international investment law (IIL) and international human rights law (IHRL) in chapter four and on the heightened obligations of home states and heightened responsibilities of investors in conflict countries such as Afghanistan (chapter five). I.  REASONS FOR A FOCUS ON THE RIGHT TO WATER

Water is essential to all forms of life and crucial to human survival. It is also of fundamental importance for the functioning of agricultural and industrial activities.5 Yet it remains a finite and irreplaceable resource. In the last few centuries, due to population growth, industrialisation, urbanisation and environmental pollution – to name only a few phenomena affecting this precious natural resource – the pressures on and demands for water have increased ­exponentially.6 According to recent forecasts, approximately one third of the world’s population will be affected by water scarcity by 2025.7 Moreover, these figures, striking though they are, do not reflect the way in which climate change and water pollution will further reduce the amount of water suitable for human consumption.8 Were the forecasts to also include these impacts, however, water availability would still be sufficient to meet people’s basic personal and household needs.9 In relation to this, it is important to understand that, despite the increasing pressures on water resources and water accessibility, it is human behaviour, ultimately, that has a profound impact on water availability, in particular in terms of how water is distributed across the different user groups and

4 As discussed in this chapter in relation to the right to health, which is directly relevant to the right to water, the obligation to fulfil entails obligations to facilitate, provide and promote. See further s III below (n 86 and related text). 5 IT Winkler, The Human Right to Water: Significance, Legal Status and Implications for Water Allocation (Oxford, Hart Publishing, 2012) especially ch 5 on various water uses. 6 ibid, especially ch 2 on the competing demands on water. 7 ibid 26–27. 8 C de Albuquerque, ‘Climate Change and the Human Rights to Water and Sanitation: Position Paper’ (Geneva, OHCHR, 2010), at www.ohchr.org. 9 Winkler (n 5) 7 and 26–27.

Reasons for a Focus on the Right to Water  97 how access to it is prioritised. Crucially, whilst the location of water resources is naturally determined, lack of access to water is not only the result of physical constraints, but mostly of political choices and economic considerations which significantly influence allocation and prioritisation.10 Generally speaking, domestic water use – necessary for human survival – competes with agricultural and industrial use. The three main areas of human water use are, in fact, agriculture (generally accounting for 70 per cent of the overall water use), industry (20 per cent) and private household use (approximately 10 per cent), with a great geopolitical variance in the way water is distributed and allocated amongst these sectors.11 Agricultural and industrial water users are usually prioritised by governments, in part because they are perceived as more important for a country’s economy, and also because they have the political means to exert pressure on decision-makers and obtain favourable conditions. Water scarcity, therefore, when it occurs, is mainly the result of unequal access to and allocation of water, and is ‘rooted in power, poverty and inequality, not in physical availability’.12 In countries already in the throes of armed conflict, the need to avert further conflicts triggered by the desire to control water resources is apparent. In conflict situations, moreover, poverty, inequality and abuse of power are usually widespread, due to the collapse of law and order as well as of other forms of governance. Already existing patterns of inequality and discrimination tend to be exacerbated by the armed conflict, in particular when control over natural resources may be perceived as source of both enrichment and power entrenchment. This is even more the case when water is already scarce and the arrival of extractive companies makes competition over water access all the fiercer. Water is vital to the functioning of the extractive industry: extractive companies need water for most of their core activities, such as ‘processing and transport of ore and waste, minerals separation, dust suppression, washing of equipment and human consumption’.13 Both the sourcing of water for these activities, and the disposal of waste and wastewater, can severely impact ecosystems and irreversibly compromise water sources relied upon by local communities 10 de Albuquerque (n 8) at 2: ‘The right to water “for personal and domestic uses” requires only a small fraction of the overall water supply. Lack of sufficient access to water for household use is more a function of power, poverty and inequality, and a failure of governments to prioritise water allocation for needs and human dignity, that it is about scarcity per se.’ 11 World Water Assessment Programme, United Nations World Water Development Report 3: Water in a Changing World (Earthscan, 2009) 99. See also World Water Assessment Programme, United Nations World Water Development Report 2018: Nature-Based Solutions for Water (UNESCO, 2018) 3, confirming that agriculture remains the largest overall user of water, despite the fast increase in domestic and industrial demands. 12 UNDP, Human Development Report 2006, Beyond Scarcity: Power, Poverty and the Global Water Crisis (Basingstoke, Palgrave Macmillan, 2006) 2. See also S Klasen, Human Development Indices and Indicators: A Critical Evaluation (New York, UNDP, 2018) 11, arguing for the continued relevance of human development indices such as multidimensional poverty, in the era of the Sustainable Development Goals and their measurements. 13 D Kemp et al, ‘Mining, Water and Human Rights: Making the Connection’ (2010) 18 Journal of Cleaner Production 1553, 1554.

98  Protection of ESC Rights and the Right to Water (with obvious direct consequences on human health). Water contamination can also be triggered by landscape changes resulting from mining activities (mining voids),14 by the usage of chemicals in mineral processing,15 and by acid and metalliferous drainage (AMD), a phenomenon which occurs ‘when minerals associated with ore bodies decompose in the superficial environment’.16 Sometimes mining companies agree to provide or contribute to access to water for neighbouring communities as part of agreements with local and/or national authorities.17 Yet, despite the apparent need to ensure water security for both local communities and mining companies, the approach to water adopted by the latter is rarely framed in protection terms.18 As cogently argued by Kemp et al, [a]ccess to water is recognized as a precondition of the fulfilment of universal human rights and indispensable for leading a life with dignity. At the same time, water security is essential to the business of mining. Consequently, the operational needs of mining and human rights of local people intersect in complex and sometimes conflicting ways. Failing to adequately understand this intersection not only flies in the face of corporate commitments to sustainable development, but may also increase the social and human rights risks that mining poses to local communities.19

This is the case in Afghanistan where, as explained in chapter one, a substantive economic restructuring of the country has taken place away from the public eye. As part of this economic restructuring, the Government of Afghanistan, despite its increasing difficulties in securing and governing the country, has engaged in a series of (at times more transparent than others) calls for tender for the exploitation of Afghanistan’s vast and untapped natural resources. The main investment contracts related to two of the major concessions already granted – that of the Mes Aynak copper deposit and of the Hajigak iron ore – remained inaccessible for public scrutiny for years, despite calls for transparency by national and international civil society.20 Given the potentially disastrous impact of natural

14 ibid. See also generally V Boege and D Franks, ‘Re-opening and Developing Mines in PostConflict Situations: The Challenge for Company-Community Relations’ in P Lujala and SA Rustad (eds), High-Value Natural Resources and Peacebuilding (London, Routledge, 2012). 15 As in the case of cyanide in gold extraction, Kemp et al (n 13) 1554. 16 Kemp et al (n 13) where AMD is defined as the most dangerous and long-lasting legacy of mining, and the one carrying the most devastating environmental and health impacts. 17 The Tolukuma gold mine in Papua New Guinea is a clear example of how drinking water allocated for domestic use can be contaminated by mining activities: see Kemp et al (n 13). 18 International Council on Mining and Metals (ICMM), Human Rights in the Mining and Metal Industry: Overview, Management Approach and Issues (London, ICMM, May 2009). For a discussion of the meaning of protection, see ch 1. 19 Kemp et al (n 13) 1553. 20 As mentioned in ch 1, the text of the concession agreement was eventually disclosed in October 2012. See G Bowley and M Rosenberg, ‘Mining Contract Details Disclosed in Afghanistan’ (14 October 2012) The New York Times at www.nytimes.com/2012/10/15/world/asia/afghanminister-discloses-details-of-mining-contracts.html. For an analysis of the agreement, see Global Witness, Copper Bottomed? Bolstering the Aynak Contract: Afghanistan’s First Major Mining Deal,

Reasons for a Focus on the Right to Water  99 resources extraction on water resources,21 the initial secrecy of these investment contracts is a significant concern, in particular if we consider that Mes Aynak, one of the largest copper deposits in the world, sits on the two main aquifers serving not only the Afghan capital Kabul and its over 3.5 million inhabitants, but also the regions that stretch eastwards towards the border with Pakistan. The mismanagement of this site could have catastrophic consequences for generations to come, both in terms of immediate and long-term access to water suitable for human consumption. The local communities living in the villages surrounding the copper deposit have also been forcibly removed by governmental authorities and the impact of these forced removals on their rights, not least their right to water, remains undocumented. Moreover, ex ante environmental impact assessments and/or human rights impact assessments were not carried out in order to ascertain and address the negative impacts that copper extraction could have in the short, medium and long term. In addition to the above, Afghanistan is already party to various international investment agreements (IIAs), including BITs with Germany, Iran and Turkey. As discussed further in chapters one and two, investment contracts can be internationalised and in turn already latent protections and privileges granted to foreign investors in investment contracts can be consolidated and strengthened, often at the expense of the host country’s local population. Against this backdrop, I contend in this chapter that a radically different approach to water distribution is needed, one which prioritises human needs and considers access to water from a protection perspective.22 A focus on the right to water, despite the inherent limitations of this right (as outlined in this chapter and in chapter four) enables a critical analysis of the way in which water resources are allocated and protected, and could be decisive in preventing a water crisis in the midst of the Afghan armed conflict. Crucially, through a clarification of states’ territorial and extraterritorial obligations, the right to water bears the great potential, if adequately re-appropriated and understood as conceptualising water as a public good rather than a commodity, of empowering individuals affected by extractive projects in demanding that their rights be protected when their fundamental human needs have to compete against the interests of major extractive companies. Moreover, in an earlier

(Global Witness, 2012) 28–29, at www.globalwitness.org/copper_bottomed/index.html. See also M  Stanley and K Mikhaylova, ‘Mineral Resource Tenders and Mining Infrastructure Projects Guiding Principles-Case Study: The Aynak Copper Deposit, Afghanistan’, World Bank Extractive Industries for Development Series, No 22, September 2011) 70–73, at http://documents.worldbank. org/curated/en/420541468149681572/pdf/655030NWP00PUB0570B0MiningSectorWEB.pdf, where reference is made to the shortcomings of the Afghanistan Land Acquisition Law, since it has no provision for a resettlement action plan and resettlement support (which was arguably introduced later, with the support of the World Bank). 21 See generally WHO, ‘Copper in Drinking-water: Background Document for Development of WHO Guidelines for Drinking-water Quality’ (2004) UN Doc WHO/SDE/WSH.03.04/88. 22 For a discussion of the concept of protection, see ch 1.

100  Protection of ESC Rights and the Right to Water report on the scope and content of human rights obligations related to equitable access to safe drinking water and sanitation, the United Nations High Commissioner for Human Rights (UNHCHR) identified the interaction between IIAs and the right to water as one of the issues in need of further research.23 With this chapter I wish to respond to this call which, in my view, still needs to be appropriately answered.24 I begin by briefly examining the legal foundations of the right to water, primarily in order to outline the legal scope of the right. Thereafter I turn to a more detailed discussion of the obligations related to it. II.  LEGAL FOUNDATIONS OF THE RIGHT TO WATER

Given the ongoing armed conflict experienced by Afghanistan, the country which is at centre of this research, it is important to start our examination of the legal foundations of the right to water by observing that this right finds explicit mention in international humanitarian law (IHL). The Third Geneva ­Convention25 requires that prisoners of war are supplied with sufficient water for drinking (Article 26) and hygiene purposes (Article 29). Articles 20 and 46 also refer to water during the evacuation and transferral of prisoners, to ensure that these are carried out humanely and with sufficient amounts of water provided. Water supplies, irrigation works and infrastructures are considered indispensable for civilian life, therefore their targeting as a method of warfare is prohibited under Article 54(2) of the First Additional Protocol to the Geneva ­Conventions.26 A similar provision is contained in Article 14 of the

23 UN Human Rights Council, ‘Report of the United Nations High Commissioner for Human Rights on the Scope and Content of the Relevant Human Rights Obligations related to Equitable Access to Safe Drinking Water and Sanitation under International Human Rights Instruments’ (hereinafter UNHCHR Report) UN Doc A/HRC/6/3 (16 August 2007) paras 63–64 and 68. 24 Various authors have written on this relationship, but mainly focussing on the methodologies adopted by investment arbitration tribunals to ‘balance’ the tensions between the right to water and the protection of investments. See eg U Kriebaum, ‘The Right to Water before Investment Tribunals’ (2018) Brill Online at http://booksandjournals.brillonline.com/content/ journals/10.1163/23527072-00101005, at 21 where the article supports the key role of legitimate expectations in achieving simultaneous compliance with obligations under IIL and IHRL and where it is argued that ‘[i]nvestment tribunals have all found that investment law and human rights law obligations could be met at the same time. They did not accept a hierarchy between the right to water and investor rights. Furthermore, they did not frame the potential tensions between the right to water and investor rights as a normative conflict. Rather, tribunals have opted for a systemic integration of human rights obligations into investment law and found that both obligations apply in parallel and can be met at the same time’. It is this very approach that I critique as inappropriate and detrimental to protection in this book (see chs 4 and 5). 25 Geneva Convention Relative to the Treatment of Prisoners of War (Third Geneva Convention), 12 August 1949, entered into force 21 October 1950 (1950) 75 United Nations Treaty Series 973. 26 Protocol Additional to the Geneva Conventions of 12 August 1949, and relating to the protection of victims of international armed conflict (Protocol I), 8 June 1977, entered into force 7 December 1978 (1979) 1125 United Nations Treaty Series 17512.

Legal Foundations of the Right to Water  101 Second Additional Protocol.27 Under Article 8(2) (xxv) of the Rome Statute of the International Criminal Court, the intentional deprivation of objects indispensable to civilian survival (such as in the case of food and water blockades) would also amount to a war crime.28 The impact of armed conflict on civilians’ access to water, however, is beyond the scope of this work. As I explained in the introductory chapter, in this book I am interested in identifying ways in which the right to water can be ensured in situations of armed conflict, when conflict countries restructure their regulatory framework to protect foreign investments in the extractive sector. When it comes to natural resources extraction, the current Afghan government as well as the international community seem to believe that this industrial sector operates in a vacuum, isolated from the impact and consequences of the armed conflict which, in reality, continues to escalate. In this work I do not intend to join this approach and act as if the armed conflict in Afghanistan was already solved. At the same time, however, there are already enough studies, based on both IHL and IHRL, dealing with the impact of the armed conflict on the civilian population.29 As mentioned in the introduction and in chapter one, this work adds value to this body of literature by looking at the ways in which, during a situation of armed conflict, access to water can be prioritised when it risks being undermined by foreign direct investment in the extractive sector, protected as it is by international investment treaties. In doing this, I wish to respond, at least in part, to the recommendation by the UNHCHR that the interaction between the obligations arising under IIAs and those flowing from the right to water be further analysed.30 Looking beyond IHL, we can see that numerous other international instruments,31 including human rights treaties, recognise explicitly or implicitly the right to water, mainly because of its importance for the realisation of other rights enshrined in the ICESCR and in other human rights instruments.

27 Protocol Additional to the Geneva Conventions of 12 August 1949, and relating to the protection of victims of non-international armed conflict (Protocol II), 8 June 1977, entered into force 7 December 1978, (1979) 1125 United Nations Treaty Series 17513. 28 UN General Assembly, Rome Statute of the International Criminal Court (last amended 2010), 17 July 1998, entered into force 1 July 2002, 2187 United Nations Treaty Series 38544. 29 For an analysis of water-related issues in armed conflict, see K Braams, Wasser als ­völkerrechtlicher Regelungsgegenstand im bewaffneten Konflikt (Aachen, Shaker, 2004). See also Geneva Water Hub, ‘The Protection of Water during and after Armed Conflicts’ (July 2016) at www.genevawaterhub. org/sites/default/files/atoms/files/gwh_ghlp_roundtable_armedconflicts_rev_march2017nomail_0. pdf. For an analysis of the impact of armed conflict on human rights in Afghanistan, see eg the various reports by OHCHR and by the UN Assistance Mission in Afghanistan (UNAMA), at www. ohchr.org/en/countries/asiaregion/pages/hrreports.aspx. 30 UNHCHR Report (n 23) paras 63–64 and 68. 31 See eg Convention on the Elimination of All Forms of Discrimination Against Women, Art 14(2); Convention on the Rights of the Child, Art 24(2) and 27(1); Convention on the Rights of Persons with Disabilities, Arts 25(f) and 28(2)(a); Geneva Convention relative to the Treatment of Prisoners of War 1949, Arts 20, 26, 29 and 46; Geneva Convention relative to the Treatment of Civilian Persons in Time of War 1949, Arts 85, 89, 29 and 127.

102  Protection of ESC Rights and the Right to Water For instance, the right to water is inextricably linked to the right to health, the right to adequate housing and the right to food.32 The most relevant provisions on the human right to water, however, are implicit in Article 11 ICESCR,33 which is also crucial to an understanding of the scope and content of the right, as elaborated by the Committee on Economic, Social and Cultural Rights (CESCR or the Committee) in General Comment 15. Although per se not legally binding, the General Comments by the CESCR are authoritative statements by the only treaty body with interpretative authority over the ICESCR, and as such they are important tools of legal interpretation (at international, regional and national level)34 and for guiding the actions of state parties, as well as of civil society in monitoring the implementation of the right. Despite the shortcomings of the approach adopted by the CESCR, which I examine later in this chapter, in General Comment 15 the Committee supports the existence of an independent human right to water through a three-fold argument. The first tenet of the argument is linked to the fact that this right can be inferred from other already established rights protected by the ICESCR, including the composite right to an adequate standard of living, enshrined in Article 11(1).35 The second tenet of the argument is that water is a ‘prerequisite for the realization of other human rights’,36 and as such ‘indispensable for leading a life in human dignity’.37 Third, General Comment 15 also refers to other international law treaties which already acknowledge the existence of the right to water, such as the Convention on the Rights of the Child (CRC, Articles 24(2) and 27(1)) and the Convention on the Elimination of All Forms of Discriminations Against Women (CEDAW, Article 14(2)). Amongst recent treaties recognising the human right to water, there is also the Convention on the Rights of Persons with Disabilities (CRPD (Articles 25(f) and 28(2)(a)). Although these treaties cannot in and of themselves establish the existence of the human 32 UN Committee on Economic, Social and Cultural Rights (hereinafter CESCR), ‘General Comment No 15, The Right to Water, Arts 11 and 12 of the International Covenant on Economic, Social and Cultural Rights’ (20 January 2003) UN Doc E/C.12/2002/1, para 3. 33 It has been argued that the use of the term ‘including’ in Art 11 ICESCR indicates the non-­ exclusiveness of the list of substantive rights guaranteed by the article itself. See ibid para 3. See further W Schreiber, ‘Realizing the Right to Water in International Investment Law: An Interdisciplinary Approach to BIT Obligations’ (2008) 48 Natural Resources Journal 431, 442; W Schreiber, ‘What Price for the Priceless? Implementing the Justiciability of the Right to Water’ (2007) 120 Harvard Law Review 1067, 1085. 34 E Filmer-Wilson, ‘The Human Rights-Based Approach to Development: The Right to Water’ (2005) 23 Netherlands Quarterly of Human Rights 213, 228; MCR Craven, The International Covenant on Economic, Social and Cultural Rights: A Perspective on its Development (Oxford, Oxford University Press, 1995) 91. On the practice of the UN Treaty Bodies more generally, see M O’Flaherty, Human Rights and the UN: Practice Before the Treaty Bodies (New York, Springer, 2002). 35 See MA Salman and S McInerney-Lankford, The Human Right to Water: Legal and Policy Dimension (Washington DC, World Bank, 2004) 56–64. 36 CESCR, General Comment 15 (n 32) 1. See also R Pejan, ‘The Right to Water: The Road to Justiciability’ (2004) George Washington International Law Review 1181, 1190–91. 37 CESCR, General Comment 15 (n 32) 1.

Legal Foundations of the Right to Water  103 right to water, their nearly universal ratification indicates a willingness by state parties to recognise the existence of a right to water by not openly objecting to it. This acceptance is further reinforced by the fact that no reservation has been entered with regard to the protection of the highest attainable standard of health through access to safe and potable water and adequate sanitation, as per Articles 24(1) and 24(2)(c) CRC.38 The Committee on the Rights of the Child (CRC Committee) often refers to access to the right to water, in particular in relation to existing disparities between urban and rural areas, and within the context of the right to an adequate standard of living, the right to health and the right to a healthy environment.39 The CRC Committee also recurrently expresses concern about the environmental impact of the operations of extractive industries, and the way in which these affect access to safe potable water for local communities.40 General Comment 14 on the highest attainable standard of health is also supportive of the right to water. In this Comment, the CESCR discusses the significance of water for the realisation of the right to health: it also recognises Article 12 ICESCR as establishing an obligation upon state parties to ensure ‘access to safe and potable water and adequate sanitation’.41 And these are then further defined as ‘underlying determinants of health’.42 These statements, however, indicate how only certain aspects of the right to water, ie those pertaining to the achievement of the highest attainable standard of health,

38 With the exception of Kiribati that entered a reservation on Art 24 in general but without clearly specifying that this was in relation to the supply of clean drinking water. 39 For a discussion of access to water for the fulfilment of the right to an adequate standard of living, see UN Committee on the Rights of the Child (hereinafter CRC Committee), ‘Concluding Observations of the Committee on the Rights of the Child: Uganda’ (23 November 2005) UN Doc CRC/C/UGA/CO/2 para 57. For a discussion on the disparity in access between urban areas and rural areas, see CRC Committee, ‘Concluding Observations of the Committee on the Rights of the Child: Peru’ (14 March 2006) UN Doc CRC/C/PER/CO/3 para 58. For a discussion of access to water in the context of the realisation of the right to health, see CRC Committee, ‘Concluding Observations of the Committee on the Rights of the Child: Ghana’ (17 March 2006) UN Doc CRC/C/GHA/CO/2 paras 49–50. For considerations on the relevance of water to the right of the child to a healthy environment, including in the context of climate change, see Centre for International Environmental Law (CIEL), ‘The Right to a Healthy Environment in the Convention on the Rights of the Child, Written Submission to the CRC’ (August 2016) at www.ciel.org/wp-content/uploads/2016/08/ CRC-Submission-RtE-23-AUG-2016.pdf. See also CIEL, ‘States’ Obligations under the Convention on the Rights of the Child, in the Context of Climate Change’ (January 2018) at www.ciel. org/wp-content/uploads/2018/01/HRTBs-synthesis-report-CRC.pdf. Specifically on A ­ fghanistan, see CRC Committee, ‘Concluding Observations of the Committee on the Rights of the Child: ­Afghanistan’ (2 February 2011) UN Doc CRC/C/AFG/1 para 57, where the CRC Committee expresses concerns at the fact that ‘less than one quarter of Afghan families have access to safe drinking water and less than one-third is able to use sanitation facilities’. See also para 17 expressing concerns at how corruption is reducing the funds available for the enjoyment of various rights, including the right to water. 40 CRC Committee, ‘Concluding Observations on Peru’, ibid paras 50–51. 41 CESCR, ‘General Comment No 14, The Right to the Highest Attainable Standard of Health’ (11 August 2000) UN Doc E/C.12/2000/4 para 4. 42 ibid para 12(a).

104  Protection of ESC Rights and the Right to Water are guaranteed under Article12 ICESCR: fuller protections can be derived from Article 11 ICESCR, as outlined above. The International Covenant on Civil and Political Rights (ICCPR) also implies a right to water as an element of the fundamental right to life (Article 6 ICCPR), as safe, potable water is of fundamental importance, for instance, to human health and the prevention of epidemics. Moreover, although the UN Human Rights Committee (HRC) made no express reference to this right in its General Comment 6 on the right to life, it did note that the right to life has been too often narrowly interpreted. The expression ‘inherent right to life’ cannot properly be understood in a restrictive manner, and the protection of this right requires that States adopt positive measures. In this connection, the Committee considers that it would be desirable for States parties to take all possible measures to reduce infant mortality and to increase life expectancy, especially in adopting measures to eliminate malnutrition and epidemics.43

This approach by the HRC seems in line with the underlying aim of the achievement of a life in dignity outlined by the UN Charter44 and by the Universal Declaration of Human Rights (UDHR)45 (especially Articles 22 and 25), consistently reiterated by core human rights instruments and reinforced by the work of the CESCR and of the Independent Expert on the Issue of Human Rights Obligations Related to Access to Safe Drinking Water and Sanitation (since 2011 called the Special Rapporteur on the human right to safe drinking water and sanitation, hereinafter respectively the Independent Expert and the Special Rapporteur).46 It is however true that the guarantees related to the right to water under Article 6 ICCPR are narrower in scope than those under the ICESCR: even with a broad interpretation of the right to life as entailing both positive and negative obligations,47 the aim of Article 6 remains the realisation of survival rights, including through access to ‘safe water for drinking purposes in an amount sufficient to prevent death caused by dehydration’.48 Elsewhere, numerous statements and declarations reiterate the existence and importance of the right to water, from the Stockholm Declaration of 1972,49

43 UN Human Rights Committee, ‘General Comment No 6, The Right to Life’ (30 April 1982) UN Doc 30/04/82 para 5. 44 Charter of the United Nations (adopted 26 June 1945, entered into force 24 October 1945) 933 United Nations Treaty Series, Preamble. 45 UN General Assembly, Universal Declaration of Human Rights, 10 December 1948, 217 A (III). 46 In March 2011, the UN Human Rights Council extended the mandate on water and sanitation and changed its title with resolution 16/2, ‘The Human Right to Safe Drinking Water and Sanitation’ (8 April 2011) UN Doc A/HRC/Res/16/2 para 4. 47 Winkler (n 5) 54. 48 ibid. See also F Menghistu, ‘The Satisfaction of Survival Requirements’ in BG Ramcharan (ed), The Right to Life in International Law (Leiden, Martinus Nijhoff, 1985) 67. 49 UN Conference on the Human Environment, Stockholm, Sweden, 5–16 June 1972, Declaration of the United Nations Conference on the Human Environment (16 June 1972) UN Doc A/Conf.48/14/Rev.1. See also Winkler (n 5) 81–87.

Legal Foundations of the Right to Water  105 to the Dublin Statement of 1992,50 and the statements of the UNHCHR which conceives of the realisation of the right to water as integral to the achievement of poverty reduction and of the sustainable development goals.51 Interestingly, however, the Dublin Statement urges states to ‘recognize the basic right of all human beings to have access to clean water and sanitation at an affordable price’,52 and that ‘[w]ater has an economic value in all its competing uses and should be recognized as an economic good’.53 This is a stance which initially seems to contrast with the views of the CESCR in General Comment  15, according to which ‘water should be treated as a social and cultural good and not primarily as an economic good’.54 The reference to ‘not primarily’ above, however, indicates that water is also to be considered an economic good, rather than exclusively a public good. In General Comment 15 the CESCR also discusses state obligations within the context of non-state actors’ involvement in the provision of water,55 and refers to the need for water to be ‘affordable’, thus explicitly acknowledging the possibility of water services being conceived as a commodity and of being delivered by private third parties: Where water services are operated or controlled by third parties, State parties must prevent them from compromising equal, affordable, and physical access to sufficient, safe and acceptable water. To prevent such abuses an effective regulatory system must be established, in conformity with the Covenant and this General Comment, which includes independent monitoring, genuine public participation, and imposition of penalties for non-compliance.56

50 International Conference on Water and the Environment, 26–31 January 1992, The Dublin Statement on Water and Sustainable Development (12 March 1992) UN Doc A/CONF/151/PC/112. 51 Office of the UN High Commissioner for Human Rights, ‘Background Paper: Human Rights, Poverty Reduction and Sustainable Development: Health, Food and Water’, para 12, prepared for the World Summit on Sustainable Development, Johannesburg, South Africa, 26 August–4 September 2002. For a critique of the Millennium Development Goals and of the SGD, see eg J Briant Carant, ‘Unheard Voices: A Critical Discourse Analysis of the Millennium Development Goals’ Evolution into the Sustainable Development Goals’ (2017) 38 Third World Quarterly 16. See also International Science Council, ‘A Guide to SDG Interactions: From Science to Implementation’ (12 May 2017) at https://council.science/publications/a-guide-to-sdg-interactions-from-science-to-implementation. 52 Dublin Statement (n 50) principle 4 (emphasis added). 53 Ibid (emphasis added). 54 CESCR, General Comment 15 (n 32) para 11 (emphasis added). 55 On the human rights obligations and responsibilities applicable in cases of non-state service provision of water, see in general C de Albuquerque, ‘Report of the Independent Expert on the Issue of Human Rights Obligations Related to Access to Safe Drinking Water and Sanitation’ (29 June 2010) UN Doc A/HRC/15/31. 56 CESCR, General Comment 15 (n 32) para 24. See also paras 1 and 2 where the CESCR concludes that the right to water guarantees access to everyone to ‘sufficient, safe, acceptable, physically accessible and affordable water for personal and domestic uses’ (emphasis added). Note that the burden on remedying unfair and inequitable access to water caused by privatisation is placed predominantly on the state, whilst private companies are allowed to profit from this fundamental resource. This is of course dictated by the state-centred nature of international law, but it remains problematic, especially in terms of ensuring access to remedies, as further discussed in this book.

106  Protection of ESC Rights and the Right to Water The CESCR, by calling upon ‘all organs of society’57 to take steps to promote the right to water in their own ‘sphere of influence’,58 refers to the responsibility of private actors in relation to the right and reminds states of their duty to adopt effective measures to ensure that companies do not breach the right to water ‘of individuals and communities in other countries’.59 I will return to the latter aspect of the right to water and of other ESC rights, that is the duty to protect individuals and communities in other countries, at the end of this chapter when discussing states’ extraterritorial obligations. This represents in fact an important point of entry to examine which obligations are binding on home states when entering into IIA, and whether for instance they are under a heightened obligation to regulate companies registered within their jurisdiction and operating in conflict countries abroad. Similarly, this aspect is relevant in ascertaining the scope and nature of the heightened responsibility of companies in conflict contexts, including in relation to the right to water (for both points see discussion chapter five). In the meantime, however, it is important to examine how, within the understanding of the CESCR, water ultimately came to be conceptualised as a commodity rather than as public good. This conceptual framing has significant implications in terms of the way in which claims to the right to water can successfully challenge inequality in the way this resource is accesses and/or redistributed (see chapter four). As aptly examined by Wills,60 it is important to note that the emergent hegemonic framing of water as a commodity was already crystallising at the time of the Dublin Principles, that is in 1992. This framing was then disingenuously presented ‘as a necessary prerequisite for the realisation to the human right to water. Without the proper valuation and efficient rationing of water resources through pricing there [would] not be sufficient supplies of water available for the world’s population’.61 In one subtle move, therefore, water availability, sustainability and access were framed as unquestionably dependent upon private sector participation in the provision and management of water, so that for instance infrastructures could be adequately maintained and made available to the wider public. One brief look at the various investor-state arbitration awards on water management, however, reveals that private investment in water services does not automatically guarantee well-maintained infrastructures, nor affordable access to all.62 Furthermore, such appropriation of the human rights discourse

57 In using the term ‘all organs of society’ the CESCR is resonant of the terminology adopted in the Preamble of the UDHR (‘every organ of society’). 58 CESCR, General Comment 15 (n 32) paras 33 and 60. 59 ibid para 33. 60 Wills (n 2) 210–23. 61 ibid, 211 (original emphasis). 62 See, eg, the controversial investment arbitration proceedings related to the Cochabamba ‘water war’, Aguas del Tunari, SA v Bolivia, ICSID Case no ARB/02/3, Decision on Respondent’s Objections to Jurisdiction, 21 October 2005. The dispute was eventually settled in January 2006 and the

Legal Foundations of the Right to Water  107 by private companies paved the way for the controversies which surrounded the 2002 preliminary discussions on a draft of General Comment 15, which saw the views of those who conceived of water as a public good opposed by those who promoted it as an economic good. The central argument that the right to water should recognise that governments were unable, without the support of the private sector, to guarantee water access for all and to ensure a rational and sustainable use of this vital resource was touted by the World Bank and by corporate representatives involved in the discussions.63 It was necessary, they advanced, for the General Comment to be ‘neutral in respect of public or private methods of delivery’ and for the private sector to be presented as ‘one of the weapons of mass salvation’ for the poorer in society.64 As mentioned earlier in this chapter, the approach eventually adopted by the CESCR in 2003, in adopting the General Comment, was one of non-­opposition to the privatisation of water, with an implicit acknowledgement that water services could be privatised and various obligations placed on state parties whenever privatisation indeed occurred.65 The release of General Comment 15, unsurprisingly, engendered a vibrant debate over the scope and content of the right to water. Emblematically, 2003 was also the year in which, despite large protests,66 the Third World Water Forum adopted the Kyoto Ministerial Declaration which explicitly supported private sector financing and involvement in

claims before ICSID were withdrawn. For an overview of the Cochabamba water p ­ rivatisation mandated by the World Bank, see M Williams, ‘Privatization and the Human Right to Water: Challenges for the New Century’ (2007) 28 Michigan Journal of International Law 469, 496–97. For a different approach to the right to water, re-appropriating the language of the right to water as a non-anthropocentric right to the commons, see the People’s Agreement of Cochabamba, stating that ‘[t]o guarantee human rights and to restore harmony with nature, it is necessary to effectively recognise and apply the rights of Mother Earth … We demand recognition of the right of all peoples, living beings, and Mother Earth to have access to water, and we support the proposal of the Government of Bolivia to recognize water as a Fundamental Human Right’. As cited in Wills (n 2) 242. See also Suez, Sociedad General de Aguas the Barcelona, SA and Vivendi Universal SA v Argentine Republic (9 April 2015) Award, ICSID Case no ARB/03/19 (formerly Aguas Argentinas, SA, Suez Sociedad General de Aguas de Barcelona, SA and Vivendi Universal ­ v ­Argentine Republic) and (5 May 2017) Decision on Annulment. The rejection of the annulment was upheld by the United States Court of Appeals for the District of Columbia where the Argentine Republic brought a claim: Republic of Argentina v AWG Group Limited (3 July 2018) Case no 16-7134 at www.italaw.com/sites/default/files/case-documents/italaw9845.pdf. See also Urbaser SA and Consorcio de Aguas Bilbao Bizkaia, Bilbao Biskaia Ur Partzuergoa v Argentine Republic (8 December 2016) Award, ICSID Case No ARB/07/26. 63 Suez, a French transnational corporation involved in water operations worldwide and in key investor-state arbitrations (see ibid), also participated in the discussions and supported this view. See CESRC, ‘Committee on Economic, Social and Cultural Rights holds discussion on right to water’ (11 November 2013) UN Doc HR/4630, as cited in Wills (n 2) 218. 64 ibid para 26, as per Wills (n 2) 218–19. 65 See eg General Comment 15 (n 32) para 44(b)(ii) where states are responsible for ensuring that private service providers are prevented ‘from compromising equal, affordable, and physical access to sufficient, safe and acceptable water’. 66 K Bakker, ‘The “Commons” Versus the “Commodity”: Alter-globalization, Anti-privatization and the Human Right to Water in the Global South’ (2007) 39 Antipode 430, 431.

108  Protection of ESC Rights and the Right to Water water supply management, including through controversial public-private ­partnerships.67 In 2007, a report by the UNHCHR, mandated by the UN Human Rights Council (Council) to prepare a report on ‘the scope and content of the human rights obligations related to the equitable access to safe drinking water and sanitation under human rights instruments’,68 concluded that it was ‘time to consider access to safe drinking water and sanitation as a human right, defined as the right to equal and non-discriminatory access to a sufficient amount of safe drinking water for personal and domestic uses’.69 The report also led to the appointment of a UN Special Procedure on the right to water,70 who in 2010 produced a report on the human rights obligations and responsibilities applicable in cases of non-State service provision of water and sanitation.71 This report sealed the ‘agnosticism’ of human rights vis-à-vis ‘the commons versus the commodity’ debate and cleared the way for a marketfriendly framing of the right to water by concluding that ‘[h]uman rights are neutral as to economic models in general, and models of service provision more ­specifically’.72 With its predominant focus on the obligations vested upon states to respect, protect and fulfil the right to water, irrespective of the privatisation of service provision, the predominant role of states as duty-bearers was confirmed, whilst the opportunity to start delineating the parallel obligations and responsibilities of companies was once again missed. This is of particular interest, if we observe the concomitant debate that at the time was taking place in relation to business and human rights, under the guidance of the Special Procedure appointed on the issue of business and human rights73 (see chapter five). Also in that context, in fact, most human rights organisations, scholars, national and international human rights bodies ‘have chosen the path of agnosticism and assumed that tinkering with existing procedural safeguards will suffice to ensure

67 ‘Third World Water Forum Ministerial Declaration, Message from the Lake Biwa and Yodo River Basin’ at www.mofa.go.jp/policy/environment/wwf/declaration.html. At para 6, the Ministers and Heads of Delegation issued the following pledge: ‘We should explore the full range of financing arrangements including private sector participation in line with our national policies and priorities. We will identify and develop new mechanisms of public-private partnerships for the different actors involved, while ensuring the necessary public control and legal frameworks to protect the public interests, with a particular emphasis on protecting the interests of the poor’. 68 UN Human Rights Council, ‘Human Rights and Access to Water’ (4 October 2006) UN Doc A/HRC/Dec/2/104. 69 UNOHCHR, ‘Report of the United Nations High Commissioner for Human Rights on the Scope and Content of the Relevant Human Rights Obligations Related to Equitable Access to Safe Drinking Water and Sanitation under International Human Rights Instruments’ (17 August 2007) UN Doc A/HRC/6/3, para 66. 70 HRC Res 7/22, ‘Human Rights and Access to Safe Drinking Water and Sanitation (28 March 2008) UN Doc A/HRC/7/22. See (n 46) on the extension of the mandate in 2011. 71 UN doc A/HRC/15/31 (n 55). 72 ibid para 15. 73 On the role of UN Special Procedures in the context of business and human rights, see D Davitti ‘Business and Human Rights in the United Nations Special Procedures System’ in A Nolan et al (eds), The United Nations Special Procedures System (Leiden, Brill, 2017) 315–35.

Legal Foundations of the Right to Water  109 favourable human rights outcomes’.74 Most importantly, they have failed to challenge the implications of the ‘shift in values that privatization has brought about’.75 These implications became apparent in the context of the human right to water in 2010, which was the year of political breakthrough for the international recognition of the right to water as an independent right. On 28 July 2010, Resolution 64/292 on the right to water and sanitation was introduced by Bolivia and adopted by the UN General Assembly.76 This resolution was silent on private sector participation, and for the first time it explicitly recognised ‘the right to safe and clean drinking water and sanitation as a human right that is essential for the full enjoyment of life and all human rights’.77 Shortly t­ hereafter, on 30 September 2010, the Council adopted by consensus a resolution which confirmed Resolution 64/292 and affirm[ed] that the human right to safe drinking water and sanitation is derived from the right to an adequate standard of living and inextricably related to the right to the highest attainable standard of physical and mental health, as well as the right to life and human dignity.78

Despite this acknowledgement of the existence of a distinct human right to water in international law,79 however, the resolution also simultaneously confirmed the conceptualisation of water as a commodity, by recognising ‘that States, in accordance with their laws, regulations and public policies, may opt to involve non-State actors in the provision of safe drinking water and sanitation services’.80 Thus, by clearly reaffirming the right to water as a component of the right to an adequate standard of living and of the right to health, the resolution crystallised the legal basis of the right, which has since been consistently confirmed by the Council and by the General Assembly.81 Yet, this international recognition, as discussed so far, came at the expense of what various scholars have

74 UN General Assembly, ‘Report of the Special Rapporteur on extreme poverty and human rights’ (26 September 2018) UN Doc A/73/396, para 4. 75 ibid (emphasis added). 76 UN General Assembly, ‘The Human Right to Water and Sanitation’ (3 August 2010) UN Doc A/Res/64/292. 77 ibid, para 1. 78 UN Human Rights Council (6 October 2010) UN Doc A/HRC/Res/15/9 para 3. 79 Winkler (n 5) 78. 80 UN Doc A/HRC/Res/15/9 (n 78) para 7 (emphasis added). Note how this language reflected the pledge of the Kyoto Ministerial Declaration of 2003 (n 67). 81 UN Doc A/HRC/Res/16/2 (n 46) para 1. See also UN Human Rights Council, ‘The Human Rights to Safe Drinking Water and Sanitation (12 October 2011) UN Doc A/HRC/Res/18/1 para 1. And see UN Human Rights Council, ‘Resolution on the Human Right to Safe Drinking Water and Sanitation (27 September 2012) UN Doc A/HRC/21/L.1; and UN General Assembly, ‘The Human Right to Water and Sanitation’ (18 December 2013) UN Doc A/RES/68/157 and (17 December 2015) UN Doc A/RES/70/169.

110  Protection of ESC Rights and the Right to Water denounced as the de-radicalisation of the right to water, because of the way in which ‘UN recognition of rights serves to placate radical demands, while ultimately delivering very little in terms of real change’.82 Already in 2007 Karen Bakker had warned against the co-option of human rights discourse by private non-state actors, and argued that the compatibility of human rights with the private sector provision of water supply indicated the inherent limitations of the right to water as a tool to counter water privatisation. ‘Rights talk’, she convincingly argued: offers us an unimaginative language for thinking about new community economies, not least because pursuit of a campaign to establish water as a human right risk reinforcing the public/private binary upon which the confrontation is predicated, occluding possibilities for collective action beyond corporatist models of service provision.83

Ten years after Bakker, Joe Wills also reflected on the way in which ‘the UN human rights framework effectively decoupled the right to water from opposition to privatisation, commodification and commercialisation of water services. This provided the basis for the discursive (re)incorporation of the right to water into the neo-liberal framework’.84 In light of the inherent limitations of the right to water as discussed so far, it is important to note that, for the purposes of our analysis, the de-radicalisation of this right has significant implications in terms of its (in)ability to clearly identify obligations vested upon private non-state actors and to hold them accountable for corporate abuse. In the remainder of this chapter I examine the nature and scope of state obligations pertaining to the right to water as outlined by the CESCR, starting with a discussion of the tripartite typology of obligations to respect, protect and fulfil this right. In doing so, I consider the views expressed by the CESRC in General Comment 24 of 2017 on state obligations in the context of business activities.85 What follows forms the basis of my analysis of the relationship between IHRL and IIL (chapter four), and of my examination of whether business and human rights frameworks are capable of addressing existing tensions between IIL and ESC rights, including in relation to the right to water (chapter five).

82 C Clark, ‘Of What Use is a Deradicalized Human Right to Water?’ (2017) 17 Human Rights Law Review 231, 242 citing B Rajagopal, International Law from Below: Development, Social Movements and Third World Resistance (Cambridge, Cambridge University Press, 2003) 229–30. 83 Bakker (n 66) 447. Bakker supports instead alter-globalisation proposals which call ‘for radical strategies of ecological democracy predicated upon calls to decommodify public services and enact “commons” models of resource management’. 84 Will (n 2) 224. 85 CESCR, ‘General Comment No 24 (2017) on State Obligations under the International Covenant on Economic, Social and Cultural Rights in the Context of Business Activities’ (10 August 2017) UN doc E/C.12/GC/24.

States’ Obligations to Respect, Protect and Fulfil  111 III.  STATES’ OBLIGATIONS TO RESPECT, PROTECT AND FULFIL

A first philosophical classification of state parties’ obligations into obligations ‘to avoid depriving’, ‘to protect from deprivation’ and ‘to aid the deprived’ was attempted by Henry Shue,86 whose approach was then followed, with some modification, by Asbjørn Eide who first adopted the terminology ‘respect, protect and fulfil’,87 currently used by the CESCR, states and commentators alike. In discussing the three-fold obligations of state parties in relation to the right to water, I focus on the actual amount of water necessary to the realisation of the right to water, rather than on the existence/creation of water infrastructure. This is mainly because water infrastructures in Afghanistan are basically non-existent and a discussion on their privatisation, which appears to be prevalent in the existing literature on the interactions between the right to water and IIL,88 would seem somehow premature. Although the creation and maintenance of water infrastructures is a clear obligation vested upon the state, a focus on water amounts is more appropriate to our discussion, as it reinforces the argument, introduced at the beginning of this chapter, that water scarcity is mainly a political issue, and the result of unequal access to and allocation of water. This angle, therefore, enables an investigation of issues pertaining to water allocation and prioritisation which is at the basis of my argument on the need to repoliticise the debate on the relationship between IIL and IHRL.89 First, under the obligation to respect the right to water, state parties are required to refrain from interfering with the enjoyment of the right, thus ensuring that their acts or omissions do not result in a deterioration of already realised elements of the right. This includes any activity resulting in constrained access to safe potable water, for instance pollution and/or contamination as well as reallocation of water resources for purposes which may be perceived as more lucrative (eg, for industrial use), when this would result in a worsening of water access for essential household purposes. As I explain below, when discussing minimum core obligations, state parties must ensure the minimum essential level of water for everybody at all times, that is the levels required for survival and for a life in dignity. At this stage it is necessary to clarify that, in the existing ESC rights literature, survival and dignity are often depicted as two (amongst many other) competing interpretative standpoints for identifying the minimum core of each ESCR and the minimum core obligations related to it.90 Within this 86 H Shue, Basic Rights: Subsistence, Affluence and US Foreign Policy (Princeton NJ, Princeton University Press, 1996) 52. 87 A Eide, UN Special Rapporteur for the Right to Food, ‘The Right to Adequate Food as a Human Right: Final Report’ (7 March 1988) UN Doc E/CN.4/Sub.2/1987/23 paras 67–69. 88 See eg F Marrella, ‘On the Changing Structure of International Investment Law: The Human Right to Water and ICSID Arbitration’ (2010) 12 International Community Law Review 335. 89 See the discussion in ch 4 of this book. 90 For a comprehensive outline of the various interpretive approaches, see KG Young, ‘The ­Minimum Core of Economic, Social and Cultural Rights: A Concept in Search of Content’ (2008) 33 Yale Journal of International Law 113.

112  Protection of ESC Rights and the Right to Water debate, some scholars support the idea that the minimum core corresponds to those elements of the right which are necessary to satisfy basic survival needs of rights-holders.91 In its General Comment 3, the CESCR also focused initially on the minimum essential levels of each ESCR, suggesting that these minimum levels required the satisfaction of minimum subsistence, eg, ‘of essential foodstuffs, of essential primary healthcare, of basic shelter and housing, or of the most basic forms of education’.92 Yet, as argued by Young with whom I agree, the focus on survival needs ‘misses the important connections between dignity and human flourishing that are intrinsic to many interpretations of the right to life’.93 According to this dignity-based argument, ‘socio-economic rights are not valued as commodities, but because of what they enable human beings to do and to be. If basic subsistence needs are not met, humans face severe threats to life and health’.94 This is key to a more comprehensive and protection-oriented understanding of the right to water which, as we saw in the preceding section, was at the core of the ‘water as commons’ discourse.95 The CESCR itself has departed from its initial survival rights approach and now refers to core obligations in guiding state parties in the implementation of the ICESCR.96 Similarly, the UN Office of the High Commissioner for Human Rights and the Special Rapporteur use the term minimum core obligations and, with reference to the fact that the right to water is an underlying determinant of the right to health, make reference to the amount of water necessary not only for human survival, but also for certain domestic uses,97 such as personal and household hygiene, food hygiene and preparation, and washing clothes.98 As further discussed in section V below, the World Health Organization (WHO) provides guidance on the minimum amount of water necessary to meet these personal and domestic uses, so that all health concerns are satisfied.99

91 See eg Shue (n 86) 19; D Bilchitz, Poverty and Fundamental Rights: The Justification and Enforcement of Socio-Economic Rights (Oxford, Oxford University Press, 2008) 1179–80. 92 CESCR, ‘General Comment No 3: The Nature of States Parties’ Obligations, art 2(1)’ (14 December 1990) UN Doc E/1991/23 para 10. For a similar approach see also Maastricht Guidelines on Violations of Economic, Social and Cultural Rights (22–26 January 1997) UN Doc E/C.12/2000/13; Inter-American Commission on Human Rights, Annual Report 1979–1980, OEA/Ser.L/V/II.50, doc 13 rev 1, at 2 (1980). Compare with the Inter-American Court of Human Rights which interpreted the right to life as including access to conditions that guarantee a dignified life in Caso Villagrán Morales y Otros (Caso de los“Niños de la Calle”), 19 November 1999 (Ser. C) No 63, para 144. 93 Young (n 63) 130. 94 ibid 151 (emphasis added). 95 Bakker (n 66) and Wills (n 2). 96 See eg CESCR, ‘General Comment 18: The Right to Work (Art 6)’ (6 February 2006) UN Doc E/C.12/GC/18 para 31; General Comment 14 (n 41) paras 43–45; General Comment 15 (n 32) paras 37–38. See also AR Chapman, ‘A “Violations Approach” for Monitoring the International Covenant on Economic, Social and Cultural Rights’ (1996) 18 Human Rights Quarterly 23. 97 CESCR, General Comment 15 (n 32) para 2. 98 UNHCHR Report (n 23) para 13. 99 G Hutton and L Haller, Evaluation of the Costs and Benefits of Water and Sanitation Improvements at the Global Level (Geneva, WHO, 2004) 22.

States’ Obligations to Respect, Protect and Fulfil  113 Thus, whilst 25 litres per person per day are mentioned as the lowest level for human survival,100 this is not considered to be sufficient to meet basic hygiene requirements,101 and an amount between 50 and 100 litres is instead indicated, although this is still subject to the specific contextual circumstances of different ­countries.102 General Comment 24 clarifies that the obligation to respect ‘is violated when State parties prioritize the interests of business entities over Covenant rights without adequate justification, or when they pursue policies that negatively affect such rights’, including in the context of investment projects.103 As discussed in chapter one, this is particularly relevant to the tendency to redirect precious water resources to large extractive projects, at the expenses to the domestic use and accessibility of local populations. In General Comment 24 the CESCR also devotes particular attention to the obligations of states in the context of investment treaties, and states that State parties should identify any potential conflict between their obligations under the Covenant and under trade and investment treaties, and refrain from entering into such treaties where such conflicts are found to exist, as required under the principle of the binding character of treaties. The conclusion of such treaties should therefore be preceded by human rights impact assessments that take into account both the positive and negative human rights impacts of trade and investment treaties, including the contribution of such treaties to the realization of the right to development. Such impacts on human rights of the implementation of the agreements should be regularly assessed, to allow for the adoption of any corrective measures that may be required.104

The above points on human rights impact assessments, although substantially correct in terms of the need to identify ex ante the negative impact of IIA, do not seem to take into consideration the complex political implications of investment treaty negotiations, and the specific exogenous pressure that conflict countries experience in terms of both achieving economic sustainability

100 Consider, for the sake of our argument, that ‘an average flush of the toilet uses more than 10 litres of water in one go’. See J Dugard and M Langford, ‘Art or Science? Synthesising Lessons from Public Interest Litigation and the Dangers of Legal Determinism’ (2011) 27 South African Journal of Human Rights 39, 44. 101 ibid para 15. Note that the Sphere Handbook, which is the best-practice guide for h ­ umanitarian actors, refers to a basic minimum provision of 7.5 to 15 litres per person per day in times of emergencies, including conflict situations, although this is subject to a set of variables, eg climate, an individual’s physiological circumstances, social and cultural norms. See The Sphere ­Handbook: Humanitarian Charter and Minimum Standards in Humanitarian Response (2011) at www.SphereProject.org. 102 See s V below for a discussion of the relevant jurisprudence of the Constitutional Court of South Africa, in particular the case of Lindiwe Mazibuko and Others v City of Johannesburg and Others, Case CCT 39/09 (2009) ZAAC 28. 103 General Comment 24 (n 85) para 12. 104 ibid para 13.

114  Protection of ESC Rights and the Right to Water and attracting foreign investment when still experiencing armed conflict (discussed in ­chapter one). Paragraph 13 of General Comment 24 also refers to the fact that [t]he interpretation of trade and investment treaties currently in force should take into account the human rights obligations of the State, consistent with Article 103 of the Charter of the United Nations and with the specific nature of human rights obligations. State parties cannot derogate from the obligations under the Covenant in trade and investment treaties that they may conclude. They are encouraged to insert, in future treaties, a provision explicitly referring to their human rights obligations, and to ensure that mechanisms for the settlement of investor-State disputes take human rights into account in the interpretation of investment treaties or of investment chapters in trade agreements.105

Such a focus on international investment agreements (IIA) in the work of the CESCR is unprecedented and certainly welcome in that it provides a necessary recognition of the negative impacts of investment agreements.106 Undoubtedly, this emphasis reflects the growing body of literature on the intersection between IIL and IHRL. By insisting on the fact that standards of investment protection should be interpreted in such a way as to ‘take into account’ the human rights obligations of the state, however, the CESCR prioritises procedural fixes (as further discussed in chapter five), whilst failing to identify and denounce the inappropriateness of investor-state arbitration as a forum capable of reviewing policies adopted by a state in order to protect human rights and, as in the case of the right to water, access to and enjoyment of a public good. Similarly, by encouraging the insertion of explicit human rights provisions in trade and investment, it attempts to create space for an ideal ‘balancing’ in future interpretation in investor-state arbitration, without examining the risks of leaving the adjudication of human rights issues at the expanding discretion of international investment tribunals.107 Thus, whilst most states and private non-state actors continue to flex their muscles to strengthen so-called investors’ rights, not least through the expansion of existing standards of investment protection, and the continued lobby against the establishment of binding business obligations,108 the CESCR has again adopted the same ‘agnostic’ stance

105 ibid. 106 ibid para 29, where the CESCR conceptualises the extraterritorial obligation to respect as requiring states ‘to refrain from interfering directly or indirectly with the enjoyment of the Covenant rights by persons outside their territories. As part of that obligation, States parties must ensure that they do not obstruct another State from complying with its obligations under the Covenant. This duty is particularly relevant to the negotiation and conclusion of trade and investment agreements or of financial and tax treaties, as well as to judicial cooperation’ (emphasis added). 107 For a more in-depth analysis of both points, see chs 4 and 5. 108 See eg the reluctant position of the EU during the early stages of the negotiations for a binding treaty on business and human rights, as noted in CIDSE, ‘EU must constructively engage in the UN Treaty for Business and Human Rights’ (4 October 2018) at www.cidse.org/newsroom/eu-mustconstructively-engage-in-the-un-treaty-for-business-and-human-rights.html.

States’ Obligations to Respect, Protect and Fulfil  115 of General Comment 15, failing to take cognisance of the way in which this pseudo-neutrality maintains the same infrastructures enabling current abuses.109 More specifically, in relation to the privatisation of public services, General Comment 24 confirms that the provisions in the Covenant do not prohibit privatisation, ‘even in areas such as the provision of water and electricity, education and health care where the role of the public sector has traditionally been strong’.110 Moving slightly from the view adopted in General Comment  15, the CESCR considers, however, that private providers should be ‘subject to strict regulations that impose on them so-called “public service obligations”: in the provision of water or electricity, this may include requirements concerning universality of coverage and continuity of service, pricing policies, quality requirements, and user participation’.111 Returning to the tripartite obligations typology, under the obligation to protect the right to water, state parties must ensure that third parties do not interfere with this right. Hence, state parties must take necessary measures to prevent effectively112 private actors (including, of course, corporate actors) from encroaching on the enjoyment of the right to water, for instance by polluting water resources and/or by participating in, or lobbying for, an inequitable allocation of water. In his critique of the claim that foreign investors deserve heightened protection from policy decisions that may adversely affect their investment, because their interests are not represented as part of a host state’s political processes, David Schneiderman emphasises that [t]his solicitude offered to investors by political process review is mostly unwarranted. The corporate political activity and business risk literature suggests that foreign corporate can and do shape host domestic policy. Indeed, not only is ­corporate

109 For an idea of the inappropriateness of investment-state arbitration as a forum to adjudicate human rights issues, see eg Chevron Corporation and Texaco Petroleum Corporation v Republic of Ecuador, UNCITRAL PCA Case No 2009-23 (30 August 2018) Second Partial Award on Track II. According to Lise Johnson, this award de facto ‘excus[es] Chevron from having to pay a roughly US$18 billion judgment Ecuadorian courts rendered against the US company in favor of Ecuadorian citizens as damages for environmental and other harms arising out of Chevron’s affiliates’ oil operations in Ecuador’. L Johnson, ‘Case Note: How Chevron v Ecuador is Pushing the Boundaries of ­Arbitral Authority’ (International Institute for Sustainable Development (IISD), 13 April 2012) at www. iisd.org/itn/2012/04/13/case-note-how-chevron-v-ecuador-is-pushing-the-boundaries-of-arbitralauthority/#_ftn1. See also D Desierto, ‘From the Indigenous Peoples’ Environmental Catastrophe in the Amazon to the Investors’ Dispute on Denial of Justice: The Chevron v Ecuador August 2018 PCA Arbitral Award and the Dearth of International Environmental Remedies for Private Victims’ (13 September 2018) at www.ejiltalk.org/from-indigenous-peoples-environmental-catastrophe-inthe-amazon-to-investors-dispute-on-denial-of-justice-the-chevron-v-ecuador-2018-pca-arbitralaward/. Desierto argues that ‘while the erudite tribunal in this case thoroughly set out the technical legal reasoning in its award on the precise legal issues of the investment treaty breaches alleged, the award itself more broadly demonstrates that we may well be at the point that a dedicated separate international dispute settlement system might already be necessary to properly adjudicate victims’ claims in human rights and environmental disputes’. 110 General Comment 24 (n 85) para 21. 111 ibid. 112 ibid para 14 (emphasis added).

116  Protection of ESC Rights and the Right to Water ­ olitical power present and pervasive in most every part of the world, corporate p power distorts political processes in ways that undermine democracy’s rationales.113

As confirmed by the CESCR in General Comment 24, and as further examined in chapter five, the obligation to protect also ‘entails a positive duty to adopt a legal framework requiring business entities to exercise human rights due diligence in order to identify, prevent and mitigate the risks of violations of Covenant rights, to avoid such rights being abused’.114 As clarified by the CESCR, the duty is breached when a state fails to prevent or counter business conduct that leads to abuses, ‘or that has the foreseeable effect of leading to such rights being abused’, for instance ‘by granting exploration and exploitation permits for natural resources without giving due consideration to the potential adverse impacts of such activities on the individual and on communities’ enjoyment of the Covenant rights’.115 As I argue in chapter five, the obligation to protect, therefore, encompasses an obligation to meaningfully regulate business entities ‘domiciled in their territory and/or jurisdiction (whether they were incorporated under their laws, or had their statutory seat, central administration or principal place of business on the national territory)’,116 including to prevent human rights violations abroad.117 Whilst scholars continue to disagree over the reach of extraterritorial obligations, in the view of the CESCR, such obligations arise when a state is in a position to influence situations located outside of its territory, consistent with the limits imposed by international law, by controlling the activities of corporations domiciled in its territory and/or under its jurisdiction, and thus may contribute to the effective enjoyment of economic, social and cultural rights outside its national territory.118

113 D Schneiderman, ‘Investing in Democracy? Political Process and International Investment Law’ (2010) 60 University of Toronto Law Journal 909, 914–15. 114 General Comment 24 (n 85) para 15 (emphasis added). Para 15 also states that this legal framework should require business entities ‘to account for the negative impacts caused or contributed to by their decisions and operations and those of entities they control on the enjoyment of Covenant rights. States should adopt measures such as imposing due diligence requirements to prevent abuses of Covenant rights in a business entity’s supply chain and by subcontractors, suppliers, franchisees, or other business partners’. 115 ibid para 18. See also CRC, ‘General Comment No 16 (2013) on State obligations regarding the impact of the business sector on children’s rights’ (17 April 2013) UN Doc CRC/C/GC/16, para 28. 116 ibid, para 26. See also CESCR, ‘Statement on the obligations of State Parties regarding the corporate sector and economic, social and cultural rights’ (20 May 2011) UN Doc E/C.12/2011/1 paras 5 and 6. 117 ibid. See also General Comment 15 (n 32) paras 31 and 33. And see UNHCHR Report (n 23) para 38, though referring mainly to host states’ obligations: ‘States must therefore regulate and control private water and sanitation providers through an effective regulatory system which includes independent monitoring, participation, and imposition of penalties in case of non-compliance’ (emphasis added). 118 General Comment 24 (n 85) para 28. See also Committee of Ministers of the ­ Council of Europe, ‘Human Rights and Business: Recommendation CM/Rec(2016) of the Committee of Ministers to Member States’ (2016) Appendix, para 13, at https://edoc.coe.int/en/ fundamental-freedoms/7302-human-rights-and-business-recommendation-cmrec20163-of-thecommittee-of-ministers-to-member-states.html.

States’ Obligations to Respect, Protect and Fulfil  117 A breach by the state would occur, in turn, for a failure by the State to take reasonable measures that could have prevented the occurrence of the event. The responsibility of the State can be engaged in such circumstances even if other causes have also contributed to the occurrence of the violation, and even if the State had not foreseen that a violation would occur, provided such a violation was reasonably foreseeable. For instance, considering the well-documented risks associated with the extractive industry, particular due diligence is required with respect to mining-related projects and oil development projects.119

Returning once again to the tripartite typology, it is important to note that the obligation to fulfil requires state parties to take all necessary positive measures to enable every person to enjoy the right to water. This includes allocating sufficient resources, through an appropriate national water strategy, to ensure sufficient quantity of ‘safe drinking water’, understood as the amount of water needed ‘to provide for personal and domestic uses, which comprise water for drinking, washing clothes, food preparation and for personal and household hygiene’.120 This obligation also demands that state parties ensure that those who do not currently have access to water gain such access,121 for instance through the construction of additional infrastructure. Whenever people are unable to realise the right to water on their own, it is argued, the state is obliged to intervene,122 not only by creating an enabling environment conducive to the realisation of the right, but also by directly providing water for those who cannot otherwise access this resource by themselves.123 In the specific context of business activities, it entails an obligation to ‘direct the efforts of business entities towards the fulfilment of Covenant rights’, for instance when designing an intellectual property rights framework;124 and an

119 General Comment 24 (n 85) para 32. 120 UNHCHR report (n 23) para 13. 121 ibid para 41: ‘Overall, public resources should prioritize those without basic access to safe drinking water and sanitation, rather than those who already have some sort of access’. 122 ibid: ‘[t]he obligation to fulfil can be disaggregated into the obligation to facilitate, promote and provide. The obligation to facilitate requires States to take positive measures to assist individuals to access safe drinking water and sanitation. The obligation to promote obliges the State to take steps to ensure that there is appropriate education about hygiene, notably concerning hygienic use of water and the protection of water. The obligation to provide demands that States ensure access to safe drinking water and sanitation for individuals when they are unable, for reasons beyond their control, to do so themselves and through the means at their disposal’. 123 Shue (n 86) 57. 124 General Comment 24 (n 85) para 24. See, relatedly, the award in Eli Lilly and Company v The Government of Canada, UNCITRAL, ICSID Case No UNCT/14/2 (16 March 2017) Final Award, where the tribunal reviewed the Canadian courts’ decisions to invalidate two of Eli Lilly pharmaceutical patents. The case was very controversial because of its potential implications for the Canadian and international legal regime on pharmaceutical patent protection as well as for public health and access to medicines. On intellectual property rights in investor-state arbitration, see H Grosse Ruse-Khan, ‘Litigating Intellectual Property Rights in Investor-State Arbitration: From Plain Packaging to Patent Revocation’ (2014) University of Cambridge Faculty of Law Research Paper No 52/2014, at https://ssrn.com/abstract=2463711.

118  Protection of ESC Rights and the Right to Water obligation to mobilise resources for the realisation of the right, including through the creation and enforcement of progressive taxation schemes.125 Although the tripartite typology respect, protect and fulfil is widely used, it has been amply criticised for not sufficiently clarifying the progressive steps that state parties should take towards the full realisation of ESC rights, as required by Article 2(1). Moreover, the CESCR, although it systematically resorts to this typology in its General Comments, has proven inconsistent in categorising the measures to be taken by state parties towards the fulfilment of the various rights at hand. One of the strongest arguments against the framework is advanced by Koch.126 She claims that this typology carries an inherent risk of suggesting that some human rights obligations are more ‘positive’ and costly than others, ie, that ‘fulfil’ obligations require greater state intervention than ‘respect’ obligations.127 This approach, she argues, is not only misleading, but also creates assumptions that the obligation to respect is somehow ‘cheaper’ than the obligations to protect and fulfil.128 It is now widely accepted, however, that positive action is required by the state for the full realisation of all human rights, and as a consequence that all obligations entail a certain level of expenditure and/or allocation of resources.129 Whilst remaining aware of the current shortcomings of the respect, protect and fulfil typology, I adopt it throughout this work, not least because it is widely used for instance in the reports compiled by human rights field officers deployed in Afghanistan, as well as by civil society organisations monitoring human rights on the ground. By proposing an approach and a typology different from those already familiar to treaty bodies, states, grassroots organisations and scholars, I would risk alienating the same audience that I wish to address and engage.130

125 General Comment 24 (n 85) paras 23 and 37. See also CRC General Comment 16 (n 115) para 29: ‘To meet this obligation, States should provide stable and predictable legal and regulatory environments which enable business enterprises to respect children’s rights. This includes clear and well-enforced law and standards on labour, employment, health and safety, environment, anticorruption, land use and taxation that comply with the Convention and the Optional Protocols thereto’. 126 IE Koch, ‘Dichotomies, Trichotomies or Waves of Duties? (2005) 5 Human Rights Law Review 81. 127 ibid 91–93. 128 ibid and see also 96–100. 129 S Skogly, ‘The Requirement of Using the ‘Maximum of Available Resources’ for Human Rights Realisation: A Question of Quality as Well as Quantity?’ (2012) 12 Human Rights Law Review 393, 395–96. 130 Some scholars have proposed to refocus the debate on identifying the steps that states should take in order to progressively realise ESC rights, without categorising them according to the tripartite typology: See M Langford and JA King, ‘Committee on Economic, Social and Cultural Rights: Past, Present and Future’, in M Langford (ed), Social Rights Jurisprudence: Emerging Trends in International and Comparative Law (Cambridge, Cambridge University Press, 2008) 486. Other commentators have focused on the minimum core approach as a tool to investigate the practical applicability of ESC rights in situations of armed conflict: see AS Müller, The Relationship between

Article 2(1) ICESCR  119 The respect, protect and fulfil obligations are closely linked to another tripartite typology crucial to this research: namely, the protect, respect and remedy framework developed by the former Special Representative of the United Nations Secretary-General for business and human rights, John Ruggie (SRSG). This three-pillar framework, endorsed in 2011 by the Human Rights Council as part of the Guiding Principles on Business and Human Rights, is analysed in detail in chapter five. The analysis carried out in that chapter, in fact, would be incomplete without a preliminary understanding of the respect, protect and fulfil obligations of state parties in relation to the right to water, upon which it builds. That analysis also demands an understanding of the notion of progressive realisation of ESC rights, and of the difference between obligations of immediate effect – where the minimum core approach becomes relevant – and the obligation to fully realise these rights. Hence in the next section of this chapter, I develop these understandings. IV.  ARTICLE 2(1) ICESCR: PROGRESSIVE REALISATION AND OBLIGATIONS OF IMMEDIATE EFFECT

A close analysis of Article 2(1) ICESCR is of fundamental importance in order to understand the scope of state parties’ obligations under the various ESCR. Article 2(1) establishes that each state party has a duty to take steps, individually and through international assistance and cooperation, especially economic and technical, to the maximum extent of its available resources, with the view of achieving progressively the full realization of the rights recognised in the present Covenant by all appropriate means, including particularly the adoption of legislative measures.

The notion of progressive realisation131 is crucial to ESC rights, as it not only enshrined in Article 2(1) ICESCR, but also in two other core international human rights treaties, namely the Convention on the Rights of the Child (CRC, Article 4) and the Convention on the Rights of Persons with Disabilities (CRPD, Article 4.2). The CESCR has described the notion as ‘a necessary flexibility device reflecting the realities of the real world and the difficulties involved for any country in ensuring full realisation of economic, social and cultural rights’.132 Implicitly, the notion also represents an acknowledgement of the

Economic, Social and Cultural rights and International Humanitarian Law: An Analysis of Healthrelated Issues in Non-International Armed Conflict (Leiden, Brill, 2013). Both of these approaches are valuable, but not followed in this study where I focus, more comprehensively, on the obligations of home states. 131 Report of the High Commissioner to the 2007 Substantive Session of ECOSOC dedicated to the ‘Issue of Progressive Realization of Economic, Social and Cultural Rights’ (25 June 2007) UN Doc E/2007/82. 132 CESCR, General Comment 3 (n 92).

120  Protection of ESC Rights and the Right to Water potential resource constraints that state parties may face in fully implementing their obligations. At the same time, however, progressive realisation has often been misunderstood and misused as an excuse for inaction, as a reason to wait until the state obtains the resources needed. This ‘stalling technique’ cannot be justified within the notion of progressive realisation, which in fact requires that state parties prioritise the resources available to them133 in order to set out immediately a map for the full realisation of the right to water, thus demonstrating that they are already making their best efforts and using all available resources towards the full realisation of the right. The CESCR has developed three main analytical frameworks aimed at outlining the parameters of ESC rights: the three-fold categorisation of state parties’ obligations into respect, protect and fulfil obligations; the delineation of four characteristics (availability, accessibility, acceptability and quality, otherwise known as the TripleAQ-framework or AAAQ framework) used to define the adequacy required for the goods, services and programmes introduced by state parties; and the development of the minimum core approach, to indicate the minimum obligations flowing from ESC rights and to be prioritised by state parties when implementing them. In what follows I investigate these frameworks in reverse order, starting with the discussion of the scope of the minimum core approach as part of existing fundamental exceptions to the notion of progressive realisation. Not all state parties’ obligations, in fact, are subject to progressive realisation: some of them require immediate implementation under the ICESCR, irrespective of the availability of resources.134 Below I look at four of these ‘obligations of immediate effect’, namely the elimination of discrimination; the obligation to ‘take steps’; the prohibition of retrogressive measures; and indeed minimum core obligations. I focus in particular on the minimum core obligations related to the right to water, in order to ascertain what, if any, is the minimum level of protection of this right and which elements of it should be prioritised by state parties whilst they move towards full (though progressive) realisation. By clarifying the minimum core obligations flowing from the right to water it should then be possible to further discuss state parties’ obligations within the context of establishing a legislative framework in countries that experience an ongoing armed conflict.

133 The concept of maximum available resources is further discussed in section VI. However, it is important to note at this stage that the resources that states can mobilise for the realisation of human rights are wide-ranging. According to Balakrishnan et al these include government expenditure; government revenue; development assistance; debt and deficit financing; and monetary policy and financial regulation. See R Balakrishnan et al, Maximum Available Resources and Human Rights: Analytical Report (New Brunswick NJ, Rutgers, 2011) 5. 134 See s VIII below for a list of the obligations of immediate effect in relation to the right to water.

Article 2(1) ICESCR  121 A.  Elimination of Discrimination State parties are under an obligation to ensure the elimination of discrimination and immediately prohibit de jure and de facto discrimination, as well as direct and indirect discrimination, in current and future measures related to the right to water. They are also under an obligation to adopt measures to address existing forms of discrimination, thus paying particular attention to particularly neglected and disadvantaged groups.135 The principle of non-discrimination is enshrined in Article 2(2) ICESCR, where a non-exhaustive list of prohibited grounds is also mentioned. Similar provisions can be found in other international human rights instruments,136 all aimed at preventing and/or redressing discrimination against certain groups and individuals in relation to the realisation of their human rights. Discrimination, as explained by the CESCR, is to be understood as any distinction, exclusion, restriction or preference or other differential treatment that is directly or indirectly based on the prohibited grounds of discrimination and which has the intention or effect of nullifying or impairing the recognition, enjoyment or exercise, on an equal footing, of Covenant rights.137

In General Comment 24, which focuses specifically on state obligations in the context of business activities, the CESCR identifies women, children and indigenous people as groups ‘disproportionately affected by the adverse impact of business activities, particularly in relation to the development, utilization or exploitation of lands and natural resources’.138 Women and girls, General Comment 24 adds, ‘face a greater risk of suffering intersectional and multiple discrimination’ and are exposed to the risk of ‘physical and sexual violence against, and inadequate compensation and additional burdens related to the resettlement for’ investment-linked evictions and displacements.139 With special reference to the right to water, General Comment 15 clarifies that state parties must act to redress discrimination ‘where individuals and groups are deprived of the means or entitlements necessary for achieving the right to water’.140 The CESCR also explicitly refers to allocation of and investment in water, explaining that these should be aimed at facilitating access to water for all members of society.141 Like any other obligation of immediate effect,

135 This includes an obligation to address situations of existing de facto discrimination. See Winkler (n 5) 113. 136 See eg Arts 2(1) and 26 ICCPR, Art 2(1) CRC. Various anti-discriminatory provisions are also contained in CEDAW, CRPD and ICERD. 137 CESCR, ‘General Comment No 20, Non-Discrimination in Economic, Social and Cultural Rights’ (10 June 2009) UN Doc E/C.12/GC/20 para 7. 138 General Comment 24 (n 85) para 8. 139 ibid para 9. 140 CESCR, General Comment 15 (n 32) para 14. 141 ibid.

122  Protection of ESC Rights and the Right to Water non-discrimination does not depend on a state party’s availability of resources and requires that certain measures are immediately prioritised: failure to remove differential treatment on the basis of a lack of available resources is not an objective and reasonable justification unless every effort has been made to use all resources that are at the State party’s disposition in an effort to address and eliminate the discrimination, as a matter of priority.142

B.  Obligation to Take Steps The notion of progressive realisation has the objective of acknowledging that the full realisation of ESC rights cannot happen overnight and requires systematic and concerted efforts by the state parties. It cannot be understood, however, as an unlimited granting of discretion to the state parties for deciding if, and when, they will act to fully realise ESC rights. According to the CESCR, state parties should make efforts to continuously143 improve the enjoyment of the right to an adequate standard of living, and therefore of the right to water. Hence,  deliberate, concrete and targeted steps144 towards this goal must be prioritised, and in any case taken within a short time,145 using all appropriate means as well as maximum available resources. Whilst the concept of maximum available resources is discussed further in section VI, the phrase ‘all appropriate means’ needs further elaboration at this stage, as it has been interpreted in different ways, with some scholars arguing that it merely requires state parties to meet a reasonable test to justify the measures adopted on the basis of their specific circumstances.146 Whilst some aspects of CESCR practice partially supports this interpretation, the CESCR has stated clearly that the measures adopted must be ‘adequate to ensure fulfilment of the obligations under the Covenant’.147 In many cases, these means and/or measures, directed specifically at meeting the obligations flowing from the ICESCR, will include the adoption of legislation, especially if the existing laws run counter to the rights themselves

142 CESCR, General Comment 20 (n 137) para 13. The CESCR adopted a very similar language when discussing the minimum core approach: see CESCR, General Comment 3 (n 92). 143 M Sepúlveda, The Nature of Obligations Under the International Covenant on Economic, Social and Cultural Rights (Antwerp, Intersentia, 2003) 323. 144 CESCR, ‘Statement, An Evaluation of the Obligation to Take Steps to the “Maximum of Available Resources” under an Option Protocol to the Covenant’ (10 May 2007) UN Doc E/C.12/2007/1 para 3. See also CESCR, General Comment 15 (n 32) para 17. 145 CESCR, General Comment 3 (n 92) para 2. See also Sepúlveda (n 143) 313. 146 Sepúlveda (n 143) 337. 147 CESCR, ‘General Comment No 9: The Domestic Application of the Covenant’ (12 March 1998) UN Doc E/C.12/1998/24 para 7. See also Limburg Principle 17 stating that means must be ‘consistent with the nature of the rights in order to fulfil their obligations under the Covenant’.

Article 2(1) ICESCR  123 (eg, if they are discriminatory in nature). Legislation, however, is not sufficient per se to respond to all state parties’ obligations.148 According to the CESCR,149 there is no measure that can automatically be considered appropriate in a specific context. Thus, whilst state parties should indicate in their reports the reasons for regarding a certain measure as appropriate under the specific circumstances of the case, ‘the ultimate determination as to whether all appropriate measures have been taken remains one for the Committee to make’.150 In addition to legislation, measures which may be appropriate for the purposes of Article 2(1) ICESCR include, inter alia, judicial,151 administrative, policy, economic, social and educational measures, and any other step which might contribute to ensuring ESC rights to all.152 Based on the above, it seems therefore unlikely that a simple reasonable test will suffice for a state party to justify its measures, were they to fall short in the realisation of ESC rights.153 State parties are therefore under an obligation to show that they are progressing towards the goal of full realisation of the right. Progress includes the adoption of laws and policies in support of the right, or indeed the amendment of regulations which have an adverse effect on it.154 In my view, within the specific context of natural resources extraction in times of armed conflict, the phrase ‘all appropriate means’ also acquires an additional dimension. As explained by Saroch, ‘water issues often have a geopolitical dimension that reflects engagement with broader national objectives of security or development or both’.155 For this reason, ‘all appropriate means’ aimed at the realisation of ESC rights in conflict areas must include measures to address geopolitical and ideological approaches to the use and allocation of water, especially when there are increasing pressures on this resource which might result in a decreased water availability for fundamental personal and household use.

148 CESCR, General Comment 3 (n 92), para 4. 149 ibid. 150 ibid. 151 See CESCR, General Comment 9 (n 147) para 2: ‘appropriate means of redress, or remedies, must be available to any aggrieved individual or group, and appropriate means of ensuring government accountability must be put in place’. 152 ibid paras 5–7. See also OHCHR, ‘Economic, Social and Cultural Rights: Handbook for National Human Rights Institutions’ (Geneva, United Nations, 2005) 9–10. 153 CESCR, General Comment 9 (n 147) para 7 (emphasis added): ‘Where the means used to give effect to the Covenant on Economic, Social and Cultural Rights differ significantly from those used in relation to other human rights treaties, there should be a compelling justification for this, taking account of the fact that the formulations used in the Covenant are, to a considerable extent, comparable to those used in treaties dealing with civil and political rights’. 154 OHCHR, ‘Factsheet No 35, The Right to Water’ (OHCHR, 2010) 21, at www.ohchr.org/EN/ PUBLICATIONSRESOURCES/Pages/FactSheets.aspx. 155 E Saroch, ‘Geopolitics of Water: From “Security” to Sustainability’ (2003) 9–10 Water Nepal 107, 110.

124  Protection of ESC Rights and the Right to Water C.  Prohibition of Retrogressive Measures The existing level of fulfilment of the right cannot be allowed to deteriorate, unless the state party is able to strongly justify such deterioration. When measures adopted by the state have a negative effect on the existing level of enjoyment of the right – for instance resulting in the withdrawal of existing services from a certain sector of the local population – such measures could amount to retrogressive measures. Retrogressive measures are, in principle, prohibited unless the state can demonstrate that all alternative options have been carefully considered, that the impact of such measures has been assessed and is justifiable within the totality of recognised ESC rights, and that the state’s maximum available resources have been fully utilised.156 As argued by Courtis, this means that ‘the state cannot use general arguments of public policy, fiscal discipline or refer to other financial or economic gains, but instead must prove that other rights provided for under the Covenant have been improved by the measure’.157 D.  Minimum Core Obligations The notion of ‘minimum subsistence rights for all’ had already been advanced in 1986 by a group of distinguished experts in international law in the Limburg Principles on the Implementation of Economic, Social and Cultural Rights (Limburg Principles)158 but the concept of a minimum essential level of each right,159 including the right to water,160 was first articulated by the CESCR in General Comment 3. As introduced above, the obligations of state parties to protect this minimum essential level of any ESC right are also known as minimum core obligations. The rationale of the minimum core approach is that there are certain minimum levels of each ESC right necessary to ensure human survival and dignity: according to this, the state is under a fundamental obligation to ensure these minimum levels immediately, as a matter of top priority.161

156 CESCR, General Comment 15 (n 32) para 19. 157 C Courtis, El Mundo Prometido. Escritos sobre derechos sociales y derechos humanos (Mexico, Fontamara, 2009) 86. 158 The Limburg Principles on the Implementation of Economic, Social and Cultural Rights (1987) 9 Human Rights Quarterly 124. The CESCR and its members have referred to the Limburg ­Principles during the last 15 years and in 1992 the Principles’ contribution in defining ESC rights was officially recognised by the CESCR in its Statement to the World Conference on Human Rights, UN Doc A/CONF.157/PC/62/Add.5. In relation to minimum subsistence rights for all, see in particular Principle 25. 159 AR Chapman and S Russell, Core Obligations: Building a Framework for Economic, Social and Cultural Rights (Antwerp, Intersentia, 2002) 9. 160 CESCR, General Comment 15 (n 32) paras 37–38. 161 ibid para 37. See also D Bilchitz, ‘Towards a Reasonable Approach to the Minimum Core: Laying the Foundations for Future Socio-Economic Rights Jurisprudence’ (2003) 19 South African Journal on Human Rights 1, 11.

Article 2(1) ICESCR  125 A less urgent understanding of core obligations would result in the right losing its inherent significance,162 and the ICESCR becoming devoid of its raison d’être. In sum, the minimum core approach aims at identifying minimum quantitative and qualitative elements of each ESC right, so that a state’s available resources163 can be redirected towards ensuring these minimum core of the right as a matter of priority for all in all circumstances,164 including armed conflict, emergency and natural disaster.165 Once the minimum core of the right is ensured, state parties must move expeditiously towards the full realisation of the right, that is they must act to protect, respect and fulfil non-core obligations as well.166 Although useful in the way it can help in identifying the immediate steps that a state party should take in the realisation of ESC rights, this approach has been criticised for the difficulty in determining clear minimum core rights, and for being unrealistic to put into practice. Debates have also ensued over how the minimum core content should be defined, whether at the national or international level – based on the assumption that the minimum core affordable by developed countries is different from that realistically affordable by developing countries. As argued by Winkler, the minimum core approach should not be considered as setting an absolute standard,167 as there may be circumstances in which even reallocation of resources for the realisation of the minimum core of the right would not be sufficient for its realisation. Thus, whereas non-compliance with minimum core obligations generally constitutes a prima facie violation of the ICESCR, state parties can prove that they are unable to meet this minimum threshold. Where failure is due to resource constraints, the state must demonstrate that it has made every effort and that all available resources have been used to satisfy, as a matter of priority, the minimum level of the right.168 The obligation upon the state is not merely to act reasonably,169 it is argued, but to acknowledge ‘that it is unacceptable for people to live in conditions that are a threat to their bare survival and infringe their dignity.

162 F Coomans, ‘The Role of the UN Committee on Economic, Social and Cultural Rights in Strengthening Implementation and Supervision of the International Covenant on Economic, Social and Cultural Rights’ (2002) 35 Verfassung und Recht in Übersee 182, 192; Sepúlveda (n 143) 366. 163 For a clarification of the term ‘available resources’ see the section on maximum available resources below and, more generally, Skogly (n 129) and Balakrishnan et al (n 133). 164 CESCR, General Comment 3 (n 92) para 10; see also Craven (n 34) 39. 165 CESCR, ‘Poverty and the International Covenant on Economic, Social and Cultural Rights’ (10 May 2001) UN Doc E/C.12/2001/10, para 18. 166 ibid. 167 Winkler (n 5) 122. 168 CESCR, General Comment 15 (n 32) para 41; General Comment 3 (n 92) para 80. See also C Scott and P Alston, ‘Adjudicating Constitutional Priorities in a Transnational Context: A Comment on Soobramoney’s Legacy and Grootboom’s Promise’ (2000) 16 South African Journal on Human Rights 206, 250. 169 See eg Government of the Republic of South Africa and Others v Grootboom and Others, (2000) 11 Butterworths Constitutional Law Reports 1169 (CC), 1188; Minister of Health v ­Treatment Action Campaign (2002) 10 Butterworths Constitutional Law Reports 1033 (CC), 1045.

126  Protection of ESC Rights and the Right to Water Accordingly, the State has to take every possible measure within its power to put an end to such c­ onditions’.170 As advanced by Müller, in order to overcome the criticism of disparity in resources between developed and developing states, it seems reasonable to require state parties to identify a national minimum core of the right in accordance with their available resources (ie, a pragmatic minimum threshold which can be achieved immediately), which has to be informed by an international minimum core (in order to avoid an arbitrary ‘race to the bottom’ on the part of the states).171 In the form outlined above, the minimum core approach can be defined as ‘the baseline from which the progressive realisation of the right to water has to start … the floor below which the realisation of a human right must not fall’.172 In defining the minimum core more specifically, some authors have proposed the prioritisation of survival interests,173 whilst others have argued that a focus on mere survival would lead to an understanding of the core that is too narrow.174 As outlined in the section on the legal foundations of the right, for the purpose of this work I adopt the widely-accepted view that the human right to water is a component of the right to an adequate standard of living, and that to a certain degree it is also guaranteed under the rights to health and life. As such, it is considered as stretching beyond survival interests: more specifically, it covers access and use of water for the satisfaction of basic human needs which include, for instance, personal hygiene and the safe preparation of food, both necessary for the protection of human health.175 This multi-purpose dimension of water as a primary resource needs to be considered when ascertaining the core content of the right to water which, throughout this work, is understood as related to minimum levels not only of human survival but also of human dignity.176 In the next section, following a structure similar to the one adopted by Winkler, I outline the core content of the right to water by analysing the elements constituting its normative content, ie, availability, accessibility, acceptability and quality. The normative content of the right, as it becomes apparent in the following investigation, includes both core elements, subject to obligations of immediate effect, and non-core elements to be realised progressively.

170 Winkler (n 5) 123. 171 A Müller, The Relationship between Economic, Social and Cultural Rights and International Humanitarian Law: An Analysis of Health Related Issues in International Humanitarian Law (Leiden, Martinus Nijhoff, 2013) 83–86 and 88–96. 172 Chapman and Russell (n 159) 9. Similarly, full realisation of the right can therefore be understood as the ‘ceiling’. 173 D Bilchitz, ‘Giving Socio-Economic Rights Teeth: The Minimum Core and Its Importance’ (2002) 119 South African Law Journal 484, 493. 174 F Coomans, ‘In Search of the Core Content of the Right to Education’ in Chapman and Russell (n 159). 175 Winkler (n 5) 121. 176 Winkler (n 5) 121.

Availability, Accessibility, Acceptability and Quality  127 V.  AVAILABILITY, ACCESSIBILITY, ACCEPTABILITY AND QUALITY

In more recent general comments the CESCR has adopted a now widely used analytical framework which refers to four constitutive elements of each ESC right, indicating its normative content: availability, accessibility, acceptability and quality – a framework that has become known as the AAAQ framework.177 In General Comment 15 the CESCR emphasises the normative force of these elements, linking them to Articles 11 and 12 ICESCR, and explaining how they underpin the basic right to water, entitling ‘everyone to sufficient, safe, acceptable, physically accessible and affordable water for personal and domestic use’.178 According to the CESCR, the AAAQ can be used to evaluate whether the steps undertaken by state parties are adequate. If coupled with the minimum core approach, it is certainly useful in clarifying the steps that state parties should be taking, immediately and progressively, for the implementation of ESC rights, including in armed conflict situations. Under the element of availability, state parties are required to ensure that water is available in sufficient quantities.179 But what does this obligation actually entail in practice? As discussed above when examining the minimum core approach, the minimum threshold of the right will have to be established by each state on the basis of the resources available to it by also taking into account the internationally-defined minimum core, ie, sufficient quantities for survival and for a life in dignity. For the sake of clarity, two elements of this requirement need to be further spelt out: first, which water uses are deemed necessary for survival and to lead a dignified life; and second, in what quantity is water needed to satisfy these uses? Water uses pertaining to the right to water are those related to the attainment of an adequate standard of living, ie, for personal and domestic use: primarily for the purpose of drinking as well as for personal and domestic hygiene – these will, of course, vary depending on the personal (eg,  religious and cultural) context.180 Access to water for sanitation and irrigation purposes, although often referred to as related to the right to water, should be framed under the right to sanitation and the right to food.181 When ascertaining the water uses the focus of the analysis should be on the purpose of the water use, rather than on whether water is needed or not for a certain activity. Hence, as confirmed by the CESCR, under the right to water ‘priority in the allocation of water must be given to the right to water for personal and domestic uses’.182



177 Müller

(n 171) 102–06. General Comment 15 (n 32) para 2. 179 ibid para 12(a). 180 Winkler (n 5) 126–27. 181 ibid 127–31. 182 CESCR, General Comment 15 (n 32) para 6. 178 CESCR,

128  Protection of ESC Rights and the Right to Water The quantity of water to be guaranteed for personal and domestic needs will vary depending on individual circumstances, however general approximations have been made:183 20 to 25 litres of water per capita per day (20–25 l/c/d)184 are often referred to as the very minimum amount necessary to satisfy the most basic human needs for personal and domestic purposes, which are sufficient to ensure basic human needs, including personal hygiene, food preparation, cooking, cleaning.185 However, the World Health Organization (WHO) has indicated that 50/l/c/d would be necessary to meet most basic hygiene and consumption needs, such as for personal and household hygiene, food preparation and clothes washing. Although contextualisation of any specific individual’s need remains of the utmost importance,186 this seems to generally represent the core content of the right to water. The WHO has also indicated that an optimal quantity for all household needs would average 100 l/c/d.187 The full achievement of the right to an adequate standard of living would therefore probably be in the range of this latter figure, although a contextual analysis would still be necessary. The above amounts were one of the two key questions raised in the South ­African case of Lindiwe Mazibuko and Others v City of Johannesburg and Others (Mazibuko).188 At first instance the High Court found that the City of Johannesburg was under an obligation to provide more than the minimum 25 l/c/d (legitimately established in the relevant regulation) if residents’ needs so required and the City had the resources to do so.189 It also ordered that the City of Johannesburg was to provide 50 l/c/d of free basic water to the applicants and ‘similarly placed’ residents of the area.190 The Supreme Court of Appeal held,191 instead, that 42 l/c/d of free basic water would be ‘sufficient water’ within the meaning of the constitutional guarantees. Accordingly, it directed

183 Winkler (n 5) 131. 184 ibid 132. 185 The minimum amount of water for drinking purposes is usually considered to be between 2 and 4.5 l/c/d, depending on climatic conditions, diet, etc. See G Howard and J Bartram, Domestic Water Quantity, Service Level and Health (Geneva, WHO, 2003) 7; P Gleick, ‘Basic Water Requirements for Human Activities: Meeting Basic Needs’ (1996) 21 Water International 83, 84. 186 P Parmar, ‘Revisiting the Human Right to Water’ (2008) 28 Australian Feminist Law Journal 77, 88. 187 Winkler (n 5) 133–34. Interestingly, this figure is still lower than the average water use in most Western countries. 188 Lindiwe Mazibuko and Others v The City of Johannesburg and Others, 30 April 2008 ZAGPHC 106 (HC) at. One of the key questions related to the installation of pre-paid water meters in order to charge users for water in excess of the free basic allowance. The other questions related to whether the free amount provided by the City of Johannesburg was in breach of the right to access sufficient water protected under section 27 of the South African Constitution. 189 ibid paras 126 and 179. 190 ibid paras 181ff. 191 City of Johannesburg and Others v Mazibuko and Others (489/08) [2009] ZASCA 20 (25 March 2009). For an insightful commentary, see generally J Dugard and S Liebenberg, ‘Muddying the Waters: The Supreme Court of Appeals’ Judgment in the Mazibuko Case’ (2009) 10(2) Economic and Social Rights Review 11.

Availability, Accessibility, Acceptability and Quality  129 the City of Johannesburg to revise its water policy so as to provide this amount. Although it allowed the local authorities two years to implement this change, it also established that residents registered as ‘indigent’ should be immediately supplied with the established 42 l/c/d.192 In October 2009, however, the South African Constitutional Court, following its reasoning in other cases,193 unanimously overturned the Court of Appeal’s judgment and refused to quantify the content of the right to access sufficient water, guaranteed in the South African Constitution, stating that ordinarily it is institutionally inappropriate for a court to determine precisely what the achievement of any particular social and economic right entails and what steps government should take to ensure the progressive realisation of the right. This is a matter, in the first place, for the legislature and executive, the institutions of government best placed to investigate social conditions in the light of available budgets and to determine what targets are achievable in relation to social and economic rights. Indeed, it is desirable as a matter of democratic accountability that they should do so for it is their programme and promises that are subjected to democratic popular choice.194

It confirmed, moreover, that the policy adopted by the City of Johannesburg (including provision of 25 l/c/d) was within the bounds of reasonableness and therefore not in breach of the right to access sufficient water.195 The South African Constitutional Court’s decision has been widely criticised as a failure to ‘give meaning’196 to the right of access to sufficient water as protected in section 27 of the South African Constitution, and for its deferential approach towards the executive in overemphasising the concept of ­reasonableness.197 Stewart, for instance, argues that – rather than prescribing the measures that a state party should adopt or the quantities that it should provide at any given time like the courts at first and second instance – the Constitutional Court should have formulated an invariable universal standard.198 As she further explains: [d]escribing the right as nothing less than a right of access to that quantity of water that is required for dignified human existence is a normative standard that still allows 192 ibid paras 4 and 46. 193 See Grootboom (n 169) para 37, in relation to the right to housing: ‘The State’s obligation to provide access to adequate housing depend on context, and may differ from province to province, from city to city, from rural to urban areas and from person to person. Some may need access to land and no more; some may need access to land and building materials; some may need access to finance; some may need access to services such as water, sewage, electricity and roads. What might be appropriate in a rural area where people live together in communities engaging in subsistence farming may not be appropriate in an urban area where people are looking for employment and a place to live’. Similarly, see also Treatment Action Campaign No 2 (n 15) paras 38, 114–115, 135. 194 Mazibuko and Others v City of Johannesburg and Others (CTT 39/09) [2009] ZAC 28, para 61. 195 ibid para 55. 196 S Liebenberg, ‘Water Rights Reduced to a Trickle’ (2009) Legal Brief, at www.legalbrief.co.za. 197 ibid. 198 L Stewart, ‘Adjudicating Socio-Economic Rights Under a Transformative Constitution’ (2010) 28 Penn State International Law Review 487, 509.

130  Protection of ESC Rights and the Right to Water for context sensitive matters. It furthermore makes provision for an approach which could allow that poor, marginalized and specific vulnerable people in urban areas which are dependent on waterborne sanitation may possibly need more water than people in rural areas.199

Dugard and Langford, however, claim that ‘there have been important direct and indirect gains from the litigation process’200 related to the Mazibuko case. In particular they refer, and I agree with them, to the key role of public interest litigation and the way in which the law can act as a platform, in the hands of communities, social movements and groups other than lawyers, to politicise key issues and thus constitute ‘politics by other means’.201 Rather than focusing on the single judicial outcome of a case, therefore, it is important to consider its wider public interest impact, especially in terms of mobilisation, as well as its political and politicising role.202 Adopting the term ‘enabling impacts’ of litigation, Dugard and Lanford pinpoint empowering effects in terms of ‘changes in socio-political assets (resources available for social groups) that have the potential to contribute to political and, ultimately, structural change by providing greater leverage in civil society’s engagement with the state (or even private power)’.203 This approach enables an analysis of ESC rights violations which is not void of an understanding of how power informs and influences such violations, and at the same time also the solutions often identified to address them. It is an approach to which I return in the concluding chapter. Returning to our analysis of the AAAQ framework, we can see that under the element of accessibility, the CESCR has addressed issues of non-­ discrimination,204 physical accessibility (being ‘within safe physical reach’ and ‘within or in the immediate vicinity’ of households, schools, etc),205 economic accessibility (affordability for all),206 and information accessibility (a more procedural aspect of the right, linked to transparency and the issue of participation in the decision-making processes related to water resources, for instance on matters of construction of new infrastructures or allocation). In terms of physical accessibility there are broad guidelines, subject to the usual contextualisation requirements, according to which basic or reasonable access cannot exceed a distance of 1,000 metres from the point of access207 and collection waiting-times should not exceed 30 minutes. Reduction in distance and

199 ibid. 200 Dugard and Langford (n 100) 42. 201 ibid 55. See also their reference to RA Abel, Politics by Other Means: Law in the Struggle Against Apartheid, 1980–1994 (After the Law) (Abingdon, Routledge, 1995). 202 Dugard and Langford (n 100) 56. 203 Ibid. 204 CESCR, General Comment 20 (n 137). 205 CESCR, General Comment 15 (n 32) para 12©(i). See also Winkler (n 5) 135. 206 CESCR, General Comment 15 (n 32) para 12(c)(ii). See also the High Court decision in the Mazibuko case (n 191) para 36. 207 Howard and Bartram (n 185) 22.

Availability, Accessibility, Acceptability and Quality  131 waiting times also contributes, of course, to the security of the individuals who collect the water, traditionally women and children.208 In relation to economic accessibility, it is important to note that the core content of the right to water does not equate affordability with free water services: affordability is usually discussed through rough estimates in terms of percentages of household income and the agreed water affordability figure amounts to three to five per cent of a household income. However, for individuals living in poverty, these estimates are devoid of any meaning and state intervention is needed in order to ensure economic accessibility. The core content of the right requires that state parties ensure that the water amounts necessary for personal and household needs are affordable for all, bearing in mind that this might result in having to provide water, through subsidies or other measures, for those who live in poverty and would be otherwise unable to access water. The final two elements in the framework – acceptability and quality – tend to overlap with each other and are often considered interchangeable. Acceptability and quality refer to various characteristics that water should have: on the one hand, it should be safe, as it should not represent a threat to human health. Water can in fact naturally contain high levels of chemicals dangerous to human health (eg, arsenic and fluoride), whereas contaminated water can be a vehicle for infectious diseases, and polluted water may transport lethal chemicals. The CESCR refers to ‘safe and potable water’209 when stating that the goods and services offered must be ‘scientifically and medically appropriate and of good quality’.210 In General Comment 15 it reiterates the need to protect water sources from pollution, ensuring that ‘the right can be realized for present and future generations’.211 Similarly, in General Comment 14 it confirms that state obligations in relation to Article 12 ICESCR entail a duty to refrain from polluting water, as well as a duty to take positive action to implement national policies aimed at reducing, eliminating and preventing pollution,212 and at prioritising ‘the distribution and management of safe and potable water to the most vulnerable or marginalized groups of the population’.213 General Comment 15 refers once again to the guidelines issued by the WHO,214 according to which drinking water can be considered safe when it ‘does not represent any significant risk to health over a lifetime of consumption, including different sensitivities that

208 UNHCHR Report (n 23) para 25. 209 CESCR, General Comment 14 (n 41) para 11(d). 210 ibid. 211 CESCR, General Comment 15 (n 32) para 11. It is interesting to note that Alan Boyle makes reference to ‘the greening of existing human rights law’ when he describes this approach to take into consideration the interests of future generations as part of the relationship between human rights and the environment. A Boyle, ‘Human Rights and the Environment: Where Next?’ (2012) 23(3) European Journal of International Law 613, 614–16. 212 CESCR, GC 14 (n 33) paras 36 and 51. 213 CESCR, GC 14 (n 33) para 40. 214 WHO, Guidelines for Drinking-Water Quality (Geneva, WHO, 1993).

132  Protection of ESC Rights and the Right to Water may occur between life stages’.215 Based on the above, the minimum core of the right to water requires that water be sufficiently safe to prevent threats to human health. Non-core elements of the right require that the colour, taste and odour of the water provided for personal and domestic use also meet the acceptability criterion, in order to avoid confusion with sources of contaminated water with similar characteristics and that are unsafe to human health.216 Sigrun Skogly has advanced an interesting argument wherein she links the element of quality with the state’s obligation to use maximum available resources for the full realisation of ESC rights.217 She argues that so far attention has almost exclusively been devoted to the financial and budgetary aspects of resources, with very little focus on other resources potentially available to the state, both nationally and internationally, and to the qualitative use of the resources already allocated to the realisation of ESC rights. This different approach enables an alternative discussion on the concept of maximum available resources as well as an in-depth analysis of states’ extraterritorial obligations in relation to ESC rights. The remainder of the chapter focuses on these crucial topics, and concludes with a brief discussion on whether states can limit the obligations imposed by the right to water in a conflict context. VI.  MAXIMUM AVAILABLE RESOURCES

The concept of ‘maximum available resources’ relates to the obligation to take steps towards the fulfilment of both minimum core and non-core obligations flowing from ESC rights. In this part I focus on the content of this concept, by first examining whether it includes a qualitative requirement to effectively use such resources; and second by analysing the scope of the obligation to seek international assistance and cooperation, in order to clarify the extent of states’ ETO obligations, if any. As it emerges from the travaux preparatoires of Article 2(1) ICESCR,218 the intention of state parties was from the outset to interpret the term ‘resources’ broadly, rather than limiting it to financial resources. The Limburg Principles, already mentioned above, first advanced the idea that, in order to ascertain whether the measures adopted by the state towards the realisation of ESC rights were adequate, it was necessary to consider the ‘equitable and effective use of and access to the available resources’.219 One year later, the then Special

215 ibid 1. See also Winkler (n 5) 134–35. 216 CESCR, General Comment 15 (n 32) para 12(c)(i). See also A Hardberger, ‘Life, Liberty, and the Pursuit of Water: Evaluating Water as a Human Right and the Duties and Obligations it Creates’ (2005) 4 Northwestern Journal of International Human Rights 331, 360. 217 Skogly (n 129). 218 14 May 1952, E/CN.4/SR/271. 219 Limburg Principles (n 158) Principle 27.

Maximum Available Resources  133 Rapporteur on the right to food, Asbjørn Eide, also interpreted the concept of available resources in a broad manner: he focused on a people’s ability to control its own destiny by being able ‘to utilize its resources for its own purposes; this includes national jurisdiction over economic activities and wealth’.220 Thus, it seems to be uncontroversial221 that when considering resources available to the state for the full realisation of ESC rights it is not only financial resources that should be considered, but also natural, human, organisational and other resources.222 In interpreting maximum available resources, Skogly223 returns to the concept of ‘all appropriate means, including particularly the adoption of legislative measures’ under Article 2(1) ICESCR. Skogly follows the approach of the CESCR224 and of the Limburg Principles225 in interpreting the term ‘means’ as referring to resources which are not only financial, but also, for instance, judicial, administrative, educational and social. She submits that a focus on improving the quality of the resources already available to the state as well as the means of implementation of such resources would go a long way in the actual realisation of ESC rights.226 Crucially, the effective mobilisation of available resources has become the focus of recent interpretations of the content of maximum available resources. Already in 2000 Asbjørn Eide had argued that ‘[t]he obligation of progressive achievement does not only refer to an increase in resources, but even more to an increasingly effective use of the resources available, which must be optimally prioritized to fulfil the rights listed in the Covenant’.227 More recently, Balakrishnan et al have embraced and further elaborated Eide’s approach.228 More specifically, they have challenged the traditional ways in which state parties are expected to mobilise available resources, and have argued that the concept of resources availability for the realisation of ESC rights includes government

220 UN Commission on Human Rights, Sub-Commission on the Prevention of Discrimination and Protection of Minorities, ‘The Right to Adequate Food as a Human Right’, a report by Special Rapporteur, Asbjørn Eide (7 July 1987) UN Doc E/CN.4/Sub2/1987/23, para 197. 221 M Sepúlveda ‘Obligations of “International Assistance and Cooperation” in an Optional Protocol to the International Covenant on Economic, Social and Cultural Rights’ (2006) 24 Netherlands Quarterly of Human Rights 271, 290. See also generally M Salomon, Global Responsibility for Human Rights: World Poverty and the Development of International Law (Oxford, Oxford University Press, 2007); M Sepúlveda ‘The Obligations of ‘‘International Assistance and Cooperation’’ under the International Covenant on Economic, Social and Cultural Rights’ (2009) 13 The International Journal of Human Rights 86. 222 G Van Bueren, ‘Alleviating Poverty through the Constitutional Court’ (1999) 15 South African Journal of Human Rights 52, 61–62. 223 Skogly (n 129) 404–20. 224 ibid 405. See also CESCR, General Comment 3 (n 92) para 7; CESCR, Statement of 2007 (n 144). 225 Limburg Principles (n 158) principle 17: ‘At the national level States Parties shall use all appropriate means, including legislative, administrative, judicial, economic, social and educational measures, consistent with the nature of the rights in order to fulfil their obligations under the Covenant.’ 226 Skogly (n 129) 405. 227 A Eide, ‘Economic and Social Rights’ in J Symonides, Human Rights: Concept and Standards (Paris, UNESCO, 2000) 126. 228 Balakrishnan et al (n 133).

134  Protection of ESC Rights and the Right to Water ‘expenditure reprioritization and efficiency; domestic resource mobilization through taxation and other revenue raising measure; foreign aid grants (Official Development Assistance); and deficit financing. In addition, we add monetary space which depends on central bank policies’.229 This elaboration of maximum available resources is also, directly or indirectly, reflected in the work of the CESCR,230 of the Special Rapporteur231 and of other Special Procedures.232 Skogly, although not directly referring to Balakrishnan’s approach, also looks at the way in which state parties utilise their domestically-available natural resources, accessible for instance through extractive activities. Skogly contends that the revenue resulting from adequate exploitation of these natural resources can contribute significantly to the realisation of ESC rights.233 If we apply this reasoning to the situation of Afghanistan, we see that the Afghan government should take into consideration these natural resources and the way in which it operates itself to effectively utilise them when calculating the resources available for the realisation of ESC rights, including the right to water. This includes the efforts made by the state to maximise revenues resulting from natural resources exploration and exploitation. From a financial point of view, Afghanistan must ensure that, when concessions for natural resources extraction are granted to corporate actors, they do not exclude the applicability of taxation measures to obtain revenue that should then be redistributed for, inter alia, the realisation of human rights,234 including the right to water. From the point of view of non-financial measures, the Afghan government should introduce appropriate regulations (eg, human rights and environmental) to ensure that the activities of these companies do not adversely impact on the enjoyment of ESC rights. This would help to ensure that the current quality of available water resources does not deteriorate and that the right to access safe water for personal and domestic use is protected. 229 ibid 4. 230 The CESCR, in fact, in assessing government’s use of its maximum available resources, has compared the expenditures allocated to the realisation of ESC rights to those for other areas; it has compared the approaches by countries at a comparable level of development; and it has used international indicators. See ibid 2–3. 231 See UN Human Rights Council, ‘Report of the Independent Expert on the Human Right to Safe Drinking Water and Sanitation’ (4 July 2011) UN Doc A/HRC/18/33 paras 34–35, where she focuses on national and local planning for the implementation of the right to water. See also generally UN Human Rights Council, ‘Report of the Independent Expert on the Human Right to Safe Drinking Water and Sanitation: Report of the Secretary-General’ (3 August 2011) UN Doc A/66/255 where she focuses on the various sources of financing the fulfilment of the right to water; and (n 55) 25–50. 232 See, eg, Danilo Türk, former Special Rapporteur on the Realization of Economic, Social and Cultural Rights, and Olivier De Schutter, Special Rapporteur on the Right to Food, on the use of taxation in fulfilling the obligation of maximum available resources. D Türk, ‘The Realization of Economic, Social and Cultural Rights: Final Report’ (3 July 1992) UN Doc E/CN.4/Sub.2/1992/16 paras 78, 83, 97, 157–59, and 227; O De Schutter, ‘Mission to Brazil’ (19 February 2009) UN Doc A/HRC/13/33/Add.6 para 36. 233 Skogly (n 129) 405. 234 See generally L Cotula, Foreign Investment, Law and Sustainable Development: A Handbook on Agriculture and Extractive Industries 2nd edn (London, IIED, 2016).

International Assistance and Cooperation  135 When looking at the scope of the term ‘maximum available resources’, reference is also often made to internationally available resources. This is because various provisions in the ICESCR235 as well as in the CRC236 expressly refer to the concept of ‘international assistance and cooperation’ as a way of realising ESC rights. This concept, next to the exercise of control, has moreover been considered one of the bases for ETOs under the ICESCR,237 as further outlined in part VII below and in chapter five. VII.  INTERNATIONAL ASSISTANCE AND COOPERATION AS A BASIS FOR EXTRATERRITORIAL OBLIGATIONS

As observed by Gondek in his analysis of the status of ETOs under international law, the idea of international cooperation for the realisation of human rights was expressed for the first time in the Charter of the United Nations (UN Charter).238 Article 1(3) of the Charter lists amongst the purposes of the United Nations (UN) the achievement of international cooperation for the promotion of human rights and fundamental freedoms. In Article 56, states pledge ‘to take joint and separate action in cooperation with the ­Organization’239 to achieve the purposes of Article 55 of the Charter, which include the promotion of, inter alia, higher standards of living and universal respect for, and observance of, human rights and fundamental freedoms for all.240 The limited obligations of cooperation contained in Articles 55 and 56 UN Charter have been expanded in the International Bill of Human Rights, as well as by various other soft law instruments.241 Crucially, in these instruments the meaning of cooperation goes beyond development aid, and includes cooperation to address situations of deprivation and denial of ESC rights,242 as provided in Articles 22 and 28 of the Universal Declaration of Human Rights (UDHR).243 Article 22 UDHR establishes that Everyone, as a member of society, has the right to social security and is entitled to realization, through national effort and international co-operation and in a­ ccordance with the organization and resources of each State, of the economic, social and cultural rights indispensable for his dignity and the free development of his personality. 235 Arts 2(1), 11, 15, 22 and 23 ICESCR. 236 Arts 4, 7(2), 11(2), 17(b), 21(e), 22(2), 23(4), 27(4), 28(8), 34, 35 and 45 CRC. 237 The first basis for extraterritorial obligations under the ICESCR is the exercise of control by a state. See M Gondek, The Reach of Human Rights in a Globalizing World: Extraterritorial Application of Human Rights Treaties (Antwerp, Intersentia, 2009) 304–16 and O De Schutter et al, ‘Commentary to the Maastricht Principles on Extra-Territorial Obligations of States in the Area of Economic, Social and Cultural Rights’ (2012) 34 Human Rights Quarterly 1084, Principle 9. 238 Charter of the United Nations (n 44) Art 56. 239 ibid. 240 ibid, Art 55. 241 See Gondek (n 237) 318. 242 ibid 320. 243 UDHR (n 45).

136  Protection of ESC Rights and the Right to Water Under Article 28 UDHR everyone is entitled to ‘a social and international order in which the rights and freedoms set forth in [the] Declaration can be fully realized’. These two articles, read in combination with each other, embody the intentions of states to grant special attention and cooperation to the realisation of ESC rights, following the grave economic crisis of the 1930s.244 Under A ­ rticle 28 UDHR, in particular, states express the need for cooperation to establish an enabling environment, suitable for the realisation of all human rights.245 Various international declarations, documents and resolutions have since elaborated on the provisions of the UN Charter and UDHR – amongst them, the 1986 Declaration on the Right to Development,246 the 1993 Vienna Declaration and Programme of Action247 and the Millennium Declaration.248 In the latter, states have recognised ‘a collective responsibility to uphold the principles of human dignity, equality and equity at the global level’.249 Although it can be argued that the above declarations represent evidence of state practice,250 recent negotiations of the Optional Protocol to the ICESCR demonstrate a continued divide between the position of developing states, which tend to support the concept of international assistance and cooperation, and developed states which tend to remain cautious or oppose the concept ­altogether.251 Yet these divisions do not reflect the approach of the CESCR’s general comments, where the treaty body clarifies that available resources include both resources available nationally and through the international community.252 The CESCR also considers international assistance and cooperation, especially economic and technical,253 to be an obligation of all states, ‘particularly incumbent on those States which are in a position to assist others in this regard’.254 The Committee on the Rights of the Child supports this interpretation by holding that states need to be able to demonstrate that, where necessary, they have sought international cooperation for the implementation of the CRC.255 In the

244 J Morsink, The Universal Declaration of Human Rights: Origins, Drafting, and Intent ­(Philadelphia PA, University of Pennsylvania Press, 2000) 83–85 and 228–30. 245 Eide (n 87) 597. 246 UNGA Resolution 41/128 (4 December 1986) UN Doc A/RES/41/128. 247 UN General Assembly, ‘Vienna Declaration and Programme of Action’ (12 July 1993) UN Doc A.CONF.157/23. 248 UN General Assembly, ‘United Nations Millennium Declaration’ (18 September 2000) UN Doc A/RES/55/49. 249 ibid, para 2. 250 A Khalfan, ‘Development Cooperation and Extraterritorial Obligations’ in M Langford and A Russell (eds), The Right to Water: Theory, Practice and Prospects (Cambridge, Cambridge University Press, 2012). 251 Gondek (n 237) 328–33. 252 CESCR, General Comment 3 (n 92) para 13. For a more recent confirmation of this approach, see generally CESCR, Statement of 2007 (n 93). 253 CESCR, General Comment 3 (n 92) paras 13–14. 254 ibid para 14. 255 CRC, ‘General Comment No 5: General measures of implementation of the Convention on the Rights of the Child (arts 4, 42 and 44(6))’ (27 November 2003) UN Doc CRC/GC/2003/5, para 21.

International Assistance and Cooperation  137 view of the Committee, by ratifying the CRC, states have undertaken ‘not only to implement it within their jurisdiction, but also to contribute, through international cooperation, to global implementation’.256 Interestingly in General Comment 15 the CESCR also examines the extraterritorial role of state parties in relation to corporate actors and it establishes that state parties should take steps to prevent their own citizens and companies from violating the right to water of individuals and communities in other countries. Where State parties can take steps to influence other third parties to respect the right, through legal or political means, such steps should be taken in accordance with the Charter of the United Nations and applicable international law.257

Similarly, the CESCR concluded that due attention should be given to the right to water when states enter into international agreement, in order ‘to ensure that these instruments do not adversely impact upon the right to water. Agreements concerning trade liberalization should not curtail or inhibit a country’s capacity to ensure the full realization of the right to water’.258 As discussed earlier in this chapter, this conclusion was reiterated in General Comment 24, where the CESCR identified human rights impact assessments of IIA as a crucial tool to ‘take into account both the positive and negative human rights impacts of trade and investment treaties, including the contribution of such treaties to the realization of the right to development’.259 As mentioned above, whilst these assessments might be useful to refuse entering into IIA altogether, all too often they shift the debate to procedural fixes – for instance by favouring strategic IIA drafting rather than challenging the constitutive political economy dimension of IIA and of the reasons why they affect human rights in the way they do (see chapter four). The CESCR was also supportive of enhancing human rights protection through IIA design in General Comment 24 where, as discussed in chapter five, it assumed that human rights-compliant interpretation of IIA in international investment adjudication will automatically flow from the insertion in IIA of provisions ‘explicitly referring to their human rights obligations’.260 Such a focus on international investment agreements (IIA) in the work of the CESCR is unprecedented and certainly to be welcomed in that it provides a necessary recognition of the negative impacts of investment agreements.261 256 ibid para 5. 257 CESCR, General Comment 15 (n 32) para 33. 258 ibid para 35. 259 ibid para 13. 260 ibid. 261 ibid para 29, where the CESCR conceptualises the extraterritorial obligation to respect as requiring states ‘to refrain from interfering directly or indirectly with the enjoyment of the Covenant rights by persons outside their territories. As part of that obligation, States parties must ensure that they do not obstruct another State from complying with its obligations under the Covenant. This duty is particularly relevant to the negotiation and conclusion of trade and investment agreements or of financial and tax treaties, as well as to judicial cooperation’ (emphasis added).

138  Protection of ESC Rights and the Right to Water Undoubtedly, this emphasis reflects the growing body of literature on the intersection between IIL and IHRL. By insisting on the fact that standards of investment protection should be interpreted in such a way as to ‘take into account’ the human rights obligations of the state, however, the CESCR prioritises procedural fixes (as further discussed in chapter five), whilst failing to identify and denounce the inappropriateness of investor-state arbitration as a forum capable of reviewing policies adopted by a state in order to protect human rights and, as in the case of the right to water, access to and enjoyment of a public good. Similarly, by encouraging the insertion of explicit human rights provisions in trade and investment, it attempts to create space for an ideal ‘balancing’ in future interpretation in investor-state arbitration, without examining the risks of leaving the adjudication of human rights issues at the expanding discretion of international investment tribunals.262 For the purposes of this book, it is important to note that the work of the CESCR and its conceptualisation of international assistance and cooperation has been influenced by the Limburg Principles (especially Principles 29–34) which support the view of an international obligation of assistance and cooperation under Article 2(1) ICESCR.263 Elsewhere,264 however, although there is a certain level of agreement on the fact that, when faced by resource constraints for the implementation of ESC rights, state parties are required to seek international assistance and cooperation, there are differing views on the existence of a corresponding duty upon other states and/or international organisations to provide such assistance and cooperation.265 Concerted efforts have however been made since at least 2011 to strengthen the implementation of the obligations. In particular, on 28 September 2011 a group of 40 international law experts adopted the Maastricht Principles on Extra-Territorial Obligations of States in the area of Economic, Social and Cultural Rights266 (Maastricht Principles or Principles) as a result of five years of consultations and research. Although the Principles are of course not binding in nature, they represent significant expert interpretations of international law in this area, and as such they can be of guidance in outlining the content of states’ ETO in relation to ESC rights. They aim at complementing both the Limburg Principles and the Maastricht Guidelines on Violations of Economic, Social and Cultural Rights,267 and they are helpful in outlining the scope of obligations of international cooperation. In identifying the meaning of ETOs, the Principles state that ‘States must desist

262 For a more in-depth analysis of both points, see chs 4 and 5. 263 Limburg Principles (n 158). 264 Sepulveda (n 167) 290. 265 See eg M Sandvik-Nylund, Caught in Conflict: Civilian Victims, Humanitarian Assistance and International Law (Turku, Abo Akademi Institute for Human Rights, 2003) 83. 266 Maastricht Principles (n 237) 267 Maastricht Guidelines (n 92).

International Assistance and Cooperation  139 from acts and omissions that create a real risk of nullifying or impairing the enjoyment of economic, social and cultural rights extraterritorially’.268 In relation to the obligation to provide international assistance and cooperation, the Principles clarify that states which are in a position to assist/ cooperate ‘must consider the request in good faith, and respond in a manner consistent with their obligations to fulfil economic, social and cultural rights extraterritorially’.269 The Principles further elaborate on the scope of such ETOs along the tripartite typology ‘respect, protect and fulfil’. Under the obligation to respect270 states are under the obligation ‘to refrain from conduct which nullifies or impairs the enjoyment and exercise of economic, social and cultural rights of persons outside their territories’.271 Similarly, they should not interfere with the ability of another state or international organisation to meet its obligations under the Covenant.272 Under the obligation to protect, states must ensure that ESC rights are not impaired by non-state actors. This obligation has been further sub-divided into an obligation to regulate, influence and cooperate: at a minimum states should influence the conduct of non-state actors, whenever they are in a position to do so, even when they are not in a position to regulate their conduct.273 This recognises the strength of political lobbying and diplomacy, and any other activity which goes beyond the exercise of extraterritorial prescriptive jurisdiction. According to a recent commentary on the Principles, influence ‘may include for instance various forms of reporting or social labelling, the use of indicators to monitor progress, the reliance on human rights-based conditions in public procurement schemes or export credit agencies, or fiscal incentives’.274 The obligation to regulate is limited to states that are in a position to impose such regulations on non-state actors,275 and is based on territory; nationality; registration/domicile and place of main business activity for companies; or because of a link between the state and the conduct by the third party that it seeks to regulate.276 Finally, all states are under an obligation to cooperate to ‘prevent human rights abuses by non-state actors, to hold them to account for any such abuses, and to ensure an effective remedy for those affected’.277 268 Maastricht Principles 13 (n 237). 269 ibid, principles 33–35. 270 ibid principle 19. 271 ibid principle 20. 272 ibid principle 21. 273 ibid principle 26. 274 Commentary to the Maastricht Principles (n 237) 40. Note how these principles interlink with the Guiding Principles on Business and Human Rights, in particular Guiding Principles 2, and 3–10: see ch 5 for further discussion. 275 ibid principle 24. 276 ibid principle 25. 277 ibid principle 27. As discussed in ch 5, this view is supported by the CESCR’s 2011 statement on business and ESC rights: see CESCR, ‘Statement on the Obligations of State Parties Regarding the Corporate Sector and Economic, Social and Cultural Rights’ (20 May 2011) UN Doc E/C.12/2011/1, para 5.

140  Protection of ESC Rights and the Right to Water Under the obligation to fulfil, Principle 29 expresses an obligation to take steps towards the creation of ‘an international enabling environment conducive to the universal fulfilment of economic, social and cultural rights, including in matters relating to bilateral and multilateral trade, investment, taxation, finance, environmental protection, and development cooperation’.278 A more in-depth analysis of the obligations fleshed out in this and other Principles is carried out in chapter five where I critically examine the UN Guiding Principles and the UN Framework on Business and Human Rights and discuss their operationalisation for the protection of investment and ESC rights (in particular the right to water) in situations of armed conflict. To conclude our discussion on the obligations flowing from the right to water, it is important to briefly consider whether and how states can limit the scope of such obligations, especially in conflict contexts. Article 4 ICESCR contains the general limitation clause of the treaty and as such, for the purposes of our discussion, it is worth a closer analysis below. VIII.  ON LIMITATIONS TO ESC RIGHTS

Whilst the CESCR has specifically stated that it considers the core elements of the right to water to be non-derogable279 at all times, it is in situations of emergencies such as economic crisis, natural disasters and, indeed, armed conflict that a state’s available resources and its ability to implement ESC rights are significantly affected. In such circumstances, therefore, it is important to identify clearly established criteria for the potential limitation of ESC rights. Article 4 ICESCR explicitly provides for the reasons and way in which limitations may be applied to ESC rights: ‘the State may subject such rights only to such limitations as are determined by law only in so far as this may be compatible with the nature of these rights and solely for the purpose of promoting the general welfare in a democratic society’. As evidenced by Müller’s study of the ICESCR drafting history,280 limitations for reasons of public order, public safety or public morals were clearly rejected by state representatives,281 and thus cannot be read into the meaning of ‘general welfare’. Similarly, the p ­ romotion of economic development and/or the allocation of government budget to defence and counterinsurgency operations in times of armed conflict cannot be read as equivalent to promoting ‘general welfare’,282 and state parties have the 278 Maastricht Principle 29 (n 237) emphasis added. 279 CESCR, General Comment 15 (n 32) para 40. 280 Müller (n 171). 281 Art 8 ICESCR, however, contains itself limitations to the right to strike and to the rights to form and join trade unions ‘in the interests of national security or public order or for the protection of the rights and freedoms of others’. 282 P Alston and G Quinn, ‘The Nature and Scope of State Parties’ Obligations under the International Covenant on Economic, Social and Cultural Rights’ (1987) 9 Human Rights Quarterly 156.

On Limitations to ESC Rights  141 burden to justify such measures in relation to each of the provisions enshrined in ­Article 4.283 Crucially, under Article 4, limitations of the minimum core of each right are also prohibited, as these would be incompatible with the nature of ESC rights.284 In the specific context of the right to water, this view is supported by the CESCR which in General Comment 15 clarifies for instance that ‘under no circumstances’ a person can be deprived of the ‘minimum essential level of water’.285 In the same General Comment, the CESCR identifies the following core obligations in relation to the right to water: (a) To ensure access to the minimum essential amount of water, that is sufficient and safe for personal and domestic use to prevent disease; (b) To ensure the right of access to water, and water facilities and services on a nondiscriminatory basis, especially for disadvantaged and marginalized groups; (c) To ensure physical access to water facilities or services that provide sufficient, safe and regular water, that have a sufficient number of water outlets to avoid prohibitive waiting times; and that are at a reasonable distance from the household; (d) To ensure personal security is not threatened when having to physically access water; (e) To ensure equitable distribution of all available water facilities and services; (f) To adopt and implement a national water strategy and plan of action addressing the whole population; … (g) To monitor the extent of the realization, or the non-realization, of the right to water; (h) To adopt relatively low-cost targeted water programmes to protect vulnerable and marginalized groups; (i) To take measures to prevent, treat and control diseases linked to water, in particular ensuring access to adequate sanitation.286

All of the above obligations are of immediate effect,287 and they all represent elements of the right to water that cannot be subject to limitations under Article 4 ICESCR. However, states may attempt to invoke resource constraints due to the war effort, thus resorting to Article 2(1) ICESCR which, as mentioned in section IV above, under certain unavoidable circumstances may enable a justification of retrogressive measures. In a statement on the drafting of the Optional Protocol, the CESCR seemed ‘ready to recognise that states facing See also Limburg Principles (n 158) para 52, where promoting general welfare is conceived of as ‘furthering the well-being of the people as a whole’. 283 See eg CESCR, General Comment 14 (n 41) para 28; and CRC, ‘General Comment No 13: The Right of the Child to Freedom From All Forms of Violence’ (18 April 2011) UN Doc CRC/C/GC/13, para 42. 284 See Müller (n 171), especially ch 5. 285 CESCR, General Comment 15 (n 32) para 56. See also CESCR, General Comment 14 (n 41) para 47. See discussion in this chapter on minimum water level. 286 CESCR, General Comment 15 (n 32) para 37. 287 ibid.

142  Protection of ESC Rights and the Right to Water armed conflicts can justify retrogressive measures resulting from the ­diversion of resources from the implementation of ESC rights to the fighting of an [international and non-international armed conflict]’.288 The general presumption that retrogressive measures are prohibited, however, remains applicable in conflict contexts and it is therefore highly unlikely that states will be able to base their justification for retrogressive measures solely on the existence of an armed conflict. They will still have to prove that all alternative options have been considered, including for instance low-cost options and international cooperation and assistance.289 Their responsibility for engendering and/or sustaining conflict will also be taken into consideration, not least because – as mentioned in chapter one – disregard and/or neglect of ESC rights often trigger divisions and grievances which fuel conflict.290 IX.  PRELIMINARY CONCLUSIONS

In this chapter I have focused on the controversial legal foundations of the right to water and on its normative content. In doing so, I have outlined the state parties’ obligations flowing from this right and examined in detail the meaning and scope of the obligations enshrined in Article 2(1) ICESCR, not least the notion of progressive realisation to the maximum of available resources, in light of the obligations of immediate effect by which state parties are also bound. Whilst exploring the scope of these obligations of immediate effect, I have focused in particular on the concept of minimum core obligations, in order to elucidate the normative content of the right to water. I have also taken into consideration relevant jurisprudence on the right to water from the South African context, which has highlighted the importance of the wider political and politicising force of public interest litigation, irrespective of the actual judicial outcome of a case. This point is relevant to our discussion on extractive sector investments in conflict countries such as Afghanistan, not least in light of the obligation of international assistance and cooperation, which I have considered in this chapter as an important entry point in clarifying home states’ extraterritorial obligations, further discussed in chapter five.

288 Müller (n 171). 289 CESCR, ‘Statement: An Evaluation of the Obligation to Take Steps to the “Maximum of Available Resources” under an Optional Protocol to the Covenant’ (10 May 2007) UN Doc E/C.12/2007/1, para 10. See also CESCR, General Comment 15 (n 32) para 19. 290 Müller (n 171). See also Müller’s argument that the concept of ‘general welfare’ enshrined in Art 4 ICESCR should be adopted by states to justify truly unavoidable retrogressive measure under Art 2(1).

4 Human Rights and Investment: Analysing the Relationship

I

n this chapter I explore in detail the nature of the intersection between international human rights law (IHRL) and international investment law (IIL) by analysing the two main macro-areas where the current relationship between these two branches of international law takes on a conflicting dimension. First I focus on the way in which investment obligations may directly or indirectly hinder a state’s ability to regulate, especially in areas related to the protection of human rights. I use the following four key arbitration awards to develop my argument. The Glamis1 award concerns the involvement of a foreign investor operating in the extractive sector. In relation to this specific award I examine the way in which fair and equitable treatment (FET) and protections against expropriation, two of the main investment standards outlined in chapter two, have developed to significantly impact on a state’s ability to fulfil its human rights obligations, and ultimately to adversely affect the lives of the local population. The other three awards (Suez Vivendi,2 AWG3 and Urbaser4) directly relate to, or have implications for, the right to water. The first two awards, Suez Vivendi and AWG, are analysed jointly, as they were also consolidated by two identically constituted investment tribunals.5 They outline the way in which access to water is impacted by the broadening interpretation of the FET standard through the doctrine of legitimate expectations. The analysis of the Urbaser award, on the other hand, is important because for the first time an international investment tribunal found that it had jurisdiction

1 Glamis Gold Ltd v United States of America, UNCITRAL, Award, NAFTA Arbitration Tribunal 8 June 2009, at http://italaw.com/sites/default/files/case-documents/ita0378.pdf. 2 Suez, Sociedad General de Aguas de Barcelona SA, and Vivendi Universal SA v The Argentine Republic, consolidated with AWG Group v The Argentine Republic, Decision on Liability (30 July 2010) ICSID Case No ARB/03/19. 3 ibid. 4 Urbaser SA and Consorcio de Aguas Bilbao Bizkaia, Bilbao Biskaia Ur Partzuergoa v Argentine Republic (8 December 2016) Award, ICSID Case No ARB/07/26. 5 Professor Salacuse, Professor Kaufmann-Kohler and Professor Nikken sat in both tribunals and issued their decision on liability on 30 July 2010. Contextually, Professor Nikken also issued its dissenting opinion, which I discuss in detail in chs 2 and 5.

144  Analysing the Relationship over a human rights counterclaim6 based on the right to water. In examining these four awards, I argue that a focus on counterclaims – or on other m ­ ethods of ‘harmonisation’ and rebalancing between IIL and IHRL – only serves the purpose of legitimising and self-preserving these bodies of international law, thus further entrenching the underlying ideological structures that enable and maintain them. These four awards, taken together, also demonstrate the extent to which certain IIL provisions significantly intersect with, and encroach upon, human rights protection in different ways and at different levels. They also enable an examination of the inherent limitations of these two bodies of international law, limitations which delineate themselves clearly at these points of intersection. Crucially, and as already discussed in chapter two, FET appears to be the key standard through which the protection of foreign investment is strengthened and developed by investment tribunals,7 despite a lack of consistency and coherence in their interpretive approaches. This lack of inherent determinacy of the IIL system has raised concerns amongst commentators, not least in relation to the systemic legitimacy of the IIL project.8 To these concerns is linked the second macro-area selected for my analysis, which is related to the current nature of investment treaty arbitration itself. I examine its origins and its procedures, in order to critically appraise its suitability to solve disputes pertaining to the public domain. I aim to demonstrate that, specifically because of the ideological foundations of IIL and of the private commercial law nature of the dispute settlement system on which investment treaty arbitration is originally based, there are inherent shortcomings which render it fundamentally unsuitable as a mechanism of adjudicative review in public law.9 These shortcomings not only have engendered well-founded criticism, but also spawned a series of suggestions on how to ensure that IIL regains its legitimacy.10 In the last part of this chapter, I engage with the most popular 6 Compare with Burlington Resources Inc v Republic of Ecuador (7 February 2017) ICISD Case No ARB/08/5, Decision on Ecuador’s Counterclaims, paras 60–62, where the tribunal’s jurisdiction in respect of Ecuador’s counterclaim was also recognised, but it was not challenged by the disputing parties, since it derived from an existing agreement between them, in which Burlington had agreed not to raise any jurisdictional objections. 7 See generally JE Alvarez et al (eds), The Evolving International Investment Regime: Expectations, Realities, Options (Oxford, Oxford University Press, 2011). 8 See eg various representative views in M Waibel et al (eds), The Backlash Against Investment Arbitration: Perceptions and Reality (The Hague, Kluwer Law International, 2010). See also M Howard, ‘Civil Society Perspectives: What Do Key Stakeholders Expect from the International Investment Regime?’ in Alvarez et al, ibid 22. 9 See generally the critique by G Van Harten, Investment Treaty Arbitration and Public Law (Oxford, Oxford University Press, 2007). See also J Paine, ‘On Investment Law and Questions of Change’ (2018) Journal of World Investment & Trade 173, 175 where Paine examines the way in which ‘arbitrators dominate the process of applying international investment norms to particular investor-state disputes, and determining whether changes in a host state’s regulatory system breach relevant investment norms’. 10 See eg SW Schill, ‘Enhancing International Investment Law’s Legitimacy: Conceptual and Methodological Foundations of a New Public Law Approach’ (2011) 52 Virginia Journal of International Law 57, 66 where Schill describes the issue of the erosion of host-states’ regulatory space

The Contours of a Troubled Relationship  145 of the suggestions put forward to reconcile existing tensions between IIL and IHRL, namely the repeated call for a balancing between ‘investors’ rights’ and human rights.11 After examining the ways in which this balancing exercise has been promoted, I discuss whether it is possible, or indeed desirable, to pursue such a balance. I.  THE CONTOURS OF A TROUBLED RELATIONSHIP

A.  Of Conflicting Laws: How States’ Obligations in International Investment Agreements Affect States’ Human Rights Obligations The steady increase in international investment agreements (IIAs) since the 1990s12 has generated an exponential rise in investor-state disputes, starting from 2000–01.13 Many of the cases considered by investment tribunals find themselves at the intersection between IIL and IHRL, as they are directly related to claims by foreign investors against host states for alleged breaches by the latter of their obligations under the relevant IIA (often a Bilateral Investment Treaty (BIT)),14 following their exercise of state powers to regulate in areas of wider public interest. At times, such regulations have been justified by the host state as aimed at human rights protection,15 ensuring for instance the supply due to their IIL obligations: ‘Host states are particularly concerned about a shrinking of domestic policy space occasioned by vague standards of investment protection, which are interpreted, partly in inconsistent ways, by international arbitrators who exercise significant interpretative powers over the content of investment treaty obligations, and who are de facto even able to restrict the policy choices made by democratically-elected legislators, without themselves enjoying a robust democratic mandate’. See also SW Schill, ‘Developing a Framework for the Legitimacy of International Arbitration’, in AJ  Van den Berg (ed), Legitimacy: Myths, Realities, Challenges (Alphen aan den Rijn, Wolters Kluwer, 2015) 789–827, adopting a comparative constitutional approach to justify the role of international arbitration as a system of global governance. 11 This chapter’s analysis of the legal relationship between these two legal branches of international law builds upon the understanding of the existing legal frameworks under IIL and IHRL, outlined in chs 2 and 3 respectively. 12 According to the United Nations Conference on Trade and Development (UNCTAD), the cumulative number of IIAs signed between 1980 and 2017 is 3,322 (2,946 BITs and 376 treaties with investment provisions) most of them belonging to first-generation IIAs (not including carve-outs for human rights and/or sustainable development). UNCTAD also noted that in 2017 ‘[f]or the first time, the number of effectively terminated IIAs (22) exceeded the number of newly concluded treaties (18) and the number of new treaties entering into force (15). However, the low number of IIAs concluded in 2017 does not necessarily translate into fewer treaty relationships among countries. Unlike BITs, a single regional IIA creates many treaty relationships, depending on the number of contracting parties’. See UNCTAD, World Investment Report 2018, Investment and New Industrial Policies (UNCTAD, 2018) 88–89. 13 By the end of 2017 the number of known investor-state disputes reached 855, with at least 65 new cases initiated pursuant to IIAs in 2017 alone, and 80 per cent of these new cases brought under BITs (mainly concluded in the 1980s and 1990s). See UNCTAD, ‘Investor-State Dispute Settlement: Review of Developments 2017’ (June 2018) 2 UNCTAD IIA Issue Note 1, 1. 14 UNCTAD (n 12). 15 B Simma, ‘Foreign Investment Arbitration: A Place for Human Rights?’ (2011) 60 International and Comparative Law Quarterly 573, 577–78.

146  Analysing the Relationship of water and sanitation services to all sectors of society,16 or the protection of indigenous populations.17 Because of the way in which investment tribunals have found themselves adjudicating on public regulatory disputes18 – and because of the way in which awards have or could have19 impacted on states’ obligations to respect, protect and fulfil human rights – the more problematic aspects of investment treaty arbitration have come to the fore, and cases that would normally have remained behind closed doors have revealed their potential, and actual, devastating impact.20 As I demonstrate in part I of this chapter through the analysis of the four awards I selected, the nature of the problematic interaction between IIL and IHRL reveals itself most clearly during the course of investor-state arbitration, when ad hoc arbitrators are called to balance ‘investors’ rights’, arguably flowing from the investment protection standards enshrined in IIAs, against human rights. On the one hand, from a legal perspective, the tension between these two branches of international law has been conceived as squarely inhabiting the realm of fragmentation of international law,21 whereby different legal branches have developed independently and in isolation from each other and from international law itself, to the point of becoming self-contained regimes.22 On the

16 This has been the argument often advanced by Argentina, as seen in the Suez Vivendi/AWG (n 1) and Urbaser (n 4) awards discussed in this chapter. 17 See eg the Glamis award (n 1) discussed in this chapter. 18 In this book I adopt Van Harten’s definition of ‘regulatory disputes’ as disputes which ‘may arise between the state and individuals who are subject to the exercise of the uniquely sovereign authority by the state’ and as distinguished from other types of public disputes ‘on the ground that they involve a claim made directly against the state by a private party’, and from private disputes ‘between individuals acting in a private capacity’. Van Harten (n 9) 48. 19 Some of the cases with obvious human rights implications were settled before the arbitrators reached a decision, such as the Foresti arbitration which was brought by the Italian and Belgo-Luxembourg owners of two granite corporations against the South African government, following the adoption by the latter of legislation aimed at contributing to reverse the impact of the apartheid regime on black South Africans, in line with the affirmative action measures enshrined in s 9 of the South African Constitution. Piero Foresti, Laura de Carli and Others v The Republic of South Africa, Award (4 August 2010) ICSID Case No ARB(AF)/07/1. 20 UN Human Rights Council, ‘Business and Human Rights: Further Steps Toward the Operationalization of the Protect, Respect and Remedy Framework’ (9 April 2010) UN Doc A/HRC/14/27, paras 20–23. 21 See eg A Van Aaken, ‘Fragmentation of International Law: The Case of International Investment Protection’ (2008) University of St Gallen Law School – Law and Economics Paper Series, Working Paper No 2008-1; O Chung, ‘The Lopsided International Investment Law Regime and its Effect on the Future of Investor-State Arbitration’ (2007) 47 Virginia Journal of International Law 953; and J Gupta and K Tienhaara, ‘Investment for Sustainable Development: Panacea, Placebo or Problematic?’ (2006) 6 International Environmental Agreements 323. For a differing view, see Simma (n 15) 576; and generally B Simma, ‘Self-Contained Regimes’ (1985) 16 Netherlands Yearbook of International Law 111; B Simma and D Pulkowski, ‘Of Planets and the Universe: Self-Contained Regimes in International Law’ (2006) 16 European Journal of International Law 483. 22 International Law Commission, ‘Fragmentation of International Law: Difficulties Arising from the Diversification and Expansion of International Law – Report of the Study Group of the International Law Commission’ (13 April 2006) UN Doc A/CN.4/L.682, 11, paras 7–8.

The Contours of a Troubled Relationship  147 other hand, from a social and practical perspective, an apparent accountability gap also delineates itself, whereby citizens find it difficult to hold elected governments accountable for protecting, respecting and fulfilling basic human rights, including access to water because of the prioritisation of conflicting obligations imposed by IIAs.23 Whilst in recent years these tensions have increasingly attracted academic attention, I believe that there has been a tendency to avoid the discussion of the political role24 that both IIL and IHRL can (and do) play within the equation. As I explain in this chapter, this is partly due to the fact that IIL presents itself as a depoliticising tool,25 and as an ‘effective’ alternative to the whimsical processes allegedly characterising the protection of foreign investors through diplomatic routes and/or national courts. In my view, however, attempts to analyse the intersection between these two legal branches of international law from an arguably ‘depoliticised’ angle cannot but fail to identify their enabling potential for both social harm and social change. That potential, as I argue throughout this book, has to be recognised. I agree with the view expressed for instance by McCann: although litigations ‘do not translate automatically into the social change desired, they can help redefine the terms of the dispute among social groups, both in the short-term and the long-term’.26 This chapter, therefore, is the first building block of my argument for a necessary re-politicisation of the debate, which is particularly appropriate to match the on-the-ground situation of conflict host countries.

23 On regulatory chill, see the discussion of the Glamis award below. See also ch 2. 24 See eg Simma (n 15) 576, identifying ‘quite a bit of reticence, Berührungsangst, vis-à-vis human rights within the foreign investment protection/arbitration profession. This might be in the investment arbitrators’ genes, because what is probably the large majority of them has a private or commercial law rather than a public law or public international law background and might thus tend to see international human rights as a potential, or probable, cause of political disturbances, intruding in their ‘purely legal’, autonomous field, with its ground rules being determined by neoliberal thought’. 25 See eg U Kriebaum, ‘Evaluating Social Benefits and Costs of Investment Treaties: Depoliticization of Investment Disputes’ (2018) 33 ICSID Review 14, 15 where Kriebaum argues not that ‘that the disputes that are before investment tribunals do not often concern questions of political importance to the host State or even to both the home and the host State. Rather, the focus is on whether it is beneficial to “depoliticize” investment disputes in the sense of transferring them from the political arena of diplomatic protection to a judicial forum with objective, previously agreed standards and a pre-formulated dispute settlement process’. See also more generally D Schneiderman, Constitutionalizing Economic Globalization: Investment Rules and Democracy’s Promise (Cambridge, Cambridge University Press, 2008). 26 M McCann, Rights at Work: Pay Equity Reform and the Politics of Legal Mobilisation (Chicago IL, University of Chicago Press, 1994) 283. See also LE White and J Perelman (eds), Stones of Hope: How African Activists Reclaim Human Rights to Challenge Global Poverty (Stanford CA, Stanford University Press, 2010); KG Young, Constituting Economic and Social Rights (Oxford, Oxford University Press, 2012); and C Rodríguez-Garavito, ‘Beyond the Courtroom: The Impact of Judicial Activism on Social and Economic Rights in Latin America’ (2011) 89 Texas Law Review 1669.

148  Analysing the Relationship The four regulatory disputes that I discuss in my analysis (Glamis, Suez Vivendi, AWG and Urbaser) are therefore selected to exemplify the way in which relevant investment protection standards often clash with host states’ human rights obligations.27 I consider the Glamis award as emblematic of the way in which IIL operates to protect extractive companies as foreign investors, despite the long-term nature of their extractive projects.28 The case concerns the adoption by the host states of legislation explicitly aimed at protecting the human rights of specific vulnerable sectors of the indigenous Quechan people in relation to planned mining activities by foreign investors. As outlined in chapter two, investment tribunals are not bound by the stare decisis principle and are subject to varying rules and regulations29 which may inform or limit their interpretative discretion, depending on the system within which they are adjudicating.30 Since these variables can all contribute to a lack of certainty for both states and foreign investors, the chosen focus of my analysis of this award is not so much on its outcome, but on the legal arguments advanced by the parties and on their implications in terms of systemic review of policy decisions by a state, including in relation to its police powers. In this case, as we will see, the foreign investor’s claim was based on alleged breaches of FET and of relevant provisions against indirect expropriation. I analyse these two key investment standards in turn on the basis of the facts and arguments presented in the Glamis dispute. The second set of awards that I have selected for this chapter includes three of the main water-related investment arbitrations, Suez Vivendi and AWG (which were decided jointly) and Urbaser. Their significance not only relates to the disputes’ direct relevance to the right to water: they also demonstrate the reach of IIL provisions (especially FET) including in situations of emergency,31 and the use of human rights counterclaims in investor-state arbitration.

27 Note that various international investment law scholars consider the protection of foreign investment by way of IIAs and investor-state arbitration to be one of the greatest international legal success stories and perceive IHRL as mostly ancillary to the substantive consideration of the dispute or as a complementary source of rights for the foreign investors. See eg ‘Rights and Duties in Investment Protection Law’ in A Peters, Beyond Human Rights: The Legal Status of the Individual in International Law (Cambridge, Cambridge University Press, 2016) 282–347. See also C Reiner and C  Schreuer, ‘Human Rights and International Investment Arbitration’ in PM Dupuy et al (eds), Human Rights in International Investment Law and Arbitration (Oxford, Oxford University Press, 2010) 83. And see KJ Vandevelde, ‘A Brief History of International Investment Agreements’ in KP Sauvant and LE Sachs (eds), The Effect of Treaties on Foreign Direct Investment: Bilateral Investment Treaties, Double Taxation Treaties, and Investment Flows (Oxford, Oxford University Press, 2009) 1–35. 28 On the nature of extractive projects, see ch 1. 29 For the difference see R Dolzer and C Schreuer, Principles of International Investment Law 2nd edn (Oxford, Oxford University Press, 2012) 238. 30 ibid. 31 As discussed in ch 5, emergency situations share contextual similarities with conflict countries and other high-risk areas, where ‘risk’ is to be understood as a risk of incidence of human rights abuses (in particular gross abuses), rather than a risk to the company.

The Contours of a Troubled Relationship  149 i.  Glamis Gold Ltd v United States Glamis is an investment-treaty dispute arbitrated under Chapter 11 of NAFTA, concerning a Canadian investor (Glamis) who had acquired, through the General Mining Act 1872, the right to mine32 a part of the California desert near the Indian Pass, an area within the California Desert Conservation Area. The Indian Pass not only was specifically protected against any environmental harm by the Federal Land Policy and Management Act 1976 (FLPMA),33 but it was also partly designated as wilderness by the California Desert Protection Act 1994.34 In 1994 Glamis applied to both the federal and the Californian government to extract gold as part of a mining project to be carried out within the conservation area, but outside of the wilderness-designated zones of the Indian Pass. The project planned to operate over three open pits, utilising the environmentally-controversial cyanide heap leach process.35 Approval of the application was subject to legal requirements that both the federal and the Californian governments carried out detailed environmental reviews of the mining project and revealed any adverse cultural and other impact that could be caused.36 The reviews revealed that the project would have destroyed the Trail of Dreams, a religiously and culturally sacred area historically used by the Native American Quechan community.37 On the basis of these findings and following the advice of its solicitor, in December 1999 the Department of Interior (DOI) denied Glamis’ application. This denial was however rescinded in November 2001 by the then incoming Bush administration, after a closed-door meeting between the new DOI officers and Glamis.38 In response, regulations were introduced in December 2002 by the State of California, requiring the complete backfilling of any mine, respect of the contours of the land during excavations and financial assurances to ensure implementation of such requirements. In July 2003 Glamis filed a NAFTA claim against the US, claiming that these regulations had destroyed the value of its mining rights and had rendered the proposed project no longer economically viable.39 More specifically, Glamis claimed that the adoption of these provisions and the delay of the review process were tantamount to an indirect expropriation of its mining 32 The General Mining Act 1872 ‘allows US citizens to mine federal lands without having to pay royalties’ and Glamis acquired such mining rights through a Nevadan subsidiary. See JC Kahn, ‘Striking NAFTA Gold: Glamis Advances Investor-State Arbitration’ (2009) 33 Fordham International Law Journal 101, 102. 33 FLPMA amended and superseded the General Mining Act 1872. 34 Kahn (n 32) 102–03. 35 ibid 103. 36 Kahn (n 32) 104. 37 The Quechan Indian Nation claimed that the Imperial Project by Glamis would affect their ceremonial practices, thus preventing the transmission of indigenous culture to future generations: US Counter Memorial, 19 September 2006, para 50. See also Kahn (n 32) 105. 38 Kahn (n 32) 106–07. 39 Notice of Arbitration Under the Rules of the United Nations Commission of International Trade Law and the North America Free Trade Agreement, 10 December 2003, 7.

150  Analysing the Relationship rights and therefore in breach of NAFTA Article 1110 guarantees against expropriation. As discussed in chapter two,40 three factors are usually taken into consideration by the tribunal in relation to a claim of indirect expropriation: the degree of interference with investor rights; the investor’s reasonable expectations; and the character of the government measure. The Glamis tribunal only considered the first of these three factors, and focused in particular on the severity of the economic impact of the measures adopted in order to exclude liability for expropriation.41 It set out to establish whether the project had been ‘so radically deprived of its economic value to Claimant as to constitute an expropriation in violation of Article 1110’.42 The tribunal found that, after carrying out the required backfilling, the valuation of the project would have still exceeded US$20 million, and for this reason established that no expropriation could be deemed to have taken place.43 Despite this finding in Glamis, which did not recognise the Californian government’s legislation to protect the environment and indigenous population as amounting to indirect expropriation, it is relevant to note that other tribunals have often relied on the ‘sole effect doctrine’ in considering whether an expropriation had taken place, thus merely ascertaining that the measures adopted by the state had adversely affected the investment. According to the ‘sole effect doctrine’, this element would be in and of itself sufficient for a finding of expropriation for which compensation is due.44 As contended by some commentators,45 the lack of an applicable threshold for the systemic determination of what constitutes indirect expropriation leaves a significant amount of discretion to tribunals,46 thus resulting in legal uncertainty for both investors and host states and de facto causing self-restraint in the exercise of a state’s regulatory powers.47 40 See discussion on the ‘sole effect doctrine’ in ch 2. On the ‘police powers doctrine’, see J Waincymer, ‘Balancing Property Rights and Human Rights in Expropriation’ in Dupuy et al (n 27) 294. 41 Consideration of the first factor would usually also imply an examination of the duration of the economic impact. Yet, this examination was deemed irrelevant in this case, as the tribunal found that the impact of the measure was not severe enough as to amount to expropriation. 42 Glamis (n 1) para 358. 43 E Obadia, ‘Introductory Note to NAFTA/UNCITRAL: Glamis Gold Ltd v United States’ (2009) 48 International Legal Materials 1035. 44 See the discussion of Metalclad in ch 2 and discussion on the ‘sole effect doctrine’ versus the ‘police powers doctrine’. 45 J Wouters and N Hachez, ‘When Rules and Values Collide: Howe Can a Balanced Application of Investor Protection Provisions and Human Rights Be Ensured?’ 3 Human Rights and International Legal Discourse 301, 321. 46 J Cantegreil, ‘Implementing Human Rights in the NAFTA Regime: The Potential of a Pending Case: Glamis Corp v USA’ in Dupuy et al (n 27) 367–95. 47 A Schram et al, ‘Internalisation of International Investment Agreements in Public Policymaking: Developing a Conceptual Framework of Regulatory Chill’ (2018) 9 Global Policy 193, 198. See also T Voon and A Mitchell, ‘Time to Quit? Assessing International Investment Claims against Plain Tobacco Packaging in Australia’ (2011) 14 Journal of International Economic Law 515, 524. And see P O’Brien et al, ‘Commentary on “Communicating Messages About Drinking”: Using the

The Contours of a Troubled Relationship  151 The expropriation aspect of Glamis, however, attracted less attention than the claim under the FET clause, given the increasing trend among tribunals to grant compensation to investors through a finding of a breach of FET.48 As seen in chapter two, FET protections have come to represent a subsidiary way for investors to obtain compensation when an investment tribunal establishes that the contested measures do not amount to expropriation, although they might still cause harm to the investment.49 Glamis heavily relied on the argument that the changes in legislation adversely affected the stability and predictability of the investment environment, thus failing to meet the investors’ alleged legitimate expectations that such environment would have remained favourable and practically unaltered throughout the life of the investment. Various investment tribunals have interpreted the concept of legitimate expectations expansively, so that the investor ‘may know beforehand any and all rules and regulations that will regulate its investments’.50 Others have instead adopted the view that FET corresponds to the customary minimum standard for the treatment of aliens, whereby only ‘egregious conduct’51 by the state would cause a breach of the international legal requirement. According to the latter view, only state conduct which is ‘arbitrary, grossly unfair, unjust or idiosyncratic, is discriminatory and exposes the claimant to sectional or racial prejudice, or involves a lack of due process leading to an outcome which offends judicial propriety’52 would amount to a breach of FET protections. The Glamis tribunal analysed the applicable FET standard in light of the relevant NAFTA Article 1105 and of the Free Trade Commission (FTC) binding Note of Interpretation, according to which FET ‘does not require treatment in addition to or beyond that which is required by the customary international law minimum standard of treatment of aliens’.53 In so doing, the tribunal referred to the state parties’ recognition that the minimum standard as articulated in Neer represented customary international law, and on the basis of which ‘an act must be sufficiently egregious and shocking – a gross denial of justice, manifest arbitrariness, blatant unfairness, a complete lack of due process, evident discrimination, or a manifest lack of reasons’54 in order to amount “Big Legal Guns” to Block Alcohol Health Warning Labels’ (2018) 53 Alcohol and Alcoholism 333, 334. 48 For a detailed analysis of the contents of the FET standard, see ch 2. 49 R Suda, ‘The Effect of Bilateral Investment Treaties on Human Rights’ in O De Schutter (ed), Transnational Corporations and Human Rights (Oxford, Hart Publishing, 2006) 101. 50 Tecnicas Medioambientales TECMED SA v Mexico, ICSID Case No ARB (AF)/00/2 (29 May 2003) para 154. For a discussion of the award see ch 2. 51 See K Miles, The Origins of International Investment Law: Empire, Environment and the Safeguarding of Capital (Cambridge, Cambridge University Press, 2013) 321, discussing the minimum standard as identified in Neer. 52 Waste Management, Inc v United Mexican States (Number 2), ICSID Case No ARB(AF)/00/3, Final Award (30 April 2004) paras 98–99. 53 North American Free Trade Agreement, Free Trade Commission, Notes of Interpretation of Certain Chapter 11 Provisions, 31 July 2001. 54 Glamis (n 1) para 616.

152  Analysing the Relationship to a breach of FET. The tribunal further established that the claimant had to prove its assertion that the standard had changed since Neer, acknowledging the difficulty of establishing a change in customary international law, given that arbitral awards could not be considered as elements of state practice. However, in addressing the investor’s claims that the host state had failed to protect its legitimate expectations ‘through the establishment of a transparent and predictable legal and business framework’, the tribunal held that the measures adopted in relation to the case did not amount to a breach of NAFTA Article 1105. Such a breach, the tribunal explained, arises if ‘a State made any specific assurance or commitment to the investor so as to induce its expectations’;55 or if it treated an investor in a ‘manifestly arbitrary manner’ (as opposed to ‘a mere appearance of arbitrariness’).56 Interestingly, in stating so the tribunal, rather than strictly following the FTC binding declaration, moved to indirectly approve the doctrine of legitimate expectations, although limiting it to ‘specific assurances’ by the host state. As already discussed in chapter two, the doctrine of legitimate expectations has been deployed in investment treaty arbitration to grant substantive  – rather than merely procedural – rights to foreign investors through FET. A substantive approach to the doctrine of legitimate expectations significantly limits a host state’s regulatory power, thus preventing any type of conduct by the state, including bona fide conduct,57 which may be perceived as directly or indirectly causing ‘harm to the investment’. The doctrine is in fact often deployed as a technical, neutral concept, enabling tribunals to infer a state’s commitment to abdicate its regulatory power. This false neutrality has served the purpose of avoiding the discussion of the consequences of such legitimate expectations. A more ‘controlled approach’ to the doctrine,58 such as the one indicated in Glamis, whereby an expectation is legitimate only if triggered by specific assurances or commitments by the host state, appears to limit the effects of the doctrine. Yet it still fails to address its inherent legitimacy (or lack thereof),59 and the inappropriateness of framing FET as a source of

55 ibid para 620. 56 ibid paras 625–26 and 803. 57 See eg Mondev International Ltd v United States of America, ICSID Case No ARB/(AF)/99/2, Award (11 October 2002) para 156; Occidental Exploration and Production Company v ­Ecuador, London Court of International Arbitration Case No UN3467, Award (1 July 2004) 12 ICSID Reports 59, para 186; CMS Gas Transmission Company v Argentina, Award (12 May 2005) 44 International Legal Materials 1205 (2005) para 280; Loewen Group Inc v United States of America, Award (26  June 2003) 42 International Legal Materials 811 (2003) para 132; Azurix v Argentina, ICSID Case No ARB/01/02, Award (14 July 2006) paras 369 and 372. 58 APG Pandya and S Moody, ‘Legitimate Expectations in Investment Treaty Arbitration: An Unclear Future?’ (2010) 19–21, at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1631507. 59 ibid 20. See also M Sornarajah, ‘The Fair and Equitable Standard of Treatment: Whose Fairness? Whose Equity?’ in F Ortino et al (eds) Investment Treaty Law: Current Issues, Volume 2 (London, British Institute of International and Comparative Law, 2006).

The Contours of a Troubled Relationship  153 rights for investors.60 As discussed in part II of this chapter, FET is better understood as a standard of conduct, whereby a state commits to the protection of investment – not the investor – of the other state party to the relevant IIA.61 In light of this, the emphasis placed by investment tribunals on the expectations of investors is not only at odds with the intentions of state parties as usually enshrined in FET clauses, but also with the international customary rules of treaty interpretation62 as expressed in Article 31(1) of the Vienna Convention of the Law of Treaties.63 An expectation that the host state will adopt certain policies to promote investment cannot be automatically inferred under a FET clause,64 as such an expectation would result in an implicit renunciation by the state of its regulatory powers,65 and in its consequent incapacity to act in the public interest. Although the Glamis award was welcomed by some commentators precisely for its indirect approval of the doctrine of legitimate expectations,66 those who favour an expansive interpretation of investment protections have strongly criticised it for its disregard of the ‘sole effect doctrine’.67 According to the latter view, a breach by the state remains, even when state action is dictated by human rights considerations: human rights should only enter the equation in assessing the level of compensation to be paid to the investors, as they are to be considered as mere external considerations which should ‘under no circumstance have an influence over the decision of the arbitrators on the merits of the case’.68 If we consider that the dispute adjudicated upon by the Glamis tribunal represents a de facto review of a state’s exercise of its sovereign authority on matters of

60 Separate Opinion of Arbitrator Pedro Nikken in Suez, Sociedad General de Aguas de Barcelona SA v The Argentine Republic, ICSID Case No ARB/03/19, Decision on Liability (30 July 2010) and AWG Group Ltd v The Argentine Republic, ICSID Case No ARB/03/19, Decision on Liability (30 July 2012), paras 4 and 19, at italaw.com/documents/SuezVivendiAWGSeparateOpinion.pdf. See also NM Perrone, ‘The Emerging Global Right to Investment: Understanding the Reasoning behind Foreign Investor Rights’ (2017) 8 Journal of International Dispute Settlement 673, 690–91, noting that ‘[t]he application of the legitimate expectations doctrine opens a large space for the subjectivity of arbitrators’ and that a ‘reliance approach to foreign investor rights serves to expand “enforcement beyond the requirement of a bargain by identifying an additional factor or factors which justify enforcement”. For most arbitrators, the main factor is that foreign investor expectations emerge from rational business calculations’. 61 Nikken, ibid para 20. 62 ibid para 3. 63 Vienna Convention on the Law of Treaties, 22 May 1969, UN Doc A/CONF.39/27 (1969) 8 International Legal Materials 679, opened for signature 23 May 1969; entered into force 27 January 1980. 64 See also the discussion of legitimate expectations by the International Court of Justice in Bolivia v Chile in s I.A.ii below (n 89). 65 Nikken (n 60) para 31. 66 Kahn (n 32) 147–55. 67 I Knoll-Tudor, ‘The Fair and Equitable Treatment Standard and Human Rights Norm’ in Dupuy et al (n 27) 342. 68 ibid. See however the critique by Philippe Sands QC in Bear Creek Mining Corporation v Republic of Peru (12 September 2017) Partial Dissenting Opinion of Philippe Sands, ICSID Case No ARB/14/2.

154  Analysing the Relationship public interest,69 the reasoning behind this view appears aimed at preserving the privileged position of foreign investors,70 especially in light of the inherent shortcomings of IIL which I highlight in part II of this chapter. An analysis of these systemic limitations, in fact, clearly reveals that the private commercial law model on which investment treaty arbitration is based ‘does not sit easily with disputes which wholly or in part deal with alleged negative externalities on society at large or on significant disadvantaged groups within society, as is inevitably the case with human rights issues’.71 ii.  Suez, Sociedad General de Aguas the Barcelona SA, and Vivendi Universal SA v The Argentine Republic (hereinafter Suez Vivendi) and AWG Group v The Argentine Republic (hereinafter AWG) The significance of these two awards, in my view, goes to the core of the debate on the interplay between IIL and IHRL, and more specifically on the way in which an investment tribunal’s interpretation may severely limit a host state’s regulatory ability, including in times of emergency. The disputes arose in relation to a 30-year concession granted in 1993 and 1995 to the foreign investors, as part of a large privatisation process, for managing the water distribution and wastewater treatment in Buenos Aires and Santa Fe. Previous to the granting of the concessions, the Argentinean government had passed a water decree that established a clear regulatory framework which would have also applied to future concessionaires. At the moment of the concessions the so-called Convertibility Law was in place, according to which the exchange rate of Argentine currency (the peso) was pegged to the exchange rate of the US dollar. Until 2001, which marked the start of the Argentinean financial crisis, the regulatory framework governing the concessions remained pretty much unaltered and the peso remained pegged to the US dollar at the rate of one peso per dollar. From March 2001 through to mid-2002, with a worsening of the crisis, the Argentinean government adopted a series of measures to deal with the situation, including a limitation to the amounts of cash withdrawals by

69 Van Harten (n 9) 45. See also L Johnson, ‘A Fundamental Shift in Power: Permitting International Investors to Convert Economic Expectations into Rights’ (2018) 65 UCLA Law Review Discourse 106, explaining at 121 how the doctrine of estoppel in contract law cannot be easily transposed to investor-state arbitration through legitimate expectations because in such contexts ‘[r]ather than mitigating disparities of power, protecting specific commitment-backed expectations can exacerbate existing inequalities, giving those with access even greater influence over the law and lawmakers than they already have’. 70 See F Irani, ‘The Production of Feeling and the Reproduction of Privilege: Expectation, Affect, and International Investment Law’ (2018) 65 UCLA Law Review Discourse 158, arguing that ‘the concept of expectations has long-served, and continues to serve, as an important technology through which certain intersecting forms of privilege are maintained and reproduced through law’. The legal protection of expectations, Irani contends, ‘has functioned, and continues to function, to maintain or reproduce privileges of various kinds’. 71 Waincymer (n 40) 307.

The Contours of a Troubled Relationship  155 account  holders in December 2001.72 With the Emergency Law of 6 January 2002, the A ­ rgentinean government passed some strict emergency measures which, according to the investors involved in the cases, significantly modified the previously existent regulatory framework. More specifically, these measures (i) abolished the currency board that had linked the Argentine Peso to the US dollar, resulting in a significant depreciation of the Argentine Peso; (ii) abolished the adjustment of public service contracts according to agreed upon indexations; and (iii) authorized the Executive branch of government to renegotiate all public service contracts.73

The latter renegotiation was based on specific criteria that, according to the claimants, injured their investment. On this basis, they repeatedly sought an adjustment of the tariff and a change of the operating conditions. The ­Argentinean government time and again rejected these requests. In April 2003 the claimants filed a request for arbitration with ICSID. The main claim by the investors (upheld by the investment tribunal) was that the measures adopted by the host state to respond to the economic crisis, and more specifically the amendment of the tariff for the water and wastewater services, frustrated the investors’ legitimate expectations, and therefore constituted a breach of FET. The significance of these two awards, therefore, lies in the way in which Argentina’s regulatory powers in times of national emergency were considered by the tribunal vis-à-vis the preponderant need to protect the foreign investment, not least through the deployment of the doctrine of legitimate expectations. Relying explicitly on the approach to the doctrine adopted in the Saluka award,74 the tribunal explained the role that the law should play in crystallising so-called investors’ expectations and in ensuring a de facto freezing of the investment environment: The theoretical basis of this approach no doubt is found in the work of the eminent scholar Max Weber, who advanced the idea that one of the main contributions of law to any social system is to make economic life more calculable and also argued that capitalism arose in Europe because European law demonstrated a high degree

72 Suez Vivendi/AWG, Decision on Liability (n 2) para 43. For the analysis of the implications of the numerous investment arbitration claims faced by Argentina in the aftermath of the financial crisis, see ED Kasentz, ‘Desperate Times Call for Desperate Measures: The Aftermath of Argentina’s State of Necessity and the Current Fight in the ICSID’ (2010) 41 George Washington International Law Review 709, 711–17. 73 Suez Vivendi/AWG (n 2) para 44. 74 Saluka Investment BV (The Netherlands) v The Czech Republic, Partial Award (17 March 2006) para 291. Note that in the Saluka award the claim of legitimate expectations was based on reliance on a promise made by a former government minister. The tribunal refused to recognise the existence of reasonable legitimate expectations, stating that ‘whatever assurance the Minister of Finance may have given, he could not bind future Governments’, para 74. See also MTD Equity Sdn Bhd and MTD Chile SA v Chile, ICSID Case No ARB/01/07, Decision on Annulment, 21 Mar 2007, para 67, where the tribunal noted that‘[t]he obligations of the host State towards foreign investors derive from the terms of the applicable investment treaty and not from any set of expectations investors may have or claim to have’.

156  Analysing the Relationship of ‘calculability’. An investor’s expectations, created by law of a host country, are in effect calculations about the future.75

This ‘calculability’ approach promoted by the Suez Vivendi/AWG tribunal does not appear to pay much attention to the possibility of emergencies affecting the host countries, nor to the fact that a divergence from these careful calculations about the future might be, at times, justified by necessity.76 IIL does provide for a defence of necessity available to host states under certain circumstances.77 In practice, however, the Argentinean crisis has proved to be the stress test for investment tribunals’ interpretation of the applicability of this defence. In all of the over 50 pending or concluded arbitrations against Argentina related to its financial crisis,78 the host country has invoked the defence of necessity, including in the Suez Vivendi/AWG arbitrations. Most of the tribunals, however, have rejected Argentina’s claim, whilst a few acknowledged the host-country’s need to regulate in the public interest.79 Suez Vivendi and AWG are also important because the tribunal acknowledged the relevance of IHRL in investment arbitration, in particular for the implications of the claim in terms of access to water and sanitation.80 In its decision to accept amicus curiae (friend of the court) submissions from suitable non-parties to the claim, the tribunal stated: [t]he factor that gives this case particular public interest is that the investment dispute centers around the water distribution and sewage systems of a large metropolitan area, the city of Buenos Aires and surrounding municipalities. Those systems provide basic public services to millions of people and as a result may raise a variety of complex public and international law questions, including human rights considerations. Any decision rendered in this case, whether in favor of the Claimant or the

75 Suez Vivendi/AWG (n 2) para 222. 76 The tribunal did consider and dismissed the defence of necessity advanced by Argentina. See ibid paras 249–71. For an analysis of investment tribunals’ different approaches to necessity, see generally J Kurtz, ‘Adjudging the Exceptional at International Investment Law: Security, Public Order and Financial Crisis’ (2010) 59 International and Comparative Law Quarterly 325. 77 Generally under the specific clauses of the relevant BIT or under Art 25 of the International Law Commission’s Articles on State Responsibility. See ILC, ‘Articles on Responsibility of States for Internationally Wrongful Acts’, in Yearbook of the International Law Commission, 2001, Volume II, UN Doc A/CN.4/SER.A/2001/Add.1 (Part Two). 78 On the IIL implications of the financial crisis in Argentina, see JE Alvarez and K Khamsi, ‘The Argentine Crisis and Foreign Investors: A Glimpse into the Heart of the Investment Regime’ in KP Sauvant (ed), Yearbook of International Investment Law and Policy (Oxford, Oxford University Press, 2009) 379. 79 For a comprehensive and clear discussion of the defence of necessity, see DA Desierto, Necessity and National Emergency Clauses: Sovereignty in Modern Treaty Interpretation (The Hague, ­Martinus Nijhoff, 2012) especially 145–236. 80 The relevance of the right to water to regulatory disputes in the area of privatised water and sanitation services was also recognised in SAUR International SA v Argentine Republic (6 June 2012) Decision on Jurisdiction and Liability, ICSID Case No ARB/04/4, paras 330–31. See also O McIntyre, ‘Emergence of the Human Right to Water in an Era of Globalization and its Implications for International Investment Law’ in JF Addicott et al (eds), Globalization, International Law and Human Rights (Oxford, Oxford University Press, 2011) 147, 163–64.

The Contours of a Troubled Relationship  157 Respondent, has the potential to affect the operation of those systems and thereby the public they serve.81

Despite this auspicious starting point, the tribunal eventually did not analyse the obligations flowing from the right to water and found that ‘[i]n the circumstances of the cases, Argentina’s human rights obligations and its investment treaty obligations are not inconsistent, contradictory, or mutually exclusive. Thus … [Argentina] could have respected both types of obligations’.82 Thus, circumventing a discussion on the nature and scope of applicable state’s obligations in relation to the right to water and on how Argentina could have, in practice, respected both types of obligations, the tribunal held that Argentina had frustrated the legitimate expectations of the foreign investors, and was therefore in breach of its FET obligations. As discussed in chapter two and as I mentioned earlier in this chapter in relation to the Glamis award, the expansion of the doctrine of legitimate expectations has been tempered by a tendency to narrow down the scope of the expectations that can be considered legitimate, not least by adopting a set of specific criteria that these expectations should meet. Such criteria include, for instance, evidence of reliance on specific commitments given by the host state to the investor to induce the investment.83 In the tobacco plain packaging award Philip Morris v Uruguay, for instance, the tribunal clarified that legitimate expectations depend on specific undertakings and representations made by the host State to induce investors to make an investment. Provisions of general legislation applicable to a plurality of persons or of category of persons, do not create legitimate expectations that there will be no change in the law.84

This concept of reliance on specific commitments for legitimate expectations to exist has been endorsed by several tribunals85 and has found its way in some IIAs.86 Its popularity, arguably, lies in its proximity to the doctrine of 81 Suez Vivendi/AWG, Order in Response to a Petition for Transparency and Participation as Amicus Curiae (19 May 2005) para 19, at http://italaw.com/cases/documents/1062. 82 Suez Vivendi/AWG, Decision on Liability (n 2) para 262. 83 See eg Micula v Romania (11 December 2013) Award, ICSID Case No ARB/05/20, para 527. 84 Philip Morris Brands Sàrl, Philip Morris Products SA and Abal Hermanos SA v Oriental Republic of Uruguay (8 July 2016) Award, ICSID Case No ARB/10/7, paras 426 (original emphasis). Note, however, how at para 427 the tribunal suggested that ‘in order to rely on legitimate expectations the investor should inquire in advance regarding the prospects of a change in the regulatory framework in light of the then prevailing or reasonably to be expected changes in the economic or social conditions of the host State’. This seems to clarify that commitment-backed legitimate expectations could indeed prohibit a host state from regulating in the public interest, irrespective of the gravity of a situation it may face. 85 See eg eg Koch Minerals Sàrl v Bolivarian Republic of Venezuela (30 October 2017) ICSID Case No ARB/11/19, para 8.52. 86 See eg Free Trade Agreement Between the European Union and the Republic of Singapore aricle 9.4(2)(e), 29 June 2015: a breach of FET will take place when a state breaches ‘the legitimate expectations of a covered investor arising from specific and unambiguous representations from a Party so as to induce the investment and which are reasonably relied upon by the covered investor’. As referenced in Johnson (n 69) 109.

158  Analysing the Relationship estoppel present in various domestic legal systems, and the concepts of utility, fairness and good faith related to it.87 Some tribunals have also claimed that the doctrine of legitimate expectations constitutes a general principle of international law because of this recognition of estoppel by various legal system.88 This claim, however, was rejected by the International Court of Justice in Bolivia v Chile89 where the Court, directly referring to decisions by international investment tribunals, stated as follows: [t]he Court notes that references to legitimate expectations may be found in arbitral awards concerning disputes between a foreign investor and the host State that apply treaty clauses providing for fair and equitable treatment. The Court considers that it does not follow from such references that there exists in general international law a principle that would give rise to an obligation on the basis of what could be considered a legitimate expectation.90

The Court went on to clarify that, for the existence of a legal obligation to be ascertained in international law, it is not sufficient to rely on negotiations between the parties. For a legal obligation to arise, ‘the terms used by the parties, the subject-matter and the conditions of the negotiations must demonstrate an intention of the parties to be legally bound’.91 Although the Court confirmed that, in the absence of an express indication of a legal commitment, such intention ‘may be established on the basis of an objective examination of all the evidence’,92 it is important to note that domestic courts, unlike some international investment tribunals,93 have approached the doctrine of estoppel with great caution.94 Yet, the invocation of the doctrine of estoppel in the context of investorstate arbitration remains in and of itself questionable because of the legal and policy implications that it entails,95 including a shift on who may decide the scope of property rights from domestic courts to international investment tribunals. As noted for instance by Anne Orford,96 this reallocation of power 87 A Kulick, ‘About the Order of Cart and Horse, Among Other Things: Estoppel in the Jurisprudence of International Investment Arbitration Tribunals’ (2016) 27 European Journal of International Law 107, 109. See also R Kolb, Good Faith in International Law (Oxford, Hart, 2017) especially ch 3. 88 See eg Bankswitch Ghana Ltd v Ghana (11 April 2014) Award, Permanent Court of Arbitration Case No 188294, para 11.71. 89 ICJ, Obligation to Negotiate Access to the Pacific Ocean (Bolivia v Chile) (1 October 2018) Judgment General List No 153. 90 ibid para 162. 91 ibid para 91 (emphasis added). 92 ibid. 93 See eg Sempra Energy v The Argentine Republic, ICSID Case No ARB/02/16 (28 September 2007). 94 J Crawford, Brownlie’s Principles of Public International Law 8th edn (Oxford, Oxford University Press, 2012) 421. 95 Johnson (n 69) 117–18. 96 A Orford, ‘Food Security, Free Trade, and the Battle for the State’ (2015) 11 Journal of International Law and International Relations 1, 28–30, tracing the economic ordering and market

The Contours of a Troubled Relationship  159 from the national to the international level is not new in international law, and is aimed at a consequential shift in the ‘exercise of public power’,97 mainly in response to a targeted framing of ‘the domestic sphere as the realm of (democratic) uncertainty and disturbance, illegitimate rent-seeking, irrational fears and populism leading to over-regulation and bellicose protectionism’.98 As discussed in the Introduction and in chapter one, this shift in the exercise of public power is indeed better understood as constitutive to the role of international investment law and investor-state arbitration,99 whereby the protection of private property is entrusted to ‘depoliticised’ international fora, where the rule of law can be safeguarded from ‘the law of the jungle’.100 To clarify, this identification of the international investment regime as a post-1945 tool to maintain the separation between politics and economics101 should not be understood as a claim that states should reclaim their sovereignty vis-à-vis investors or investment t­ribunals.102 The argument I advance here, instead, is that IIL was conceived as a legal instrument to constrain state sovereignty (at a time of decolonisation and civil rights) and redirect the role of the state towards ‘encasing the world economy’ through the protection of ‘the human rights of capital’ and investors, thus not only ‘the right to own and stay, but [also] the right to sell and leave’.103 As evidenced by the three awards considered so far in this chapter, and as also reiterated in some of the existing IIL literature,104 so-called investors’ rights are often considered as trumps, and consequently any consideration of public concern as irrelevant or, at best, of secondary importance when assessing the quantum of compensation. Some commentators, however, maintain that tensions between IIL and IHRL could be resolved through the principle of

embedding role of international law in the context of food security. See also A Orford, ‘Locating the International: Military and Monetary Interventions after the Cold War’ (1997) 38 Harvard International Law Journal 443, 449. 97 M Koskenniemi, ‘It’s Not the Cases, It’s the System! Book Review Essay of M Sornarajah, Resistance and Change in the International Law on Foreign Investment (Cambridge University Press, 2015)’ (2017) 18 Journal of World Investment and Trade 343, 345. 98 N Tzouvala, ‘The Academic Debate about Mega-Regionals and International Lawyers: Legalism as Critique?’ (2018) 6 London Review of International Law 189, 194. 99 For a critique of investor-state arbitration, see G Van Harten, Sovereign Choices and Sovereign Constraints: Judicial Restraint in Investment Treaty Arbitration (Oxford, Oxford University Press, 2013) especially ch 6 ‘Strict Controllers of Nations’. 100 Q Slobodian, Globalists: The End of Empire and the Birth of Neoliberalism (Cambridge MA, Harvard University Press, 2018) 140–41, referring to the racialised dimension of the post-World War II debate on investors’ rights, a debate that led to the tabling of the 1959 Abs-Shawcross Draft Convention on Investment Abroad. 101 ibid 143. 102 See PR Gilbert, ‘Sovereignty and Tragedy in Contemporary Critiques of Investor State Dispute Settlement’ (2018) 6 London Review of International Law 211. 103 ibid 145, also referencing F Cooper, ‘Afterword: Social Rights and Human Rights in the Time of Decolonization’ (2012) 3 Humanity 487. 104 C Schreuer and C Reiner, ‘Human Rights in International Investment Arbitration’ in Dupuy et al (n 27) 82.

160  Analysing the Relationship systemic integration105 and a harmonised interpretation of applicable norms of international law by international investment tribunals. As I shall argue in the remainder of this chapter – not least by examining the approach adopted by the Urbaser tribunal – solutions based on interpretation would still be insufficient per se to ensure an appropriate and meaningful consideration of public concerns (and the related protection of human rights), due to the structural inappropriateness and shortcomings of investment treaty arbitration.106 More importantly, an insistence on harmonisation and systemic integration, (re)negotiation of IIAs and/or reform of investor-state arbitration, obscures the underlying objective of the proposals advanced, which is the uncritical acceptance of the core elements of IIL and, ultimately, the legitimisation and self-preservation of the system.107 Thus, by engaging in a debate on how to best harmonise IIL and IHRL, international legal scholars miss the opportunity to identify and challenge the underlying structures, limitations and assumptions of these two bodies of international law, thus foreclosing the possibility for more radical transformation.108 As evidenced in Urbaser, an award generally welcomed as an important precedent for human rights counterclaims in investment treaty arbitration, an explicit recognition by an investment tribunal that business have obligations in international law does not necessarily result in reneging on the ‘promise’ of investors’ rights, nor in relinquishing the ideological underpinnings of investor-state arbitration. In other words, it does not alter the political commitment of IIL and its institutions to protect foreign investment, and through them neoliberal markets. As demonstrated by Slobodian, the investment regime efficiently operationalises ‘the neoliberal idea that markets are not natural but are products of the political construction of institutions to encase them’.109 This operationalisation also delineates itself in the statements of the Urbaser tribunal, which I now turn to analyse. iii.  Urbaser SA and Consorcio de Aguas Bilbao Bizkaia, Bilbao Biskaia Ur Partzuergoa v Argentine Republic The relevance of the Urbaser award needs to be contextualised within the legitimacy debate described so far in this chapter, and as part of the reform efforts 105 C McLachlan, ‘The Principle of Systemic Integration and Article 31(3)(c) of the Vienna ­Convention’ (2005) 54 International and Comparative Law Quarterly (ICLQ) 279. 106 Waincymer (n 40) 308. 107 See D Schneiderman, ‘International Investment Law’s Unending Legitimation Project’ (2017) 49 Loyola University Chicago Law Journal 229. 108 See Koskenniemi (n 97) 352. See also Tzouvala (n 98) 195, emphasising that in the meantime ‘the discipline remains committed to some core characteristics of this legal order, and – therefore – to its ideological underpinnings’. 109 Slobodian (n 100) 7 (emphasis added). On how IIL and its institutions ‘encased’ the market through the conceptualisation of investors’ rights, see in particular Slobodian’s ch 4. For an approving explanation of how IIL enables ‘sustainable liberalism’ and the ‘liberal consensus’ on the desirability of attracting foreign investment through free market policies, KJ Vandevelde,

The Contours of a Troubled Relationship  161 aimed at rebalancing IIL110 and harmonising it with broader public interests, such as public health,111 access to medicines112 and to public goods such as water and sanitation. Since at least 2016, in fact, human rights counterclaims have been suggested as a way of enabling a host state to bring human rights abuses by the foreign investor under the jurisdiction of an arbitral tribunal, thus also addressing some of the criticism levelled against investor-state arbitration.113 It is important to note that the legal basis for a human rights counterclaim is the link between the alleged abuse by the investor and the primary claim addressed by the dispute. The cause of action for the counterclaim must flow from an obligation vested upon the investor: in the case of the Urbaser award, the argument of Argentina was that this obligation was enshrined in the right to water. In light of our analysis in chapter three, however, it is apparent that ascertaining the obligations of an investor vis-à-vis the right to water may be easier in theory than in practice. Investors, as business enterprises, are private non-state actors, while the traditional bearers of international legal obligations are states, including in international human rights law.114 Despite the existence of numerous non-legally-binding instruments on business and human rights115 (see further chapter five) aimed at clarifying the human rights responsibilities of companies, and the ongoing negotiations for a treaty on business and human rights directly binding on transnational corporations and other business entities,116 scholars

‘Sustainable ­Liberalism and the International Investment Regime’ (1998) 19 Michigan Journal of International Law 373, 391–99. 110 A de Nanteuil, ‘Counterclaims in Investment Arbitration: Old Questions, New Answers?’ (2018) 17 The Law and Practice of International Courts and Tribunals 374, 377. See also AK Bjorklund, ‘The Role of Counterclaims in Rebalancing Investment Law’ (2013) 17 Lewis & Clark Law Review 461, 464. 111 See eg Philip Morris v Uruguay (n 74) and Philip Morris v Australia, both relating to plain packaging regulations aimed at reducing the incidence of lung cancer: Philip Morris Asia Limited v The Commonwealth of Australia, UNCITRAL, PCA Case No 2012-12. See also Vattenfall AB and Others v Federal Republic of Germany (31 August 2018) Decision on the Achmea issue, ICSID Case No ARB/12/12, concerning Germany’s decision to phase out nuclear power plants in the country, following the Fukushima Daiichi nuclear disaster triggered by the earthquake and tsunami on 11 March 2011. 112 See eg Eli Lilly v Canada, relating to the protection of intellectual property rights of pharmaceutical corporations and the debate on access to medicines: Eli Lilly and Company v The Government of Canada, ICSID Case No UNCT/14/2 (16 March 2017) Final Award. 113 E De Brabandere, ‘Human Rights Counterclaims in Investment Treaty Arbitration’ (8 October 2018) Grotius Centre Working Paper Series No 2018/078-IEL. 114 P Alston, ‘The “Not a Cat” Syndrome: Can The International Human Rights Regime Accommodate Non-State Actors?’ in P Alston (ed), Non-State Actors and Human Rights (Oxford, Oxford University Press, 2005) 3. 115 See eg the UN Guiding Principles on Business and Human Rights (UNGP), the OECD Guidelines for Multinational Enterprises, the UN Global Compac and the International Labour Organisation (ILO) Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy. 116 Open-ended Intergovernmental Working Group on Transnational Corporations and Other Business Enterprises with respect to Human Rights, mandated by the UN Human Rights Council with ‘Resolution 26/9: Elaboration of an international legally binding instrument on transnational corporations and other business enterprises with respect to human rights’ (14 July 2014) UN doc A/HRC/RES/26/9.

162  Analysing the Relationship disagree on which obligation, if any, may bind investors, as corporate non-state actors.117 The predominant view, however, is that in large part existing investors’ obligations derive primarily from the host state’s domestic law, from the terms of the investment contracts themselves118 and, less frequently, from the home state’s domestic law.119 The Urbaser award is interesting because for the first time an investment tribunal accepted jurisdiction over a human rights counterclaim and considered at length whether foreign investors can bear obligations under international human rights law.120 This regulatory dispute, like Suez and AWG discussed earlier in this chapter, resulted from Argentina’s emergency measures introduced in response to its 2001–02 financial crisis. The claimant, Urbaser, held shares in a concessionaire which supplied water and sanitation services in Buenos Aires. The primary ICSID claim was brought by Urbaser on the basis of alleged breaches of FET and of the provisions against expropriation in the Spain-Argentina BIT, breaches which caused the financial loss suffered by Urbaser and its subsequent insolvency. Argentina based its counterclaim121 on an alleged violation of the right to water, triggered by a failure by the concessionaire to adequately invest in the concession.122 The investment tribunal’s finding that the counterclaim was within the jurisdiction of the centre and its 117 On this point, see eg C Ryngaert, ‘Non-State Actors: Carving out a Space in a State-Centred International Legal System’ (2016) 63 Netherlands International Law Review 183, 191 explaining that ‘[d]irect NSA [non-state actors] obligations exist, but they are certainly not widespread. They exist for armed groups under humanitarian law treaties and for deep seabed mining corporations under the UN Convention on the Law of the Sea. More often than not, NSA obligations are just indirect: the treaty imposes obligations on states to regulate NSAs. Such NSA obligations then arise under domestic rather than international law’. See also J d’Aspremont, ‘Non-State Actors and the Social Practice of International Law’ in M Noortmann et al (eds), Non-State Actors in International Law (Oxford, Hart Publishing, 2015) 11–31. See more generally M Karavias, Corporate Obligations under International Law (Oxford, Oxford University Press, 2013). 118 De Brabandere (n 113). 119 Such as in the case of the French Corporate Duty of Vigilance Law, imposing compulsory due diligence requirements along the supply chains of certain companies incorporated or registered in France, selected on the number of employees: Loi de Vigilance No 2017-339 of 2017, Décision no 2017-750 DC du 23 Mars 2017 du Conseil Constitutionnel. S Cossart et al, ‘Developments in the Field. The French Law on Duty of Care: A Historic Step Towards Making Globalization Work for All’ (2017) 2 Business and Human Rights Journal 317. 120 See E Guntrip, ‘Urbaser v Argentina: The Origins of a Host State Human Rights Counterclaim in ICSID Arbitration?’ (10 February 2017) EJILTalk! at www.ejiltalk.org/urbaser-v-argentina-theorigins-of-a-host-state-human-rights-counterclaim-in-icsid-arbitration/. 121 The counterclaim was filed under Art 46 ICSID Convention and Rule 40(1) of the ICSID ­Arbitration Rules. 122 Urbaser v Argentina (n 4) para 1156, where Argentina argued that ‘under the Concession Contract and the applicable Regulatory Framework, Claimants assumed investment obligations. These obligations gave rise to bona fide expectations that those investments would indeed be made and would make it possible to guarantee, in the area in question, the basic human right to water and sanitation. By failing to make the investments they had undertaken to make, Claimants violated the principles of good faith and pacta sunt servanda that are recognized both by Argentine law and by international law. Such failure did not only affect mere contractual provisions, but basic human rights, as well as the health and the environment of thousands of persons, most of which lived in extreme poverty’ (original emphasis).

The Contours of a Troubled Relationship  163 reluctance to accept ‘the principled position that guaranteeing the human right to water is a duty that may be borne solely by the State, and never borne also by private companies like the C ­ laimants’123 was considered ground-breaking, both for creating a precedent for a host state human rights counterclaim in investor-state arbitration, and for having the potential to shift the debate on corporate human rights obligations in international law.124 To establish the existence of corporate obligations vis-à-vis the right to water, the tribunal relied on the Universal Declaration of Human Rights (UDHR) and the International Covenant on Economic, Social and Cultural Rights (ICESCR).125 It also relied on Article 30 UDHR126 and Article 5(1) ICESCR127 to affirm that these instruments were also addressed to companies128 and that they established ‘an obligation on all parts, public and private parties, not to engage in activity aimed at destroying such rights’.129 Although the tribunal did not elaborate further on this point, it arguably referred to a company’s obligation to respect the right to water.130 As seen in chapter three, the Committee on Economic Social and Cultural Rights (CESRC) considered the nature of state obligations in the context of business activities,131 and referred to privatisation when discussing the state obligation to protect the right to water. Despite acknowledging that ‘privatisation is not per se prohibited by the Covenant’,132 the CESCR clarified that private providers however should be subject to strict regulations, imposing on them so-called ‘public service obligations’: in the provision of water or electricity, this may 123 ibid paras 1193–94. 124 See K Crow and L Lorenzoni Escobar, ‘International Corporate Obligations, Human Rights and the Urbaser Standard: Breaking New Ground?’ (2018) 36 Boston University International Law Journal 87, 111, arguing that whilst the international human rights regime ‘cannot logically apply to business as it is, it is possible to build frameworks that link concrete business operations to the substance of the right through a functional, rather than formal, approach’. See also See Y ­Levashova, ‘The Accountability and Corporate Social Responsibility of Multinational Corporations for Transgressions in Host States through International Investment Law’ (2018) 14 Utrecht Law Review 40, 41. 125 See Urbaser v Argentina (n 4) paras 1196–97. 126 Art 30 UDHR establishes that ‘[n]othing in this Declaration may be interpreted as implying for any State, group or person any right to engage in any activity or to perform any act aimed at the destruction of any of the rights and freedoms set forth herein’. 127 Art 5(1) ICESCR provides that ‘[n]othing in the present Covenant may be interpreted as implying for any State, group or person any right to engage in any activity or to perform any act aimed at the destruction of any of the rights or freedoms recognized herein, or at their limitation to a greater extent than is provided for in the present Covenant’. 128 Urbaser v Argentina (n 4) para 1196. 129 ibid para 1199 (emphasis added). 130 On this point see further E Guntrip, ‘Private Actors, Public Goods and Responsibility for the Right to Water in International Investment Law: An Analysis of Urbaser v Argentina’ (2018) Brill Open Law . 131 CESCR, ‘General Comment No 24 (2017) on State Obligations under the International Covenant on Economic, Social and Cultural Rights in the Context of Business Activities’ (10 August 2017) UN doc E/C.12/GC/24. 132 ibid para 21. On the importance of conceptualising water as part of the commons rather than as a commodity, see ch 3 and more generally K Bakker, ‘The “Commons” Versus the

164  Analysing the Relationship include requirements concerning universality of coverage and the continuity of the service, pricing policies, quality requirements, and user participation.133

Yet, the obligation to regulate, so as to impose such legally binding ‘public service obligations’ upon private providers, still rests upon the state, to ensure that the services [private actors] provided are accessible to all, are adequate, are regularly assessed in order to meet the changing needs of the public and are adapted to those needs. Since privatisation of the delivery of goods or services essential to the enjoyment of Covenant rights may result in a lack of accountability, measures should be adopted to ensure the right of individuals to participate in assessing the adequacy of the provision of such goods and services.134

In light of the above, therefore, the recognition that business can bear obligations under international law, as formulated by the Urbaser tribunal, should be approached with caution. As argued by Guntrip, the tribunal could not construe such an obligation from Article 30 UDHR and Article 5(1) ICESCR, which are instead ‘aimed at preventing the deliberate misinterpretation of one human rights obligations to justify the violation of other rights’.135 Despite recognising the existence of an investor’s obligation not to destroy the rights enshrined in Article 5(1) ICESCR, the tribunal affirmed that in international law the human rights to water entails an obligation of compliance on the part of the State, but it does not contain an obligation for performance on part of any company providing the contractually required service. Such obligation would have to be distinct from the State’s responsibility to serve its population with drinking water and sewage services.136

Referring to the CESCR General Comment 15 on the right to water, discussed in detail in chapter three, the tribunal reiterated that the Covenant’s obligations

“Commodity”: Alter-globalization, Anti-Privatization and the Human Right to Water in the Global South’ (2007) 39 Antipode 430. See also V Petrova, ‘At the Frontiers of the Rush for Blue Gold: Water Privatization and the Human Right to Water’ (2005–06) 31 Brooklyn Journal of International Law 577, 604. 133 General Comment 24 (n 131), para 21. 134 ibid para 22. Despite existing controversies over the existence (vel non) of a home state obligation to regulate the extraterritorial conduct of companies domiciled in its territory and/or jurisdiction, at para 33 the CESCR stated that the extraterritorial aspect of a state obligation to protect includes the imposition of due diligence obligations on such companies, and the creation of appropriate monitoring and accountability procedures to ensure effective prevention and enforcement. ‘Such procedures’ the CESCR continued ‘may include imposing a duty on companies to report on their policies and procedures to ensure respect for human rights and providing effective means of accountability and redress for abuses to Covenant rights’. 135 Guntrip (n 120), referencing B Saul et al, The International Covenant on Economic Social and Cultural Rights: Commentary, Cases, and Materials (Oxford, Oxford University Press, 2014) 263. See also P Abel, ‘Counterclaims Based on International Human Rights Obligations of Investors in International Investment Arbitration: Fallacies and Potentials of the 2013 ICSID Urbaser v  Argentina Award’ (2018) Brill Online 19–22, http://booksandjournals.brillonline.com/content/ journals/10.1163/23527072-00101003. 136 Urbaser v Argentina (n 4) para 1208.

The Contours of a Troubled Relationship  165 impose a duty on state parties to take steps to ensure that everyone enjoys the right to water. According to the tribunal, [t]he necessary step is therefore that a host State accepting investments in the domain of the provision of water relies on the BIT to have the investor participating to its obligation under international law. It thus complies with the conclusion of UN Committee on Economic, Social and Cultural Rights that ‘States parties should ensure that the right to water is given due attention in international agreements.’ This includes the possibility to consider matters related to the human right to water in the dispute resolution mechanisms provided for in such agreements. However, the investor’s obligation to ensure the population’s access to water is not based on international law. This obligation is framed by the legal and regulatory environment under which the investor is admitted to operate on the basis of the BIT and the host State’s laws.137

With this statement, the tribunal endorsed the CERSC’s view that states should protect their regulatory space, for instance by introducing human rights clauses in IIA. It also added that if the host state wanted to establish legally binding obligations on investors, this should be introduced in the legal framework applicable to the investor at the time of the investment. Investors’ obligations, therefore, could only be derived from the concession agreement and/or under domestic law, not from international law, and since the tribunal had no jurisdiction over the concession agreement or on matters of domestic law, the counterclaim could not succeed.138 The tribunal went on to state, however, that [t]he situation would be different in case an obligation to abstain, like a prohibition to commit acts violating human rights would be at stake. Such an obligation can be of immediate application, not only upon States, but equally to individuals and other private parties. This is not a matter for concern in the instant case.139

This categorisation of human rights obligations by the Urbaser tribunal as an obligation not to destroy the right; an obligation of performance; and an obligation to abstain from violating human rights, differs substantially from the taxonomy adopted by international courts and tribunals, and by relevant UN  Treaty Bodies such as the CESCR. At this point of our discussion, it is important to note that the affirmation by Urbaser of the existence of investors’ obligations in international law has prompted some proposals which define investors’ obligations along the lines of the Urbaser tribunal’s interpretation. Some of these proposals are presented as a functional understanding of human rights, which would ‘link concrete business operations to the substance of the rights’,140 crucially through corporate social responsibility (CSR). Crow and Lorenzoni Escobar argue that CSR adopts a functional approach to human



137 ibid

para 1209 (emphasis added). para 1210. 139 ibid (emphasis added). 140 Crow and Lorenzoni Escobar (n 124) 22. 138 ibid

166  Analysing the Relationship rights because it ‘manages human rights contingencies of specific business ­operations’.141 The Urbaser tribunal, in their view, also understands CSR in this way, and as such is insufficient, on its own, ‘to oblige corporations to harmonize internal policies with human rights law’142 but is capable to contextualise the specific activities of a company vis-à-vis their relationship to the human right at issue. In this way, CSR is seen as a tool to determine whether an international legal obligation attaches to a corporate non-state actor.143 This functional approach to human rights largely reflects the ‘principled pragmatism’ invoked by the UNGP, which in turn prioritises the ‘liberal management of vulnerability’144 over a preventative approach to human rights protection, as delineated in chapter one. Undoubtedly, as we have seen in chapter three, there are clear limitations to what can be achieved through claims framed in human rights terms, especially in the context of the human right to water, not least because of its current indifference as to the way in which water is conceptualised (ie its compatibility with the understanding of water as an economic good) and administered (its ‘agnosticism’ as to whether water should be privatised or not). Nevertheless, whilst a functional approach based on CSR conceptualises human rights as ‘business contingencies’ – that is to say, mainly as a business risk to the company – a focus on preventative protection would at least demand the identification and prevention of risks to the people affected by the business activities of the investor. As I discuss in chapter five, CSR (or business and human rights as CSR’s contemporary manifestation) adopts ‘the same categories and logic that corporations use to manage public attitudes towards their activity’.145 Before examining the role of business and human rights at the intersection of IIL and IHRL in conflict countries, however, I consider the inherent limitations of IIL and their relevance to the ‘balancing’ exercise that investment arbitration tribunals are called to make between the interests of the investors and those of the local population of the host state. B.  Of the Inherent Limitations of International Investment Law Given the potential reach of investor-state regulatory disputes, exemplified by the arbitrations examined in the previous section, it is important to critically examine the claim that investment treaty arbitration is capable of dealing with disputes that, beyond economic aspects concerning investment, also present

141 ibid (emphasis added). 142 ibid. 143 Urbaser v Argentina (n 4) para 1195, as quoted in Crow and Lorenzoni Escobar (n 124). 144 L Eslava and L Buchely, ‘Security and Development? A Story about Petty Crime, the Petty State and its Petty Law’ Revista de Estudio Sociales (2019, forthcoming, copy in file with author). 145 L Eslava, ‘Corporate Social Responsibility and Development: A Knot of Disempowerment’ (2008) 2 Sortuz Oñati Journal of Emergent Socio-Legal Studies 43, 43.

The Contours of a Troubled Relationship  167 human rights, environmental and wider public dimensions relevant to the health, wellbeing and human dignity of the affected local population. In this regard, investment treaty arbitration has been the subject of fierce criticism on various fronts: as outlined below, given its hybrid genesis and its distinctive nature in international law as a de facto mechanism of public law review, it has been defined by many as biased,146 lopsided147 and imperialistic.148 Investment treaty arbitration is also considered by many to be a unique system in public international law, in that it directly inherited the features of private commercial law, whilst at the same time fully operating within the public law sphere.149 This private commercial law legacy is at the core of much criticism of investment treaty arbitration. Commercial arbitration was conceived as an alternative dispute mechanism to solve private conflicts arising between equal private actors out of mutually agreed contractual obligations, and to obtain damages for eventual breaches of such obligations. Investment treaty arbitration, by contrast, addresses regulatory disputes between states and corporate individuals, by reviewing the conduct of sovereign states on the basis of standards of investment protection enshrined in IIAs. The scope of this review often relates to state regulatory measures involving public interest issues, such as the granting of concessions to operate public utilities, extract natural resources or carry out large infrastructure projects.150 The damages awarded for breaches of relevant investment treaty standards usually amount to hundreds of millions of dollars,151 taxpayers’ money funnelled away from governments’ budgets because of investment tribunals ‘holding sovereign states liable in damages for democratically adopted laws and regulations’.152 Furthermore, commercial arbitration is based on the mutual consent by private disputing parties to adopt an alternative method of dispute resolution which is less expensive and time-consuming than proceedings in national courts. In IIAs, on the other hand, states agree to bring to international arbitration any future dispute arising from their regulatory actions, thus automatically bypassing the ‘risk’ of domestic constitutional review and challenges to the investment agreements themselves. As contended by Van Harten, [p]ublic law adjudication is distinct from reciprocally consensual adjudication in the private sphere because the state acts in a sovereign capacity when it consents to the

146 Van Harten (n 9). 147 Chung (n 21). 148 K Miles, ‘International Investment Law: Origins, Imperialism and Conceptualizing the Environment’ (2010) 21 Colorado Journal of International Environmental Law and Policy 1. Contrast with JE Alvarez, ‘Contemporary International Law: An “Empire of Law” or the “Law of Empire”?’ (2009) 24 American University International Law Review 811, 832. 149 Van Harten (n 9) ch 3. 150 N Blackaby and C Richard, ‘Amicus Curiae: A Panacea for Legitimacy in Investment Arbitration?’ in Waibel et al (n 8) 255. 151 ibid. 152 ibid.

168  Analysing the Relationship adjudication and because the relevant dispute arises from the exercise of sovereign authority by the state.153

If we conceive of sovereignty as ‘a conceptual framework for understanding the representative relationship between the state and the people in its ­territory’154 and ‘as a tool for thinking about how people are organized as political ­entities’,155 the problematic aspect of future consent to investment arbitration in an international forum, often without having to exhaust domestic remedies,156 becomes apparent. For the purposes of this book, an analysis of the systemic shortcomings of IIL and its arbitration mechanism is necessary to counter claims that investment treaty arbitration represents a neutral forum for the settlement of international investment disputes.157 In the following sections I focus, therefore, on the historical roots of IIL, as well as on the way in which investment treaty arbitration responds to the requirements of transparency, public participation and judicial independence, all seen as fundamental elements of any adjudicatory system in charge of reviewing a state’s regulatory powers.158 It is from this public law review perspective, in fact, that systemic faultlines become more apparent and that the credibility, sustainability and inherent legitimacy of the IIL project can be clearly challenged. i.  The Neoliberal Lineage of International Investment Law An analysis of the historical roots of IIL reveals that there are at least two competing genealogies describing the way in which the project has evolved.159 These contrasting histories reflect different theoretical and ideological understandings of how IIL should be conceived and what role it should play in protecting foreign private capital and in performing the often-invoked balancing between private and public interests.160 For those who perceive IIL as ‘a coherent and systemic international legal order’,161 it primarily aims at promoting and protecting investment162 and relies on the general understanding that foreign investors require protection, particularly when they invest

153 Van Harten (n 9) 49. 154 ibid 48. 155 ibid. 156 S Ratner, The Thin Justice of International Law (Oxford, Oxford University Press, 2015) 371. 157 See eg U Kriebaum, ‘Human Rights and the Population of the Host State in International Investment Arbitration’ (2009) 10 The Journal of World Investment & Trade 653. 158 Van Harten (n 9). 159 A Mills, ‘Antinomies of Public and Private at the Foundations of International Investment Law and Arbitration’ (2011) 14 Journal of International Economic Law 469, 471. 160 ibid 471. 161 ibid 472. 162 R Dolzer and M Stevens, Bilateral Investment Treaties (The Hague, Kluwer Law International, 1995).

The Contours of a Troubled Relationship  169 in high-risk countries, prone to sudden economic and political changes.163 Thus, whilst foreign investors usually, but not always, remain constrained by local legal and regulatory frameworks pre-existing the investment, IIL grants them additional overarching protections.164 For those espousing this perspective, IIL is a constantly developing body of law, which reflects a ‘universal’, ‘non-ideological’ consensus towards foreign investment,165 and investor treaty arbitration a necessary forum to prevent discrimination against foreign investors in national courts.166 According to this view the investment project has progressively developed since the nineteenth century, as a result of developing states’ increased recognition of ‘the benefits of global standardization and the freeing up of global capital’.167 The growing number of international IIAs is seen by those who support this historical reconstruction as a testimony to a conscious decision by the international community to overcome past controversies, and embrace ‘the emergence of an international investment regime that has become virtually universal’.168 The alternative view understands the history of IIL as one of opposing perspectives and interests between North and South.169 According to this contrasting genealogy, European liberal ideologies resulted in an alignment of the interests of capital-exporting states with those of investors.170 Supporters of this view argue that this alignment is still evident today in the way in which ‘the law of capital-exporting states enables their multinational corporations to pursue economic activities globally, but disengages when called upon to protect the local communities and environments within which those companies operate’.171 Rather than as a ‘coherently’ expanding regime capable of offering technical solutions to the challenges faced, IIL is perceived as the legal arena in which unresolved ideological tensions continue to manifest themselves.172

163 JD Taillant and J Bonnitcha, ‘International Investment Law and Human Rights’ in M ­Cordonier Segger et al (eds) Sustainable Development in World Investment Law (The Hague, Kluwer Law International, 2011) 57, 61. 164 ibid. 165 Mills (n 159) 472. See also M Sornarajah, Resistance and Change in the International Law on Foreign Investment (Cambridge, Cambridge University Press, 2015) especially ch 3. 166 See ch 2. See also A Yilmaz Vastardis, ‘Justice Bubbles for the Privileged: A Critique of the Investor-State Dispute Settlement Proposals for the EU’s Investment Agreements’ (2018) 6 London Review of International Law 279. 167 Mills (n 159) 472. 168 KJ Vandevelde, ‘A Brief History of International Investment Agreements’ (2005) 12 University of California Davis Journal of International Law and Policy 157, 193. 169 M Sornarajah, The International Law on Foreign Investment (Cambridge, Cambridge University Press, 2010) 18. 170 Miles (n 51) 39–40. 171 ibid 37. 172 A Kaushal, ‘Revisiting History: How the Past Matters for the Present Backlash Against the Foreign Investment Regime’ (2009) 50 Harvard International Law Journal 491, 496. See also Mills (n 159) 476.

170  Analysing the Relationship These two competing historical genealogies of IIL seem to reflect two conflicting historical Weltanschauung which characterised the emergence of the international investment regime,173 accelerated in the aftermath of World War II by the reassertion of control over natural resources by newly independent states during the 1950s. The wave of nationalisation and expropriation of foreign concessions of the 1950s was followed by parallel claims by developing countries in the UN General Assembly174 for permanent sovereignty over natural resources in Resolution 1803175 and for a new international economic order in Resolution 3201176 and Resolution 3281.177 This succession of events from the 1950s through to the 1970s did not engender the immediate emergence of IIAs,178 but foreign investors and their home states mobilised to retain control and protect property in newly independent developing states.179 Various factors were used to promote IIAs. Up until the end of the 1970s, capital-exporting states reassured domestic constituencies that international investment treaties would not generate more foreign investment and capital outflows,180 whilst the general idea that IIAs would attract foreign investment was actively promoted to host states. Host states were thus pitted against each other to attract a perceived

173 Kaushal, ibid 499. See also, more generally, T St John, The Rise of Investor-State Arbitration: Politics, Law and Unintended Consequences (Oxford, Oxford University Press, 2018) especially ch 6 ‘Layering: How Investor-State Arbitration Was Added to Investment Treaties’. 174 Kaushal (n 172) 500. 175 Permanent Sovereignty over Natural Resources (14 December 1962) GA Res 1803 (XVIII), 15, UN Doc A/5217. 176 Declaration on the Establishment of a New International Economic Order (1 May 1974) GA Res 3201 (S-VI), UN Doc A/9559. 177 Charter of Economic Rights and Duties of States (12 December 1974) GA 3281 (XXIX), UN Doc A/9631. 178 See J Bonnitcha et al, The Political Economy of the Investment Treaty Regime (Oxford, Oxford University Press, 2017) 20–21, providing evidence that the vast majority of IIAs (mainly BITs) were signed during the 1990s, and not simultaneously to their opposition to foreign investment protection in the UN General Assembly during the 1970s (see also 210–12): ‘in 1974, the year of the Charter of Economic Rights and Duties of States, the international BIT network largely remained a phenomenon between Europe and Africa. Most other developing countries refrained as the North-South divide of the investment regime was entrenched … Yet, the investment treaty regime was built, slowly but steadily, treaty by treaty’. 179 See ibid 21, explaining that the resolutions promoted by Third World countries within the UN General Assembly ‘encouraged several developed countries to begin, or accelerate, their BIT programs in response’. See also Slobodian (n 100) 220–24, describing how the nationalisation of US-owned firms after the declaration of a New International Economic Order was perceived by companies and governments as creating legal uncertainty regarding existing norms regulating private property. He also explains at 220 that ‘since the 1930s the Geneva School neoliberals believed that empire could end as long as private property rights … were protected worldwide and the free flow of capital and goods disciplined the behavior of postcolonial states. By extending the demand for sovereignty and autonomy form the realm of politics into the realm of property, the NIEO was in direct opposition to the normative neoliberal model of double government. As with the creation of the United Nations in the immediate postwar period, the scaling up of the democratic principle to the international level after the end of decolonization threatened the doubled world of global capitalism envisaged by neoliberals’. 180 St John (n 173).

The Contours of a Troubled Relationship  171 limited amount of foreign investment.181 Within this context, IIAs were held up as an obvious sign of a country’s commitment to establishing an environment favourable to foreign investment.182 From the late 1970s, the need to compete for available funds was exacerbated by several changes, eventually leading to the IIA ­‘explosion’ of the 1990s: the oil crisis of 1973, the economic crises of the 1980s and the related decline in development aid and assistance were compounded by the increasing pressure for the opening of developing countries’ markets to foreign investment being exerted jointly by the International Monetary Fund (IMF) and the World Bank (WB).183 The IMF’s structural adjustment programmes and the WB’s structural adjustment loans operated simultaneously in demanding harsh economic policy reforms through their loan conditionalities, which were directly aimed at openness to foreign investment through market liberalisation, extensive privatisation and fiscal austerity.184 The coercion exercised by these conditionalities, coupled with the lack of alternative funding through aid or development assistance, meant that developing countries mostly acquiesced to the prevailing mantra that IIAs would promote foreign investment inflows and stimulate economic development.185 As explained by Van Harten, investment treaty arbitration is ‘an important legal and institutional piece of the neoliberal puzzle because it imposes exceptionally powerful legal and economic constraints on governments and, by extension, on democratic choice, in order to protect from regulation the assets of multinational firms’.186 Yet, although specifically conceived as a tool to bolster legal protections for foreign investors, IIL and its arbitration mechanism are very often presented as a ‘neutral’ alternative to the resolution of disputes in the national courts of the host state. The latter are in fact usually considered inadequate, biased or corrupt, and in any case less efficient than international alternative dispute resolution systems, especially when the host states are developing or transitioning states.187 Moreover, international investment tribunals are often presented as capable of achieving rapid, impartial decisions, and able

181 Kaushal (n 172) 503. 182 ibid 502. 183 ibid 504–07. 184 ibid 507. See also A Anghie, Imperialism, Sovereignty and the Making of International Law (Cambridge, Cambridge University Press, 2005) 258–72. 185 Both of these assumptions have recently been widely challenged. On the promotion of investment point, see T St John, ‘Investment Law Leads to More Investment: A Faulty Premise?’ (27 May 2018) https://blog.oup.com/2018/05/investment-law-investor-state-arbitration/ where she provides archival evidence of the fact that when the system was originally set up states appreciated the protection aspect of IIL, but did not expect it to promote investment: they actually favoured the system because, wanting to prevent opposition from labour unions for instance, they did not expected it to lead to further foreign investment. On the development claim, see eg UN Human Rights Council, ‘Protect, Respect and Remedy: A Framework for Business and Human Rights’ (7 April 2008) UN Doc A/HRC/8/5, 33–42. 186 G Van Harten, ‘Five Justifications for Investment Treaties: A Critical Discussion’ (2010) 2 Trade Law and Development 19, 24. 187 ibid 33.

172  Analysing the Relationship to independently balance so-called investors’ rights against the human rights of the wider public.188 However, as I discuss below, the purported neutrality of investment treaty arbitration as well as the independence of investment arbitrators are far from unchallenged.189 I argue that the ‘neutrality’ argument is best understood as an attempt to depoliticise public interest disputes by offering technical legal solutions to problems that, in reality, present multi-faceted dimensions which, in fact, go to the core of political decision-making. ii.  Judicial Independence As we have seen, investment treaty arbitrators have wide powers to adjudicate on the legality of a state’s regulatory powers, without being subject to any further review of their decision.190 Unsurprisingly, given this de facto final public law review role, they have increasingly come under close scrutiny and criticism because of the lack of safeguards to their judicial independence, in particular security of tenure.191 Various commentators have argued that the standards of independence and impartiality required for investment treaty arbitrators should be commensurate to their powers, and therefore correspond to those applicable to similar adjudicating public law bodies,192 especially with regards to guarantees of impartiality and independence. The concept of judicial independence is primarily aimed at ensuring a separation of powers between the judiciary and other government branches, so that adjudicators would be insulated from external political or financial undue influence or pressure which may be seen as potentially affecting their impartiality.193 In other words, and in a context that is particularly relevant to investment treaty arbitration, judicial independence is not only intended to isolate the adjudicators from political influence, but also from possible pressure and manipulation from powerful corporate actors or lobby groups.194

188 AS Sweet, ‘Investor-State Arbitration: Proportionality’s New Frontier’ (2010) 4 Law and Ethics of Human Rights 47, 75. 189 For an insight in the legitimacy debate, see eg Schneiderman (n 107) at 268, highlighting that taking regulatory disputes back to national legal systems would alleviate some of the problems engendered by investor-state adjudication, but that investment law’s agents fiercely resist this move. ‘Instead, investment lawyers and scholars have a different end game in sight: having states everywhere internalize investment law standards of treatment so that all economic actors within host states benefit from investor protections, not just foreigners’. See also A Roberts, ‘Triangular Treaties: The Extent and Limits of Investment Treaty Rights’ (2015) 56 Harvard International Law Journal 353, 355. See further DD Caron, ‘Investor State Arbitration: Strategic and Tactical Perspectives on Legitimacy’ (2009) 32 Suffolk Transnational Law Review 513, 515–16. 190 G Van Harten, ‘Perceived Bias in International Treaty Arbitration’ in Waibel et al (n 8) 436. 191 Van Harten (n 186) 12–15. See also G Van Harten, ‘Investment Treaty Arbitration, Procedural Fairness, and the Rule of Law’ in SW Schill (ed), International Investment Law and Comparative Public Law (Oxford, Oxford University Press, 2010). 192 Van Harten (n 190) 436. See W Park, ‘Arbitrator Integrity’ in Waibel et al (n 8) part III. 193 Van Harten, ibid 437–38. 194 ibid 438.

The Contours of a Troubled Relationship  173 Criticism of investment arbitrators is mainly animated by the fact that they are nominated on an ad hoc basis, and that many of them are part of the inner circles of international investment law, as they serve as counsel in certain disputes, sit as adjudicators in others, and generally participate in lobby groups which support the entrenchment of investment treaty arbitration as a whole. For these reasons, they are often perceived as having a vested interest in ensuring that investment provisions are interpreted expansively or in a way which maintains the status quo and favours the interests of investors,195 potentially to ensure future reappointment. Proponents of investment treaty arbitration have responded to these arguments by claiming that there is no evidence of actual bias in the actions of investment arbitrators and that many arbitrators actually have extensive expertise in public international law. Yet, the public law standard of judicial independence does not require proof of actual bias, which would be in most cases almost impossible to prove. The general tendency has been to require ‘the absence of an unacceptable apprehension of bias or appearance or suspicion or danger of bias’.196 As long, however, as investment arbitrators are perceived as prone, for matters of principle or of financial gain, to please the investors or countries that are most likely to appoint them,197 it will be very difficult to eliminate the perception of bias which pervades investment treaty arbitration – not least because the main concerns are not related to the professionalism or integrity of any individual investment arbitrator, but rather to the systemic shortcomings of investment treaty arbitration which undermine the adjudicative process as a whole.198 As mentioned earlier in the chapter, however, the issue of judicial independence is most likely just a ‘fig leaf’ covering the underlying structural violence which characterises the ‘naked’ body of IIL, and probably the easiest aspect to address through procedural reforms, which however leave the substance of the system fundamentally unchallenged. As such, many of the proposals for reforms have latched on, almost exclusively, to this aspect of investment treaty arbitration, and proposed the creation of investor-state courts with tenured judges. As argued by Schneiderman, despite the undeniable advantages brought by the investment court model, ‘an investment state court will not remedy the principal defect of investment arbitration, which is not about process but about substance. The treaty disciplines enforced by this cadre of investment and trade lawyers, on retainer or not, remain mostly intact’.199

195 Van Harten (n 186). See also P Sands, ‘Reflections on Judicialization’ (2017) 27 European Journal of International Law 885. 196 Van Harten (n 190) 439. 197 Van Harten (n 186). 198 Van Harten (n 190) 438. 199 D Schneiderman, ‘A CETA Investment Court is Not the Solution’, The Globe and Mail, 5 March 2016, available at www.theglobeandmail.com/report-on-business/rob-commentary/a-cetainvestment-court-is-not-the-solution/article29034167/, as quoted in Tzouvala (n 98) 199 (emphasis added).

174  Analysing the Relationship iii.  Transparency and Public Participation Another recurrent criticism of investment treaty arbitration concerns the confidentiality of the proceedings.200 Confidentiality is one particular aspect of commercial arbitration which has been directly transferred to investment treaty arbitration, but that sits very uneasily with the requirements of public access to information, ‘a fundamental principle of judicial decision-making in domestic and international courts’. One of the requirements of public access to information is ‘that adjudication take place in the public eye, subject to specifically enumerated exceptions, and that the judicial decisions and relevant documents filed in a litigation be placed on the public record’.201 This is to ensure that judicial decisions with the potential to affect the public at large are subject to public scrutiny, and that the accountability and independence of adjudicators are ensured. Commercial arbitration, however, unlike public law, is based on the concept of ‘party autonomy’, according to which the parties are entitled to confidentiality in relation to the arbitration of their dispute, unless they decide otherwise.202 By directly incorporating party autonomy into the rules of the main investment arbitration bodies (ICSID, UNCITRAL, International Chamber of Commerce, etc), matters of public law are de facto adjudicated upon without public scrutiny, and affected communities – as well as other relevant stakeholders – have no standing in the disputes. Whilst some states and investment tribunals have recognised the need to increase the transparency of investment arbitration proceedings, not least in order to achieve increased legitimacy for the IIL project, improvements regarding the compulsory publication of documents related to the arbitration proceedings203 are mainly limited to awards adjudicated within the ICSID system. Arguably, however, these developments are insufficient to meet the standards of judicial decision-making necessary in public law adjudication, since transparency of the proceedings is not only about how many people can eventually read a tribunal’s decision. As explained by Van Harten, transparency is about the parties and the adjudicators knowing that their views and arguments can be read and picked apart by anyone, so that they will more assuredly consider the implications of what they do or decide for their reputation and for that of the system. This knowledge is integral to the accountability and independence of judges, especially where they are deciding questions of sovereign authority and the allocation of taxpayer funds.204

200 M Jacob, ‘International Investment Agreements and Human Rights’ (2010) INEF Research Paper Series No 03/2010, 23. 201 Van Harten (n 9) 159. 202 ibid 160. 203 J Harrison, ‘Recent Developments to Promote Transparency and Public Participation in Investment Treaty Arbitration’ (2011) University of Edinburgh School of Law Working Paper Series No 2011/01, 11–14, at http://ssrn.com/abstract=1739181. 204 Van Harten (n 9) 161.

The Contours of a Troubled Relationship  175 In cases which can bear far-reaching consequences for the rights of the public and of affected local populations,205 the power in the hands of the arbitrators seems too extended for it to be exercised behind the closed door of investment tribunals. There are, however, also significant risks inherent in the current tendency to consider transparency and public participation as two sides of the same coin. One specific characteristic of this trend is the acceptance of amicus curiae briefs submitted by non-disputing parties (NDPs). Amici do not become, by virtue of their written submissions, full parties to the dispute but simply offer their technical expertise and experience to the adjudicators who, in turn, are free to take the advice into consideration or not in resolving the dispute. ICSID Arbitration Rules were amended in 2006 to include the new Rule 37, enshrining specific provisions for amicus curiae submissions.206 Such provisions grant discretion to the tribunals to accept submissions by NDPs on an ad hoc basis.207 The Rule 37 criteria, therefore, are subject to the interpretation of the tribunal on establishing, for instance, whether the dispute raises public interest concerns208 and whether the NDPs have relevant expertise or specific knowledge in order to assist the tribunal.209 The final decision to disclose relevant documentation to NDPs in advance of their amicus curiae submissions, therefore, remains subject to tribunal discretion, as evidenced by some decisions210 in which the tribunals rejected the submissions and reiterated the limited role that amici can actually play.211 But, in my view, the most important reason why conflating transparency with public participation may be misleading is that there are, at the moment, at least two contrasting narratives on the meaning of the terms ‘public p ­ articipation’ within the context of investment treaty arbitration. Those in favour of the concept understand it as entailing public participation in the proceedings, access to information and access to judicial or administrative procedures.212 Those who 205 Such were the investment disputes, already mentioned above, concerning the Argentinean measures adopted in the midst of the country’s financial crisis of the early 2000s. For an overview of these cases, see JE Alvarez and K Khamsi, ‘The Argentine Crisis and Foreign Investors: A Glimpse into the Heart of the Investment Regime’ in KP Sauvant (ed), The Yearbook on International Investment Law and Policy (Oxford, Oxford University Press, 2009). 206 J Harrison, ‘Human Rights Arguments in Amicus Curiae Submissions: Promoting Social Justice’ in Dupuy et al (n 27) 24. 207 Biwater Gauff (Tanzania) Limited v Tanzania, ICSID Case No ARB/05/22, Procedural Order No 5 (2 February 2007) para 46. 208 Suez Vivendi/AWG (n 81) para 19. 209 ibid para 24. 210 LE Peterson, ‘Amicus Curiae Interventions: The Tail that Wags the Transparency Dog’ (27 April 2010) at http://kluwerarbitrationblog.com/blog/2010/04/27/amicus-curiae-interventions-the-tail-thatwags-the-transparency-dog/. See also Harrison (n 206). 211 N Blackaby and C Richard, ‘Amicus Curiae: A Panacea for Legitimacy in Investment Arbitration?’ in Waibel (n 8) 260. Also compare the Suez Vivendi/AWG response to the petition (n 81) paras 24–25 and the response in Biwater Gauff (n 207) paras 64–65, with the one in Foresti, ICSID Case No ARB(AF)/07/1 (5 October 2009) Letter from the Tribunal. 212 A Kent, ‘The Principle of Public Participation in ICSID Arbitration’, IDLO Conference on Global Sustainability, Rome June 2011, at www.idlo.int/english/Pages/PPEventJune2011.aspx.

176  Analysing the Relationship oppose it, fearing a loss of confidentiality and a re-politicisation of investment disputes,213 favour instead a utilitarian approach whereby public participation is limited to the ‘managed’ authorisation of amicus curiae submissions, mainly aimed at ensuring that investment treaty arbitration regains a veneer of public legitimacy.214 Not surprisingly, the utilitarian narrative is the only one embraced by tribunals so far. As mentioned above, publication of awards and materials related to the regulatory disputes have improved in response to the criticism levelled against the IIL regime. These improvements, however, have mainly focused on procedural aspects, whilst the substantive elements of investment protection, as discussed in chapter two, continue to be developed expansively. Teitelbaum, in her critique of the ‘transparency movement’ appropriately denounces the fact that ‘enhanced transparency procedures in investment arbitration continue to blur the line between public and private adjudication’.215 If the real issue at hand, she argues, is protecting the host state’s regulatory powers in matters of public interest, then it would seem more appropriate to ‘focus on taking the power to adjudicate regulatory authority away from arbitrators, rather than on legitimizing, through transparency procedures, the arbitrators’ ability to determine whether a state’s environmental regulation is a breach of investment treaty obligation’.216 I agree with Teitelbaum and submit that this is a power that should be taken away from investment treaty arbitration altogether and brought back into the remit of national fora, in both home and host states.217 The compounded limitations of investment treaty arbitration that I have examined in this section are sufficient, in my view, to raise a certain scepticism to the suggestion, advanced by some, that investment tribunals need to carry out a ‘balancing’ exercise between investors’ rights and human rights when interpreting competing obligations. In what follows I discuss the implications of this suggestion. II.  IS A BALANCE BETWEEN ‘INVESTORS’ RIGHTS’ AND HUMAN RIGHTS POSSIBLE?

The question that I ask in the title of this section is not meant to be a rhetorical question. The suggestion that investment tribunals could harmonise

213 E Levine, ‘Amicus Curiae in International Investment Arbitration: The Implication of an Increase in Third-Party Participation’ (2010) 29 Berkeley Journal of International Law 200. 214 Kent (n 212). 215 R Teitelbaum, ‘A Look at the Public Interest in Investment Arbitration: Is It Unique? What Should We Do About It?’ (2010) 5 Publicist 54, 60. 216 ibid 60. 217 See Yilmaz Vastardis (n 166) 281, explaining that various fora are indeed available to solve investor-state disputes, such as ‘judicial proceedings, conciliation, mediation, negotiation and arbitration’.

Is a Balance Between ‘Investors’ Rights’ and Human Rights Possible?  177 c­ ompeting IIL and IHRL obligations through treaty interpretation has in recent years gained some momentum.218 Among other things, scholars dedicated some attention to the possible deployment of the proportionality principle when considering the nature of host state’s actions which may have impaired foreign investment.219 As argued by Bruno Simma, however, easing the tension between investment protection and human rights protection is like ‘aiming at two moving targets’,220 the problem being ‘that the present architecture of international dispute settlement cannot adequately respond to this challenge’.221 In his view, one of the crucial problems with the current system of investment treaty arbitration is that remedies are only available ex post: once the problem has arisen for the host State and the foreign investor, the ‘moving targets’ problem is simply reduced to an issue of compensability namely, whether an investor is entitled to ‘prompt, adequate, and effective compensation’, following a

218 See eg SW Schill and V Djanic, ‘Wherefore Art Thou? Towards a Public Interest-Based Justification of International Investment Law’ (2018) 33 ICSID Review 29, 45 arguing that ‘there is ample room for employing the principle of systemic integration as a gateway for competing public interests to guide the interpretation of otherwise vague treaty standards, such as the concept of indirect expropriation or the requirement to treat foreign investors fairly and equitably. Certainly, as an arbitral tribunal is only required to “take into account” these concerns when interpreting a treaty, their precise impact can only be assessed on a case-to-case basis. In some instances (such as in Al-Warraq v Indonesia), their effect may be to help clarify IIA standards for the benefit of investors, while in others (such as Philip Morris v Uruguay) they will elucidate the limits of investor protection and, hence, minimize frictions with competing public interests’ (emphasis added). See also E de Brabendere, ‘Human Rights and International Investment Law’ (26 March 2018) Grotius Centre Working Paper Series No 2018/075-HRL, 17–18, https://papers.ssrn.com/sol3/ papers.cfm?abstract_id=3149387. M Goldmann, ‘Foreign Investment, Sovereign Debt, and Human Rights’ in I Bantekas and C Lumina (eds), Sovereign Debt and Human Rights (Oxford, Oxford University Press, 2018), arguing that systemic integration of IIL and IHRL ‘might prevent investment arbitration from distorting economically and socially beneficial sovereign debt restructurings and other regulatory measures in the context of sovereign debt crises’. R Yotova, ‘Systemic Integration: An Instrument for Reasserting the State’s Control in Investment Arbitration?’ (1 August 2017). University of Cambridge Faculty of Law Research Paper No 37/2017, https://ssrn.com/ abstract=3020166. A Saldarriaga, ‘Investment Awards and the Rules of Interpretation of the Vienna Convention: Making Room for Improvement’ (2013) 28 ICSID Review 197, 211–15. 219 See generally V Vadi, Proportionality, Reasonableness and Standards of Review in International Investment Law and Arbitration (Cheltenham, Edward Elgar, 2018) especially ch 6. See also C Henckels, Proportionality and Deference in Investor-State Arbitration: Balancing Investment Protection and Regulatory Autonomy (Cambridge, Cambridge University Press, 2015), arguing for the adoption of the proportionality reasoning by investment tribunals and in favour of a deferential approach to the standard of review in the determination of regulatory disputes, so as to ascertain whether an interference with a right is justifiable, or whether a state has overstepped the boundaries of discretion enshrined in the police powers doctrine. See further G Bücheler, Proportionality in Investor-State Arbitration (Oxford, Oxford University Press, 2015) 100, arguing that ‘whether called “meta-constitutional rule”, tool of “neutral, rational-decision making” or “principle”, for the purposes of Article 38(1) (c) of the ICJ Statute it only matters that proportionality is a legal concept sufficiently established in domestic law and transposable to the international level’. As such, he argues, proportionality is a principle of international law within the meaning of Article 38(1) (c) of the ICJ Statute. See also A Stone Sweet, ‘Investor-State Arbitration: Proportionality’s New Frontier’ (2010) 4 Law and Ethics of Human Rights 47. 220 Simma (n 15) 579. 221 ibid.

178  Analysing the Relationship substantial deprivation of his investment through a measure that a host State considers necessary to implement its international obligations.222

In order to solve this problem, Simma identifies two entry points for IHRL into the international investment regime: first, the operationalisation of IHRL through treaty interpretation; second, a different approach to foreign investment contracts according to which the human rights obligations of the host state are clarified from the outset. This would enable, he argues, a recast of investors’ ‘legitimate expectations’.223 According to Simma’s first entry point, IHRL can be brought to bear in the interpretation of the relevant international investment treaty through the ‘principle of evolutionary (or dynamic) interpretation’224 provided that the parties intended the possibility for the meaning of a certain term to change in future.225 On the basis of this reasoning, international law can be used to determine the meaning of specific term when the treaties in question use ‘known legal terms whose content the parties expected would change through time’.226 International law will then be referred to on the basis of its evolution and current status, rather than considering the state of the law at the time of the conclusion of the treaty.227 Another way in which IHRL can be considered as relevant to the investment treaty in question is through the interpretative presumption that treaties are intended to produce effects which accord with existing rules of international law. This presumption is used to resolve issues of interpretation relating to the broader normative content of a treaty rather that to the meaning of a specific term.228

The key tool for IHRL to be considered in the interpretation of an international investment treaty, Simma argues, is Article 31(3)(c) of the Vienna Convention on the Law of Treaties (VCLT).229 This article, however, needs to be considered as a means of treaty interpretation and not as a potential instrument to modify the scope and content of a treaty (for instance, in order to introduce ex novo human rights consideration).230 Simma uses the 222 ibid 580. 223 ibid. 224 ibid 583. 225 ibid. See also Legal Consequences for States of the Continued Presence of South Africa in Namibia (South West Africa) notwithstanding Security Council Resolution 276 (1970), Advisory Opinion, [1971] ICJ Rep 16, as referenced in Simma. 226 ibid. 227 ibid. See also Legal Consequences for States of the Continued Presence of South Africa in Namibia (South West Africa) notwithstanding Security Council Resolution 276 (1970), Advisory Opinion, [1971] ICJ Rep 16, 28–30, paras 45–49. 228 Simma (n 15) 583. Oil Platforms (Islamic Republic of Iran v United States of America) Judgment, [2003] ICJ Rep paras 73–78. 229 United Nations, Vienna Convention on the Law of Treaties (23 May 1969) 1155 UN Treaty Series 331. 230 As discussed later in the chapter, the modification of the scope can still occur, because it falls within the discretion of the adjudicators. See further L Lo Giacco, The Use of Judicial Decisions in

Is a Balance Between ‘Investors’ Rights’ and Human Rights Possible?  179 ­example

of the Foresti  arbitration,231 in order to illustrate the potential of Article 31(3)(c) VCLT in interpreting the concept of non-discrimination under the relevant BITs. In Foresti the foreign investors claimed, inter alia, that the legislation adopted by the South African government breached the host state’s non-discrimination obligations under the relevant BITs. Simma argues that Article 1(4) of the Convention on the Elimination of All Forms of Racial Discrimination (CERD) is relevant to the interpretation of the term ‘discrimination’ in the Benelux-South Africa BIT 1998 and in the Italy-South Africa BIT 1997. According to Article 1(4) CERD, [s]pecial measures taken for the sole purpose of securing adequate advancement of certain racial or ethnic groups or individuals requiring such protection as may be necessary in order to ensure such groups or individuals equal enjoyment or exercise of human rights and fundamental freedoms shall not be deemed racial ­discrimination.

Affirmative action measures aimed at reversing the impact of the apartheid regime on black South Africans, as those adopted by South Africa in line with section 9 of its Constitution, should therefore not be considered discriminatory. Similarly, under Article 2(2) CERD state parties are required to adopt such positive measures ‘when the circumstances so warrant’. Thus, both articles are relevant to the interpretation of the non-discrimination obligations enshrined in the BITs concluded by the South African government with the Benelux countries and Italy. Accordingly, Simma concludes, it would be difficult for an investment tribunal to uphold the investors’ argument, as South Africa could not be presumed to have significantly deviated from the language adopted in the CERD when adopting the BITs.232 Simma’s second entry point for IHRL is related to the negotiation and conclusion of investment contracts between the host states and the foreign investor. In this regard, he proposes a human rights audit of the terms of each contract, as part of the due diligence assessment conducted by the investors. Thus, Simma’s approach appears to go some way towards ensuring that human rights are properly taken into consideration by international investment tribunals and foreign investors alike. One main concern, however, needs to be raised when considering his approach: despite acknowledging that investment treaty arbitration as it stands is unable to respond to the challenge of harmonisation, the two entry International Criminal Law Adjudication: New Perspectives in International Law-Making (2018, unpublished thesis, Lund University, copy on file with author). The starting point for the application of this article is to see whether human rights is a ‘relevant rule of international law applicable between the parties’ to the investment treaty at hand, on the basis of three criteria. As argued by Kill and Simma, human rights fulfil all three requirements. See B Simma and T Kill, ‘Harmonizing Investment Protection and International Human Rights: First Steps Towards a Methodology’ in C Binder et al (eds), International Investment Law for the 21st Century: Essays in Honour of Christoph Schreuer (Oxford, Oxford University Press, 2009) 678, 707. 231 Foresti award (n 18). 232 Simma (n 15) 585–86.

180  Analysing the Relationship points proposed by Simma leave the status quo practically unchallenged. The delicate task of weighing so-called ‘investors’ rights’ against the human rights of the host country’s population continues to lie in the hands of ad hoc investment treaty arbitration panels, within a system that, in itself, is both ideologically and practically inappropriate to review a state’s exercise of its regulatory powers. Simma himself recognises that his first entry point (via treaty interpretation) possibly leaves excessive discretion to investment tribunals.233 Skilfully crafted BIT clauses, which enable a human-rights-friendly reading of ‘investors’ rights’, will always remain contingent upon tribunal interpretation.234 As evidenced throughout this book, investment treaty arbitration cannot offer any guarantee in terms of systemic consistency and/or coherence, either to foreign investors or to host states. And when it comes to human rights protection, it is clear that this cannot be realised in a forum mandated to provide remedies for breaches of standards of investment protection. Various proposals for reform have been put forward to bring some change to investment treaty arbitration so as to render it more suitable to public law review functions. As I argue in this book, however, these reforms fail to address the fact that investment treaty arbitration is a fundamentally unsuitable forum in which such public review functions can be exercised. Investment treaty arbitration enthusiasts, meanwhile, appear unconcerned by its apparent systemic faults and refer to the problems outlined so far as to a crise de croissance,235 that is to say the growing pains of an otherwise effectively functioning system. Interestingly, the same commentators have increasingly turned to the proportionality principle as a strategy to deal with the increased politicisation of disputes and to provide ‘a semblance of a response to substantive indeterminacy’, providing a procedure to determine a dispute, but also ‘a stable framework for argumentation and justification’.236 Undoubtedly, proportionality may be, under certain circumstances, a valid tool to balance the broader public interests (including human rights) and the interests of an individual or group of individuals, and as such it is widely used by courts and tribunals.237 Yet, the suggestion that proportionality ­reasoning 233 ibid 573. 234 Simma admits that the harmonisation of competing host state’s obligations ‘will always be a difficult exercise and sometimes compliance with both set of obligations will be virtually impossible’: ibid 591. 235 B Stern, ‘The Future of International Investment Law: A Balance Between the Protection of Investors and the States’ Capacity to Regulate’ in Alvarez et al (n 2) 174. See also, in the same volume, PC Mavroidis, ‘All Clear on the Investment Front: A Plea for a Restatement’, 95. 236 Stone Sweet (n 219) 50. 237 The way in which proportionality is deployed varies, of course, from jurisdiction to jurisdiction. Its elements, however, remain more or less the same. As set out by Lord Reed in Bank Mellat v HM Treasury [2013] UKSC 39, para 74: ‘The approach adopted in Oakes can be summarized by saying that it is necessary to determine (1) whether the objective of the measure is sufficiently important to justify the limitation of a protected right, (2) whether the measure is rationally connected to the objective, (3) whether a less intrusive measure could have been used without unacceptably compromising the achievement of the objective, and (4) whether, balancing the severity of the measure’s effects on the rights of the persons to whom it applies against the importance of the objective, to the

Is a Balance Between ‘Investors’ Rights’ and Human Rights Possible?  181 should be adopted by international investment tribunals appears to me as a Trojan horse carrying two misleading assumptions. First, the suggestion is once again based on the postulation that investment treaty arbitration is a neutral and independent system of adjudication, devoid of the inherent limitations discussed in this chapter.238 As for instance explained by Lord Reed in a 2013 judgment by the United Kingdom’s Supreme Court, ‘[a]n assessment of proportionality inevitably involves a value judgment at the stage at which a balance has to be struck between the importance of the objective pursued and the value of the right intruded upon’.239 For this reason, it seems imprudent, to say the least, to insist on the proportionality assessment as a resolving tool for international investment treaty tribunals. If, as some scholars have advanced,240 proportionality reasoning is to be used to justify and further legitimise the IIL project, despite its ideological flaws and limitations, then the principle would not serve the purposes of justice for which some human rights proponents may be supportive of it.241 Typically, constitutional courts or national supreme courts are in a better position to interpret state regulatory powers in areas of public interest. Echoing, once again, Teitelbaum’s criticism of the ‘transparency’ movement242 and applying it to the wider debate on the legitimacy of investment treaty arbitration as a mechanism of public law review, the power to adjudicate a state’s regulatory authority should simply be removed from the remit of investment arbitration tribunals.243 It is important to reiterate, at this point, that transforming investment tribunals into permanent international investment courts would not address the concerns raised by the significant shift in the determination of public interests that investor-state adjudication entails.244 The second misleading assumption hidden behind proportionality as a solving tool is that, by the way in which it is framed, it uncritically introduces the idea that ‘investor’s rights’ flow automatically from the standards of investment protection. Nikken, former judge and president of the Inter-American Court of Human Rights, in criticising the tendency by investment treaty tribunals to interpret FET as a source of investors’ rights through the doctrine of legitimate expectations, offers a lucid analysis of why the concept of ‘investors’ rights’

extent that the measure will contribute to its achievement, the former outweighs the latter  …  In essence, the question at step four is whether the impact of the rights infringement is disproportionate to the likely benefit of the impugned measure’. 238 Stone Sweet (n 219) 49–50. B Kingsbury and SW Schill, ‘Public Law Concepts to Balance Investors’ Rights with State Regulatory Actions in the Public Interest: The concept of Proportionality’ in Schill (n 133). 239 Bank Mellat (n 237) para 72 (emphasis added). 240 See eg Kingsbury and Schill (n 238); Stone Sweet (n 219). 241 See in general the contribution in part II of the edited collection Dupuy et al (n 27). 242 Teitelbaum (n 157) 60. 243 R Radović, ‘Inherently Unneutral Investment Treaty Arbitration: The Formation of Decisive Arguments in Jurisdictional Determinations’ (2018) 1 Journal of Dispute Resolution 143, 179. 244 Koskenniemi (n 97). See also Schneiderman (n 141). See also FG Sourgens, ‘Value and Judgment in Investment Treaty Arbitration’ (2018) 1 Journal of Dispute Resolution 185, 186 quoting Radović.

182  Analysing the Relationship itself should be rejected. In his capacity as arbitrator in the Suez Vivendi/AWG award, which I analysed earlier, Nikken issued a separate opinion, in which he clarifies his position towards the use of the doctrine in IIL by extending his disagreement to all other awards that identify FET with the protection of the legitimate expectations of the investor.245 The emphasis placed by tribunals on the expectations of the investors is misplaced and misleading, Nikken argues: The assertion that fair and equitable treatment includes an obligation to satisfy or not to frustrate the legitimate expectations of the investor at the time of his/her investment does not correspond, in any language, to the ordinary meaning to be given to the terms ‘fair and equitable.’ Therefore, prima facie, such a conception of fair and equitable treatment is at odds with the rule of interpretation of international customary law expressed in Article 31.1 of the Vienna Convention of the Law of Treaties (VCLT). In addition, I think that the interpretation that tends to give the standard of fair and equitable treatment the effect of a legal stability has no basis in the BITs or in the international customary rules applicable to the interpretation of treaties.246

Nikken conceives of FET as primarily a standard of conduct or behaviour of the state in relation to foreign investment: ‘[t]he conduct that each State Party to a BIT is willing and obliged to adopt for the promotion and protection of investment and, conversely, what each State is entitled to expect and does expect from the behavior of the other Party in the same situation.’247 This standard of conduct should not automatically be equated to a source of rights for investors, since IIAs establish the obligations that state parties undertake towards each other in relation to their respective investments.248 Nikken considers it ‘illogical to understand that the intention of the Parties was to extend the protection of fair and equitable treatment that they undertook to give to the investments (not investors) of the other Party, above what is implied in good governance’.249 He further argues that the investment tribunals that have outlined the doctrine of legitimate expectations as a key element of FET have systematically failed to justify this interpretation by applying the customary rules of interpretation as per Article 31(1) VCLT.250 If host states arbitrarily dispute the commitments undertaken in IIAs, their FET breaches are to be linked to 245 Nikken (n 60) para 2. 246 ibid para 3. 247 ibid para 4. 248 ibid para 19. 249 ibid para 20 (original emphasis). Note, however, as discussed in ch 1, that the concept of weak/ good governance is not a neutral concept either, not least because of how the good governance agenda is often used as a tool to introduce far-reaching economic reforms aimed at creating an enabling environment for foreign direct investment. See C Tan, ‘Reviving the Emperor’s Old Clothes: The Good Governance Agenda, Development and International Investment Law’ in S Schill et al (eds), International Investment Law and Development: Bridging the Gap (Cheltenham, Edward Elgar, 2015) 147–79, 156. See also M Sattorova, The Impact of Investment Treaty Law on Host States: Enabling Good Governance? (Oxford, Hart Publishing, 2018), especially ch 6. 250 Nikken (n 60) para 25.

Is a Balance Between ‘Investors’ Rights’ and Human Rights Possible?  183 their wrongful conduct – contravening the canons of good governance – rather than to a frustration of an investor’s legitimate expectations.251 As confirmed by the ICJ in Bolivia v Chile (see discussion in section I above) a willingness to be legally bound cannot be simplistically inferred. Equally, an expectation that the host state will adopt certain policies to promote investment cannot be inferred under FET, as such an expectation is not legally enforceable.252 Similarly, tribunals cannot infer, through the broad interpretation of FET clauses, a state’s willingness to forsake its regulatory power in order to preserve the profitability of the investment. This is mainly because a state’s regulatory power goes to the core of state sovereignty, and is crucial for its ability to function: ‘so to renounce to exercise it is an extraordinary act that must emerge from an ­unequivocal commitment; more so when it is at stake its ability to deal with a serious crisis.’253 At the basis of Nikken’s argument, therefore, is the understanding that investment protections in general are not included in IIAs as sources of ‘investors’ rights’, but as provisions aimed at clarifying the commitments undertaken by states towards each other in order to protect investments. As such they are best understood as prescribing an obligation of due diligence that state parties have pledged to each other with respect to investments from their respective nationals.254 But what then would be a valuable alternative to the ‘balancing’ approach? Suggestions put forward by international scholars partly follow Simma’s argument, but they also present some deviations from it. In order to ensure that human rights considerations come into the equation from the outset, efforts have been made to change the wording of investment treaties and contracts when these are signed. Investment treaty or contract design,255 however, it is not per se sufficient to ensure effective human rights protection. It could be seen, perhaps, as one of the various ‘arrows in the bow’ when aiming at human rights protection, but in my view it remains a blunt arrow against the iron armour of investor-state arbitration.256 As discussed in chapter five, some commentators argue that it should be possible to utilise the emerging UN Framework

251 ibid para 26. 252 ibid. 253 ibid para 31 (emphasis added). 254 ibid. 255 See also UN Human Rights Council, ‘Principles for Responsible Contracts: Integrating the Management of Human Rights Risks into State-Investor Contract Negotiations: Guidance for Negotiators’ (25 May 2011) UN Doc A/HRC/17/31/Add.3; UNOHCHR, ‘Training Modules on the Principles for Responsible Contracts’ at www.ohchr.org/EN/Issues/Business/Pages/trainingmodules. aspx. 256 S Steininger, ‘What’s Human Rights Got To Do With It? An Empirical Analysis of Human Rights Reference in Investment Arbitration’ (2018) 31 Leiden Journal of International Law 33. P Šturma, ‘Public Goods and International Investment Law: Does the New Generation of IIAs Better Protect Human Rights’ (2018) Brill Open Law http://booksandjournals.brillonline.com/docserver/ journals/23527072/23527072_00101002_text.pdf?expires=1539524574&id=id&accname=guest& checksum=6809FBC6EE16AA7C0D51C7A9B6FC821.

184  Analysing the Relationship for business and human rights257 to guide international investment negotiations and investment treaty and contract design. In the remainder of this book I consider in detail the viability and desirability of this business and human rights approach. III.  PRELIMINARY CONCLUSIONS

In this chapter I have analysed the interplay between IIL and IHRL by looking at the reasons for the current tension between these two legal projects. Through the analysis of four key arbitrations, I have outlined the way in which international investment standards of protection impact on the protection of human rights, not least the right to water. The different approaches adopted by the investment tribunals in these cases, reveal that FET is the key standard through which arbitrators have expanded, first, their own jurisdiction at the expense of national courts and, second, the reach of so-called ‘investors’ rights’, not least through the development of the doctrine of legitimate expectations. I have argued that these four cases also emblematically highlight the inherent shortcomings of IIL and the ultimate unsuitability of an investor-state arbitration tribunal (or of its court doppelgänger) to adjudicate upon a state’s attempts to reconcile its obligations to protect the foreign investment with its human rights obligations. The system’s neoliberal lineage as well as its lack of judicial independence, transparency and public participation make it unsuitable for what is essentially a review of a host state’s regulatory powers. Hence, suggestions that tensions between IIL and IHRL could be resolved through systemic interpretation and harmonisation of applicable rules of international law by international investment tribunals,258 including through the adoption of proportionality reasoning, would still leave excessive discretion to investment arbitrators and/or judges259

257 For all documents and statements related to the work of the former SRSG on business and human rights, see www.business-humanrights.org/SpecialRepPortal/Home. For his work after the end of his mandate, see JR Ruggie, ‘Just Business: Multinational Corporations and Human Rights’ (New York, WW Norton & Company, 2013), and more generally his work as Chair of the Board at Shift, at www.shiftproject.org. 258 Waincymer (n 40) 308. 259 See eg UP and CD Holding Internationale v Hungary (9 October 2018) Award ICSID Case No ARB/13/35, para 370: ‘To be a legitimate exercise of police power, regulatory measures must be proportionate to the public purpose pursued. That measures are adopted in the public interest does not preclude them from being expropriatory or absolve the state from its duty to compensate. As with any other measure, the critical question is the extent of the interference with the investor’s property. The deference due to a host state does not preclude tribunals from scrutinizing the proportionality of the measures adopted’. The tribunal acknowledged the important public and social goals that Hungary pursued with the introduction of the voucher system (para 384). This measure was in fact aimed at ensuring better nutrition and improving access to food in support of the welfare of its citizens, as a result of budget concerns. It also recognised, however, that the purpose of the measure was discriminatory, since it was to exclude foreign providers from the food voucher market, ‘not a legitimate public purpose under Art 5(2) of the BIT’ (para 414).

Preliminary Conclusions  185 and remain contingent upon the varying approaches that they may favour, under their overarching mandate to ensure the protection of foreign investment. I have also argued that the idea of pursuing a systemic integration of human rights by recourse to Article 31(3)(c) VCLT260 within investor-state adjudication contributes to the purpose of self-preservation of the system. Simma’s two entry points for human rights in the international investment regime can do little more than ‘minimise frictions’261 in investor-state disputes which directly affect broader public interests, such as the welfare of human beings, their human rights and the preservation of the environment. I will nevertheless return to these two entry points at the end of this book, after considering whether business and human rights may add value when investment and human rights protection intersect in conflict countries.



260 Simma 261 Schill

(n 15) 584. and Djanic (n 218).

5 Business and Human Rights: A Tool for Investment and Human Rights Protection in Armed Conflict?

I

n this chapter I consider the Framework for business and human rights1 as developed from 2005 to 2011 as part of the work of the former United Nations (UN) Special Representative of the Secretary-General on Business and Human Rights (SRSG). I analyse the contents of the Framework, and more specifically of the UN Guiding Principle on business and human rights (UNGP), and highlight what I see as their weaknesses. In so doing, I examine whether the standards enshrined in the UNGP can serve as a useful tool to achieve human rights and investment protection in situations of armed conflict. Hence, in this chapter I focus in particular on principles 7 and 23(c) of the UNGP,2 and on other principles closely related to them, to see if they can help us clarify the content of (host and home) state obligations and business responsibility within the context of extractive sector investment in conflict areas. The reason for focusing on the Framework is that much attention is devoted  – by intergovernmental bodies,3 states,4 scholars5 and UN Special 1 As indicated in the Introduction of this book, I use the term Framework to refer both to the Protect, Respect and Remedy Framework endorsed by the Council in 2008 (individually referred to as the UN Framework) and the Guiding Principles for the operationalisation of the UN Framework adopted in 2011 (individually referred to as the Guiding Principles or UNGPs). 2 UN Human Rights Council, ‘Guiding Principles on Business and Human Rights: Implementing the United Nations’ “Protect, Respect and Remedy” Framework’ (21 March 2011) UN Doc A/HRC/17/31. 3 See eg the reform supported by UNCTAD, ‘World Investment Report 2015: Reforming International Investment Governance’ (UNCTAD, 2015) http://unctad.org/en/PublicationsLibrary/wir2015_en.pdf. See also UNCTAD, ‘Investment policy framework for sustainable development’ at http://unctad.org/ en/PublicationsLibrary/diaepcb2015d5_en.pdf. For an insightful analysis of the proposed reforms, see A Roberts and Z Bouraoui, ‘States and ISDS Reforms: What are States’ Concerns?’ (5 June 2018) EJILTalk! www.ejiltalk.org/uncitral-and-isds-reforms-what-are-states-concerns/. 4 For a useful overview of draft treaty models advanced by states to include state policy exceptions or human rights and environmental clauses, see K Singh and B Ilge (eds), Rethinking Bilateral Investment Treaties: Critical Issues and Policy Choices (Both Ends, Madhyam and SOMO, 2016) www. somo.nl/wp-content/uploads/2016/03/Rethinking-bilateral-investment-treaties.pdf. 5 See eg W Alschner and K Hui, ‘Missing in Action: General Public Policy Exceptions in Investment Treaties’ (22 August 2018) Ottawa Faculty of Law Working Paper No 2018/22 https://ssrn.com/ abstract=3237053.

Business and Human Rights in Conflict  187 Procedures6 – to the design of ‘human rights-compatible’7 international investment agreements (IIA). Some of the proposals advanced rely on the UNGP as a tool capable of providing guidance to improve IIA design, so that states can maintain, in the words of UNGP 9 itself, ‘adequate domestic policy space to meet their human rights obligations when pursuing business-related policy objectives with other States or business enterprises’.8 The UN Working Group on Business and Human Rights (UNWG) has been particularly vocal in championing IIA design as a way of locating remedies for business-related human rights abuses in diverse settings, whilst at the same time managing the negative impact of parallel regimes (such as IIL) on access to effective remedies.9 The UNWG, while clearly identifying the way in which IIA constrain host states’ regulatory powers and limit an individual’s ability to seek effective remedies for business-related human rights abuse,10 regrettably decided to focus on procedural fixes, assuming – like some scholars, UN Treaty Bodies and international nongovernmental organisations – that ‘tinkering with existing procedural safeguards will suffice to ensure favourable human rights outcomes’.11 In 2018 Philip Alston, in his capacity as UN Special Rapporteur on extreme poverty and human rights, denounced the recourse to such procedural fixes as a way of addressing the negative impacts of privatisation, which IIA fundamentally support, enable and enforce (as seen in chapters two and three). Procedural fixes, he argued: have not worked precisely because privatization is a philosophy of governance rather than just a financing mechanism. A new strategy therefore needs to be focused first and foremost on basic values. Indeed, privatization’s original proponents saw it as a question of values, albeit very different ones. Margaret Thatcher famously remarked that ‘there is no such thing as society … There is no such thing as an entitlement, unless someone has first met an obligation’.12

The UNWG’s emphasis is in line with UNGP 9 and focuses on the conduct by states of ‘inclusive and transparent human rights impact assessments before concluding trade-investment agreements and [on inserting] explicit ­substantive

6 Working Group on Business and Human Rights, ‘Crowd-Drafting: Designing a Human RightsCompatible International Investment Agreement’, Call for submission for a session of the Forum of Business and Human Rights, Geneva 26–28 November 2018 www.ohchr.org/Documents/Issues/ Business/Forum2018CrowdDrafting.pdf. 7 ibid. 8 UNGP (n 2) Principle 9. 9 UN General Assembly, ‘Human rights and transnational corporations and other business enterprises’ (18 July 2017) UN Doc A/72/162, para 75. See also Columbia Center on Sustainable Development and UNWG, ‘Impacts of the International Investment Regime on Access to Justice: Roundtable Outcome Document’ (September 2018) at www.ohchr.org/Documents/Issues/Business/ CCSI_UNWGBHR_InternationalInvestmentRegime.pdf. 10 UN Doc A/72/162, ibid, para 76. 11 UN General Assembly, ‘Report of the Special Rapporteur on extreme poverty and human rights’ (26 September 2018) UN Doc A/73/396, para 4. 12 ibid, para 68 (emphasis added and references omitted).

188  Business and Human Rights in Conflict human rights provisions in those agreements to preserve adequate policy space to discharge their human rights obligations’.13 I submit that this emphasis is misplaced. The UNWG based its recommendations for a ‘reconfiguration of investment agreements’ on General Comment 24 issued by the Committee on Economic Social and Cultural Rights (CESCR) in 2017,14 as well as on the Urbaser award15 (discussed in detail in chapter four) and on the work of scholars supportive of IIL reform and of business and human rights-inspired IIA design.16 The UNWG thus recommended such ‘reconfiguration’ of IIA ‘to impose explicit human rights obligations on investors, including an obligation to provide or participate in effective remedies for human rights abuses’, for example by requiring ‘that mechanisms for the settlement of investor-State disputes take human rights into account in the interpretation of investment treaties or of investment chapters in trade agreements’ or that they ‘contain a provision subjecting investors to legal action before courts in the host State for human rights abuses linked to the investment’. The UNWG also considered favourably the incorporation of the ‘clean hands’ doctrine into IIA, so that ‘non-compliance with human rights provisions [would] disentitle the investor to claim benefits under an investment treaty’.17 The business and human rights (BHR) approach to IIA design embraced by the UNWG, however, is based on a fundamental multi-layered assumption that is worth dissecting in more detail. This assumption is that a state can maintain the necessary regulatory space by drafting clearer (ie more precise) substantive clauses that a) provide a state with more policy flexibility; b) increase the predictability of judicial outcomes for states and investors alike;18 and c) enable an international investment tribunal to balance conflicting host state obligations flowing from international investment law (IIL) and international human rights law (IHRL). Put simply, better drafting will provide more regulatory flexibility, increase the predictability of arbitral decisions, and guide the ‘balancing’ exercise carried out by tribunal.

13 UN Doc A/72/162 (n 9) para 77. 14 CESCR, ‘General Comment No 24 (2017) on State Obligations under the International Covenant on Economic, Social and Cultural Rights in the Context of Business Activities’ (10 August 2017) UN doc E/C.12/GC/24. 15 Urbaser SA and Consorcio de Aguas Bilbao Bizkaia, Bilbao Biskaia Ur Partzuergoa v Argentine Republic (8 December 2016) Award, ICSID Case No ARB/07/26. 16 See eg B Choudhury, ‘Spinning Straw into Gold: Incorporating the Business and Human Rights Agenda into International Investment Agreements’ (2017) 38 University of Pennsylvania Journal of International Law 425, referenced by the UNWG at para 78. 17 UN Doc A/72/162 (n 9) para 78 (references omitted). 18 See TL Berge and W Alschner, ‘Reforming Investment Treaties: Does Treaty Design Matter?’ Investment Treaty News, International Institute for Sustainable Development (17 October 2018) www.iisd.org/itn/2018/10/17/reforming-investment-treaties-does-treaty-design-matter-taraldlaudal-berge-wolfgang-alschner/?utm_source=Investment+Treaty+News&utm_campaign=33388461c5EMAIL_CAMPAIGN_2018_04_24_COPY_01&utm_medium=email&utm_term=0_ce99edb66e33388461c5-225591741#_ftn6.

Business and Human Rights in Conflict  189 As my analysis of international investment awards and of the interpretation of substantive standards of investment protection in previous chapters has demonstrated, however, there is no evidence that strategic IIA design will automatically lead to better (ie ‘human rights-compatible’) interpretation by international investment tribunals. This axiomatic approach, I contend, is based on false premises. So far, the introduction in IIA of public policy exceptions or similar carve-out clauses, and of legality requirements (such as the suggested ‘clean hands’ doctrine) has not lead to a systematic ‘human rights-compatible’ judicial interpretation.19 As discussed in this book, for instance, in relation to efforts by states to restrain and guide tribunals’ interpretation of the fair and equitable treatment (FET) standard, binding interpretations issued by state parties as well as treaty drafting aimed at introducing greater clarity and determinacy into substantive IIA obligations have brought, at best, mixed results.20 Most importantly, a focus on IIA design has implicitly contributed to legitimising the role of investment tribunals and/or courts in reviewing public policy decisions by states, a role that, as examined in chapter four, they are fundamentally unsuitable to play. Debates over IIL reform, crucially, also shift the attention away from much-needed challenges to the ideological and constitutive underpinnings of IIL, which de facto continue to enable substantive inequality and corporate abuse.21 In this chapter, therefore, I further examine the reasons why this BHR axiomatic approach is unsubstantiated and why it proves particularly unsatisfactory to address the challenges encountered at the intersection between IIL and IHRL in situations of armed conflict. The argument I put forward is structured as follows: first, in section I, I critically analyse the Framework, to better assess the claim that it can be a useful tool in guiding and informing IIA drafting. In section II, I then focus on the specific provisions pertaining to conflict situations, to see if they are useful to clarify

19 See eg the awards in Copper Mesa Mining Corporation v Republic of Ecuador (15 March 2016) Award, PCA No 2012-2; and Bear Creek Mining Corporation v Republic of Peru (30 November 2017) Award, ICSID Case No ARB/14/2, cited in Berge and Alschner, ibid. In relation to relevant debates amongst IIL scholars over the application of ‘clean hands’ doctrine in the Yukos Awards, see P Dumberry, ‘State of Confusion: The Doctrine of “Clean Hands” in Investment Arbitration after the Yukos Award’ (2016) 17 Journal of World Investment and Trade 229; and see the response by O Pomson, ‘The Clean Hands Doctrine in the Yukos Awards: A Response to Patrick Dumberry’ (2016) 18 Journal of World Investment and Trade 712. 20 See the discussion in chs 2 and 4 on the minimum standard for the treatment of aliens and on the doctrine of legitimate expectations. 21 UN Doc A/73/396 (n 11) para 2 where Special Rapporteur Philip Alston states as follows: ‘While some proponents present privatization as just “a financing tool”, others promote it as being more efficient, flexible, innovative and effective than public sector alternatives. In practice, however, privatization has also metamorphosed into an ideology of governance. As one advocate put it, “anything that strengthens the private sector [against] the State is protective of personal freedom”. Freedom is thereby redefined as an emaciated public sector alongside a private sector dedicated to profiting from running key parts of the criminal justice system and prisons, determining educational priorities and approaches, deciding who will receive health interventions and social protection, and choosing what infrastructure will be built, where and for whom’ (emphasis added).

190  Business and Human Rights in Conflict the normative content of state obligations and business responsibilities in such contexts. In this section, I explain that according to the UNGP the home states of companies investing in conflict host states have heightened human rights obligations (UNGP 7), whilst business enterprises themselves have a heightened responsibility to respect human rights (UNGP 23(3)). In examining what these heightened obligations and responsibility mean in practice, I argue that heightened home state obligations entail, at a minimum, an obligation to regulate so as to introduce, in the domestic legal framework, a requirement for compulsory human rights due diligence for companies domiciled in their territory and/or under their jurisdiction; access to the courts of the home states for those who have suffered human rights abuse because of a breach of these domestic obligations; and the imposition of meaningful compensation for such breaches. Similarly, UNGP 23(3) provides that ‘business enterprises should treat the risk of causing or contributing to gross human rights abuses as a legal compliance issue wherever they operate’ (emphasis added), and I contend that this means, at a minimum, ongoing monitoring and assessment of its adverse impacts, compulsory public notification, and, crucially, immediate action to prevent or (if already ongoing) stop such harm. Under this heightened approach, non-compliance would lead to processes informed by the judicial remedies provided for under a ‘heightened’ version of pillar one. Whilst the procedural measures adopted under pillar two would not be sufficient, per se, to ensure effective remedies, if understood jointly with the enhanced judicial mechanisms envisaged under pillars one and three, they could go some way to ensuring accountability for corporate abuse in conflict situations. I.  A CRITICAL APPRAISAL OF THE BUSINESS AND HUMAN RIGHTS FRAMEWORK

During the 1990s the rapid expansion of extractive companies in so-called weak governance zones,22 and the denunciation of the dire working conditions in clothing and footwear factories producing goods for popular global corporations,23 brought the issue of corporate human rights abuses to the world’s attention. As evidenced by Quinn Slobodian in his historical analysis of neoliberal globalism, on the other hand, attempts to consolidate and ‘encase’ the rights of business enterprises as fundamental market actors date, at least, as far back as the 1920s, 22 This strategic expansion often coincided with ‘compromised, but often indirect, relationships with corrupt governments or government owned enterprises in Africa and elsewhere.’ C Parker and J Howe, ‘Ruggie’s Diplomatic Project and its Missing Regulatory Infrastructure’ in R Mares (ed), The UN Guiding Principles on Business and Human Rights: Foundations and Implementation (Leiden, Brill, 2011) 296. 23 CA Rodríguez-Garavito, ‘Global Governance and Labor Rights: Codes of Conduct and AntiSweatshop Struggles in Global Apparel Factories in Mexico and Guatemala’ (2005) 33 Politics & Society 203.

A Critical Appraisal of the Business and Human Rights Framework  191 a time in which empires were dissolving and democratic self-determination, socialism and nationalism were perceived as threatening the stability of the global capitalist system.24 Since then, states and global institutions have mobilised to insulate the markets from political change and democratic demands for social justice and equality. In the 1990s, however, the issue of corporate accountability for human rights violations (or lack thereof) became more prominent and arguably engendered ‘a crisis of legitimacy for global corporate capitalism’.25 But it was not until 2004 that the first consolidated attempts26 were made at UN level to address the challenges posed by the lack of an adequate system of accountability for businesses: in that year, the Draft Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with Regard to Human Rights27 (UN Norms) were presented for approval to the Commission on Human Rights (Commission). These Norms tried to identify obligations directly applicable to companies, thus attempting to radically reshape the status of international law as pertaining to corporations.28 The opposition mounted by the business world was unprecedented and the Commission rejected the Norms due to a lack of consensus. Following an in-depth study on ‘the scope and legal status of existing initiatives and standards’29 on business and human rights, however, the Commission requested the appointment of an SRSG in order to ‘clarify the roles and responsibilities of states, companies and other social actors in the business and human rights sphere’.30 In 2005 John Ruggie was appointed to this role and in June 2008, at the end of his first mandate, he presented the ‘Protect, Respect and Remedy’ framework (UN Framework) to the Human Rights Council (Council) which by then had replaced the Commission. The UN Framework was introduced as ‘an authoritative focal point around which actors’ expectations could converge’: it sought to clarify the responsibilities of relevant actors and provide ‘the foundation on which thinking and action could build over time’.31 24 Q Slobodian, Globalists: The End of Empire and the Birth of Neoliberalism (Cambridge MA, Harvard University Press, 2018) Introduction ‘Thinking in World Orders’, 4–7. 25 Parker and Howe (n 22) 296. 26 In my analysis I do not consider the UN Global Compact as an initiative aimed at pursuing business accountability, so although it pre-dated the UN Norms, it is not examined in this chapter. See UN Global Compact at www.unglobalcompact.org/. For a critical evaluation of this initiative, see eg P Seele and L Gatti, ‘Greenwashing Revesited: In Search for a Typology and Accusation-Based Definition Incorporating Legitimacy Strategies’ Business Strategy and the Environment (2017) 26 Business Strategy and the Environment 239. 27 UN Commission on Human Rights, ‘UN Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with Regard to Human Rights’ (26 August 2003) UN Doc E/CN.4/Sub.2/2003/12/Rev.2. 28 Parker and Howe (n 22) 296. 29 UN Human Rights Council, Resolution 2005/69, ‘Mandate of the Special Representative of the Secretary General on the issue of human rights and transnational corporations and other business enterprises’ (20 April 2005) UN Doc E/CN.4/RES/2005/69. 30 Ibid. 31 OHCHR, ‘The UN “Protect, Respect and Remedy” Framework for Business and Human Rights: Official Summary’, 1, at http://198.170.85.29/Ruggie-protect-respect-remedy-framework.pdf.

192  Business and Human Rights in Conflict Against the background of the UN Norms’ failure, what was effectively requested of the SRSG was a diplomatic endeavour, a mediation exercise to overcome the impasse on business and human rights.32 The SRSG obtained unanimous Council approval for the UN Framework, which consists of three complementary pillars: the state duty to protect against human rights abuses by third parties, including business; the corporate responsibility to respect human rights; and the availability of effective remedies.33 The UN Framework confirmed that states have a primary duty to protect against human rights violations perpetrated by non-state actors, including companies; that companies may not have obligations under international human rights law but they do have a responsibility to respect human rights; and finally that victims of corporate human rights abuse need strengthened access to effective remedies.34 The Council extended the SRSG’s mandate until 2011, in order for him to provide further guidance on the operationalisation of the Framework, a task that he carried out through the development of a set of Guiding Principles on Business and Human Rights (UNGPs or Principles), submitted and approved in June 2011.35 At the same time, an annual stakeholder forum on business and human rights and an expert UNWG were also established as follow up mechanisms.36 The Framework represents the prevalent discourse on business and human rights. As such, and because of the attention that the BHR community has dedicated to IIL reform and IIA design as mentioned above, the relevance of the Framework also pertains to our discussion on the protection of human rights in conflict countries when foreign investors explore and extract a host state’s natural resources. In order to assess whether and how the Framework could be operationalised in conflict countries, however, it is important to examine what scholars have denounced as its apparent shortcomings. It has been argued that one crucial limitation of the Framework, and I agree with this view, is its failure to recognise that home states have an obligation to regulate the cross-border conduct of companies under their jurisdiction,37 a matter usually referred to 32 Parker and Howe (n 22) 297. 33 UN Human Rights Council, ‘Protect, Respect and Remedy: A Framework for Business and Human Rights’ (7 April 2008) UN Doc A/HRC/8/5. 34 Ibid. 35 UNGP (n 2). 36 UN Human Rights Council, ‘Human Rights and Transnational Corporations and Other Business Enterprises’ (15 June 2011) UN Doc A/HRC/L.17/Rev.1. 37 See eg S Skogly, Beyond National Borders: States’ Human Rights Obligations in International Cooperation (Antwerp, Intersentia, 2004), R McCorquodale and P Simons, ‘Responsibility Beyond Borders: State Responsibility for Extraterritorial Violations by Corporations of International Human Rights Law’ (2007) 70 Modern Law Review 589; D Davitti, ‘On the Meanings of International Investment Law and International Human Rights Law: The Alternative Narrative of Due Diligence’ (2012) 12 Human Rights Law Review 421; N Bernaz, ‘Enhancing Corporate Accountability for Human Rights Violations: Is Extraterritoriality the Magic Potion?’ (2013) 117 Journal of Business Ethics 493, O De Schutter, ‘Towards a New Treaty on Business and Human Rights’ (2016) 1 Business and Human Rights Journal 41.

A Critical Appraisal of the Business and Human Rights Framework  193 in the BHR discourse as the issue of home states’ extraterritorial obligations (ETOs). As I argue in this chapter, the Framework’s first pillar focuses mainly on the duties of host states to protect human rights from harm caused by third parties. Such an emphasis not only is insufficient to ensure protection from the harmful extraterritorial effects of business activities, but it also ignores the wider structural picture and the role that home states play in enabling the occurrence of certain abusive corporate conduct. As I have argued elsewhere38 and further clarify in this chapter, the significance of ETOs can be delineated by clarifying the relevance of the international law principle of due diligence to the first pillar of the Framework, in particular as it pertains to the obligation to regulate corporate activities abroad in order to prevent violations of economic, social and cultural rights (ESC rights). However, before discussing home states ETOs (in section II), where I also consider the standards provided under the UNGP for situations of armed conflict, I turn to a brief analysis of the other pillars of the Framework. I look at them in reverse order, to provide a practical understanding of their contents, as my central argument on ETOs under pillar one is ultimately aimed at rendering the business responsibility to respect more binding in nature and at improving access to remedies. A.  Third Pillar: Effective Remedial Action There is extensive evidence to show that when individuals or groups of ­individuals – such as indigenous populations as in the Glamis award discussed in chapter  four – suffer human rights abuse in which business enterprises are involved, access to remedy represents a significant challenge, both practically and legally.39 This challenge was acknowledged by the UNGP, which adopted a wide interpretation of the term ‘remedy’, often understood as a process rather than as an end result. Along similar lines, a grievance is understood as a perceived injustice evoking an individual’s or a group’s sense of entitlement, which may be based on law, contract, explicit or implicit promises, customary practice, or general notions of fairness of aggrieved communities. The term grievance mechanism is used to indicate any routinized, State-based or non-State-based, judicial or

38 D Davitti, ‘Refining the Protect, Respect and Remedy Framework for Business and Human Rights and its Guiding Principles’ (2016) 16 Human Rights Law Review 55. 39 See J Zerk, ‘Corporate Liability for Gross Human Rights Abuses: Towards a Fairer and More Effective System of Domestic Law Remedies. A Report Prepared for the Office of the UN High Commissioner for Human Rights’ (2014) at www.ohchr.org/Documents/Issues/Business/ DomesticLawRemedies/StudyDomesticeLawRemedies.pdf. See also G Skinner et al, ‘The Third Pillar: Access to Judicial Remedies for Human Rights Violations by Transnational Business’ (ICAR/ CORE/ICCJ, 2013) at www.icar.ngo/publications/2017/1/4/the-third-pillar-access-to-judicialremedies-for-human-rights-violations-by-transnational-business.

194  Business and Human Rights in Conflict non-judicial process through which grievances concerning business-related human rights abuse can be raised and remedy can be sought.40

The terminology used arguably reveals a certain preference for non-judicial grievance mechanisms in the UNGP, mainly because in the SRSG’s view, a ­‘judicial remedy is not always required; nor is it always the favoured approach for all claimants’.41 It is true, on the one hand, that accessing judicial remedies, especially in the courts of home states, has often proven problematic for rightsholders. Jurisdictional restrictions such as the forum non conveniens doctrine, according to which courts are able to refuse jurisdiction over a case because they deem that a more suitable forum is available to the parties (eg, a court in another country, an alternative dispute settlement forum or a more specialised court/tribunal), have translated into de facto barriers to accessing remedies,42 as appropriately identified by the SRSG.43 On the other hand, the issue of accountability avoidance typical of the way in which responsibility is (not) attributed within a business group, due to the legal separation of the various business entities within a group,44 could hardly be better addressed through non-judicial mechanisms. More broadly, the complex nature of the relationship between business and human rights indicates that, whilst certain situations can be resolved more expeditiously through non-judicial routes, judicial mechanisms still remain vital to ensure that corporate human rights harm is redressed. In conflict host countries, non-judicial mechanisms may have a role to play in ensuring the independence and impartiality of existing judicial mechanisms and in demanding that home and host states meet their obligations under national and international law, whilst relevant capacity in the field of business and human rights is developed amongst the different relevant actors. Non-judicial mechanisms can also, at times, support states’ efforts to ‘[consider] ways to reduce legal, practical and other relevant barriers that could lead to a denial of access to remedy’.45

40 UNGP (n 2) commentary to Principle 25. 41 UNGP 30 (n 2). 42 Skinner et al (n 39) 24–30. 43 See eg the emblematic cases of Kiobel and Jesner under the Alien Tort Statute (ATS). Kiobel v Royal Dutch Petroleum (17 April 2013) Supreme Court of the United States 133 Supreme Court 1659, where the court found that corporate liability under the ATS is only possible when the tort violations ‘touch and concern’ the territory of the US. For a commentary and the examination of similar cases in European jurisdictions see R McCorquodale, ‘Waving Not Drowning: Kiobel Outside the United States’ (2013) 107 American Journal of International Law 846. See also Jesner v Arab Bank Plc (24 April 2018) 138 Supreme Court of the United States 1386, where the court held that foreign corporations per se cannot be liable. See WS Dodge, ‘Corporate Liability under the US Alien Tort Statute: A Comment on Jesner v Arab Bank’ (2019, forthcoming) Business and Human Rights Journal. See also S Moyn, ‘Time to Pivot? Thoughts on Jesner v Arab Bank’ (25 April 2018) Lawfare blog contribution at www.lawfareblog.com/time-pivot-thoughts-jesner-v-arab-bank. 44 UNGP 26–27 and related commentary (n 2). 45 UNGP 26, ibid. See also K Hausler et al, ‘Non-Judicial Remedies: Company-Based Grievance Mechanisms and International Arbitration’ in JJA Rubio and K Yiannibas (eds), Human Rights in

A Critical Appraisal of the Business and Human Rights Framework  195 The Framework operates, of course, with a distinction between statebased and non-state-based non-judicial mechanisms. In relation to the latter, it proposes companies’ operational-level grievance mechanisms, based on the fact that the corporate responsibility to respect demands adequate means ‘for those who believe they have been harmed to bring this to the attention of the company and seek remediation, without prejudice to legal channels available’.46 The institutionalisation of such internal grievance mechanisms could be valuable if understood in conjunction with the human rights due diligence processes indicated under pillar two, although questions remain in relation to the independence of the investigative measures adopted to ascertain responsibility for human rights violations; the level of state involvement in ensuring compliance; and the aim of such processes (eg, whether the aim is remediation for the harm caused or the avoidance of reputational damage to the company). The commentary to UNGP 29, for instance, clarifies that these mechanisms can be important complements to wider stakeholder engagement and collective bargaining processes, but cannot substitute for either. They should not be used to undermine the role of legitimate trade unions in addressing labour-related disputes, nor to preclude access to judicial or other non-judicial grievance mechanisms.47

As for state-based non-judicial mechanisms, the Framework places a strong emphasis on national human rights institutions (NHRI) as the preferred fora to provide redress, although they may often not have the capacity or the mandate to take on this demanding task.48 As acknowledged by the repeated requests by NHRI to play a role under all three pillars of the Framework, at the moment these institutions could contribute more significantly to the repositioning of the first two pillars, as a result for instance of their expertise in monitoring and reporting on specific human rights issues, acting as mediators between relevant stakeholders and offering research-informed education.49 In particular, NHRI could Business: Removal of Barriers to Access to Justice in the European Union (Abingdon, Routledge, 2017) 78–118, where at 105–13 the authors surprisingly consider the Permanent Court of Arbitration (PCA) as a possible venue for human rights claims against companies. As noted by Muchlinski, the PCA ‘is not known for conducting human rights-oriented arbitrations, nor for being a major forum for investor-state arbitrations, which raise human rights questions and which would offer the closest real-life examples of the problems involved. However, the PCA is seen as a potential forum for developing human rights-oriented arbitrations, presumably as an alternative to foreign direct liability litigation. This appears rather misguided’. P Muchlinski, ‘Book Review of JJA Rubio and K Yiannibas (eds), Human Rights in Business: Removal of Barriers to Access to Justice in the European Union (Routledge, 2017)’ (2018) 3 Business and Human Rights Journal 299, 300. 46 UN Framework (n 33) para 82. 47 Commentary to Guiding Principle 29 (n 2). 48 LC Reif, ‘The UN Guiding Principles on Business and Human Rights and Networked Governance: Improving the Role of Human Rights Ombudsman Institutions as National Remedies’ (2017) 17 Human Rights Law Review 603, 610–16. See also M Brodie, ‘Pushing the Boundaries: The Role of National Human Rights Institutions in Operationalising the “Protect, Respect and Remedy” Framework’ in Mares (n 22) 260–64. 49 See, for instance, the Berlin Action Plan on Business and Human Rights agreed by the European Group of National Human Rights Institutions on 7 September 2012; at www.scottishhumanrights.com.

196  Business and Human Rights in Conflict have a key role in directly carrying out the independent human rights impact assessments suggested by the UNWG and/or in supporting civil society organisations during their own assessments. Undoubtedly, NHRI can also play a role in ensuring access to remedies, especially by contributing to the identification of certain forms of immediate and/or interim remedial action; but this will inevitably vary from institution to institution, depending on their mandate, the resources (technical, financial and of other nature) made available to them, and on the contextual circumstances under which they operate. There is a risk, I believe, of creating too high expectations vis-à-vis what these institutions are able to achieve in terms of ensuring access to remedies for corporate human rights abuse, especially in contexts where their operational environment is not conducive to the protection and respect of human rights50 and/or dangerous for human rights defenders.51 During the years leading to the adoption of the UNGP and in the aftermath of its endorsement by the Council, pillar three of the Framework was the least researched and discussed of the three pillars. In 2014 the Council mandated the Office of the UN High Commissioner for Human Rights (OHCHR) to facilitate the sharing and exploration of the full range of legal options and practical measures to improve access to remedy for victims of business-related human rights abuses, in collaboration with the Working Group, and to organize consultations with experts, States and other relevant stakeholders to facilitate mutual understanding and greater consensus among different views.52

Following this request, in 2014 OHCHR launched the ‘Accountability and Remedy Project’ (ARP),53 the first phase of which focused on judicial mechanisms. Parts two and three of the ARP focus respectively on non-judicial mechanisms54 and on non-state-based grievance mechanisms.55 See also the International Coordination Committee of National Institutions for the Promotion and Protection of Human Rights (ICC) and its Working Group on Business and Human Rights, at www. nhri.ohchr.org. 50 See in general C Sidoti, ‘National Human Rights Institutions and the International Human Rights System’ in R Goodman and T Pegram (eds), Human Rights, State Compliance, and Social Change: Assessing National Human Rights Institutions (Cambridge, Cambridge University Press, 2011) 93–123. 51 M Ineichen, ‘Protecting Human Rights Defenders: A Critical Step Towards a More Holistic Implementation of the UNGPs’ (2018) 3 Business and Human Rights Journal 97. 52 Human Rights Council, ‘Human rights and transnational corporations and other business enterprises’ (15 July 2014) UN Doc A/HRC/RES/26/22, para 7. 53 For all documents related to the different phases of the ARP, see the dedicated OHCHR website at www.ohchr.org/EN/Issues/Business/Pages/OHCHRaccountabilityandremedyproject.aspx. 54 For the final report of this second phase of the ARP, see Human Rights Council, ‘Improving accountability and access to remedy for victims of business-related human rights abuse through State-based non-judicial mechanisms: Report of the United Nations High Commissioner for Human Rights’ (14 May 2018) UN Doc A/HRC/38/20. See also the explanatory note accompanying the report, Human Rights Council, ‘Improving accountability and access to remedy for victims of business-related human rights abuse through State-based non-judicial mechanisms: explanatory notes to final report’ (1 June 2018) UN Doc A/HRC/38/20/Add.1. 55 Human Rights Council, ‘Business and human rights: improving accountability and access to remedy’ (18 July 2018) UN Doc A/HRC/RES/38/13. With this resolution, the Council requested

A Critical Appraisal of the Business and Human Rights Framework  197 As part of the first phase of the ARP and as requested by the Council, OHCHR published a progress report in June 2015,56 a final report in June  2016,57 and a further update in June 2018:58 the research underpinning these documents was very comprehensive and covered various different aspects and challenges of judicial remedies, offering policy recommendations to states on how to improve access. The 2018 report focused specifically on the relevance of human rights due diligence to determinations of corporate liability, a topic to which I return in section II below, after briefly examining the standards enshrined in pillar two. B.  Second Pillar: The Corporate Responsibility to Respect Human Rights The second pillar of the Framework concerns the corporate responsibility to respect human rights, a concept that is increasingly reflected in numerous soft law instruments,59 such as the Guidelines for Multinational Enterprises of the Organisation for Economic Co-operation and Development (OECD).60 As indicated above, early supporters of the Framework claimed that its strength came from the vast amount of consultations that the SRSG carried out with relevant stakeholders who, at least in theory, accepted that companies ‘are expected to obey the law, even if it is not enforced, and to respect the principles of r­ elevant

OHCHR to continue its work on access to remedy and, in relation to the third phase of ARP, requested it to ‘identify and analyse challenges, opportunities, best practices and lessons learned with regards to non-state-based grievance mechanisms that are relevant for the respect by business enterprises of human rights’. A report will be submitted to the 44th session of the Council. See also the exploratory report on phase three: S Zagelmeyer et al, ‘Non-state based non-judicial grievance mechanisms (NSBGM): An exploratory analysis’ (13 July 2018) at www.ohchr.org/Documents/ Issues/Business/ARP/ManchesterStudy.pdf. 56 Human Rights Council, ‘Progress of the United Nations High Commissioner for Human Rights on legal options and practical measures to improve access to remedy for victims of business-related human rights abuses’ (7 May 2015) UN Doc A/HRC/29/39. Crucially, there is no mention in this report of investor-state arbitration as a possible avenue to improve access to remedy. 57 Human Rights Council, ‘Improving accountability and access to remedy for victims of businessrelated human rights abuse: Report of the United Nations High Commissioner for Human Rights’ (10 May 2016) UN Doc A/HRC/32/19. At para 5, the report recognises the challenges that investment poses, amongst other factors, to accessing effective remedies: ‘While many domestic legal regimes focus primarily on within-territory business activities and impacts, the realities of global supply chains, cross-border trade, investment, communications and movement of people are placing new demands on domestic legal regimes and those responsible for enforcing them’ (emphasis  added). See also Human Rights Council, ‘Improving accountability and access to remedy for victims of business-related human rights abuse: explanatory notes for guidance’ (12 May 2016) UN Doc A/HRC/32/19/Add.1. 58 Human Rights Council, ‘Improving accountability and access to remedy for victims of business-related human rights abuse: The relevance of human rights due diligence to determinations of corporate liability’ (1 June 2018) UN Doc A/HRC/38/20/Add.2. 59 ibid 23. 60 OECD, ‘OECD Guidelines for Multinational Enterprises, 2011 Update’, at http://­mneguidelines. oecd.org/text/.

198  Business and Human Rights in Conflict international instruments where national law is absent’.61 Often, however, companies have used human rights as a public relations tool to boost their corporate reputation,62 whilst they have resisted the adoption of regulations which could increase their accountability for human rights abuses. To tackle this issue, the Framework depicts companies as an ‘organ of society’, whose responsibilities ‘cannot and should not simply mirror the duties of States’63 and defines the corporate responsibility to respect human rights as ‘the baseline expectation for all companies in all situations’.64 In practical terms, the responsibility to respect corresponds to a ‘do no harm’ responsibility, whereby companies are required to avoid infringing on the human rights of others and to address adverse impacts which they may have caused or to which they may have contributed.65 Crucially, however, the ‘do no harm’ principle on which the responsibility to respect rests should translate into a requirement for positive action on the part of the company in order to avoid harm and respond to situations in which adverse impact is triggered.66 The SRSG’s choice not to frame the responsibility of companies in terms of legal obligations was criticised by non-governmental organisations and scholars, who felt that the Framework missed a key opportunity to ensure legal accountability for corporate violations.67 As argued by Muchlinski, however, the fact that the responsibility to respect is not framed in legal terms does not automatically exclude binding legal duties emerging under the Framework, not least because of the possible effects of the due diligence concept on both external corporate regulations and internal corporate governance.68 The Framework, in fact, requires companies to introduce clear human rights due diligence mechanisms, whereby they ‘not only ensure compliance with national laws but also manage the risk of human rights harm with a view to avoiding it’.69 The SRSG emphasised, furthermore, that a human rights due diligence process differs significantly from other commercial due diligence processes in that ‘it  goes beyond simply identifying and managing material

61 International Organisation of Employers, International Chamber of Commerce, Business and Industry Advisory Committee to the Organisation for Economic Co-operation and Development (OECD), ‘Business and Human Rights: The Role of Government in Weak Governance Zones’, December 2006, para 15. 62 UN Framework (n 33) para 23. See also UN docs. A/HRC/4/35/Add.3, A/HRC/4/35/Add.4. 63 ibid para 53. 64 ibid 24. 65 ibid, and Guiding Principle 17(a) (n 2). 66 P Muchlinski, ‘Implementing the UN Corporate Human Rights Framework: Implications for Corporate Law, Governance, and Regulation’ (2012) 22 Business Ethics Quarterly 145–77, 148. 67 See eg Human Rights Watch, ‘UN Human Rights Council: Weak Stance on Business Standards’ 16 June 2011; C Albin-Lackey, ‘Without Rules: A Failed Approach to Corporate Accountability’ (Human Rights Watch, 2013) both at www.hrw.org. 68 Muchlinski (n 66) 147–48. 69 UN Framework (n 33) 25.

A Critical Appraisal of the Business and Human Rights Framework  199 risks to the company itself, to include risks to rights-holders’.70 This shift from a narrower focus on the interests of the shareholders to a broader management style which takes into consideration the interests of all stakeholders (including rights-holders) is what supporters of the Framework argue may eventually lead to substantive changes, including of a binding legal nature, capable of ‘informing the legal form of the corporation and … its legitimate functional limits’.71 Evidence indicates, however, that the operationalisation of pillar two remains at best inconsistent and at worst ineffective.72 In order to understand how a non-binding risk assessment process can translate into binding obligations for corporations, it is necessary to understand the relationship between the concept of due diligence and the possible emergence of a binding duty of care to observe human rights for company directors and, as a consequence, for the company itself.73 The acceptance that directors have a duty to carry out human rights due diligence and, therefore, to take into consideration aspects that go beyond the mere goal of profit maximisation, could ‘constitutionalise concern over human rights impacts in the corporate psyche and culture. The due diligence process then allows this concern to be put into operation’.74 This change in the corporate culture that the SRSG wished to encourage,75 although improbable,76 is certainly necessary to ensure that human rights due diligence is not only a matter of cosmetic compliance. On the other hand, human rights cannot be left to management discretion, to be taken into consideration only ‘in response to risk to reputation, social and political legitimacy, and ultimately to profit’.77 This is where, within the reasoning of the Framework, the ‘do no harm’ principle suggested by the UNGP becomes crucial: strengthened by the emphasis that the SRSG put on national legal remedies, the concept introduces a requirement to act in order ‘to operate investments in

70 Commentary to Guiding Principle 17 (n 2) 16. See also B Fasterling, ‘Human Rights Due Diligence as Risk Management: Social Risk Versus Human Rights Risk’ (2017) 2 Business and Human Rights Journal 225. 71 Muchlinski (n 66) 146. 72 See eg R McCorquodale et al, ‘Human Rights Due Diligence in Law and Practice: Good Practices and Challenges for Business Enterprises’ (2017) 2 Business and Human Rights Journal 195. See also M Langlois, ‘Human Rights Reporting: Are Companies Telling Investors What They Need to Know?’ (Shift Project, 2017) at www.shiftproject.org/resources/publications/corporate-humanrights-reporting-maturity/. 73 Muchlinksi (n 66) 150. 74 ibid 156. 75 See generally JG Ruggie, Just Business: Multinational Corporations and Human Rights (New  York NY, WW Norton & Company, 2013). For a contrasting view, see D Rajak, In Good Company: An Anatomy of Corporate Social Responsibility (Stanford CA, Stanford University Press, 2011) especially ch 7 ‘Between the Company and the Community: The Limits of Responsibility?’ 215–30. 76 See McCorquodale et al and Langlois (n 72). 77 Parker and Howe (n 22) 278.

200  Business and Human Rights in Conflict a human rights compliant way and to avoid investments that cannot comply with human rights’.78 The 2018 OHCHR report on human rights due diligence (HRDD), submitted to the Council as part of the first phase of the ARP, specifies that HRDD refers to processes and activities by which businesses identify, prevent, mitigate, and account for how they address their adverse human rights impacts. The identification, prevention, and mitigation of adverse impacts, as well as the communication of the effectiveness of these efforts externally, are integral to meeting the corporate responsibility to respect human rights.79

The report also clarifies the difference between HRDD and other forms of legal due diligence activities carried out by companies for compliance purposes in areas such as banking and anti-corruption.80 In business practice, therefore, due diligence is a process aimed at ensuring that corporate managers meet the established legal standards: in order to avoid corporate misconduct they are required not only to set up appropriate compliance mechanisms and processes aimed at discharging their duty of care but also to act in case of risk of non-compliance, for instance through ongoing monitoring and redress of identified problems.81 Muchlinski suggested that this ‘enlightened management approach’ could also be adopted in HRDD, since it is already used in defining the duties of directors under the corporate law of various countries and as such could pave the way for a more direct consideration of human rights in corporate decision-making.82 The inherent danger of this approach, however, is that a duty of care based on existing corporate law standards would primarily relate to the conduct of the affairs of the company and not to a protection of the interests (including human rights) of the people affected by the company: ‘the essential elements of the duty are that the director has a sufficient knowledge and understanding of the company’s affairs and that the director remains responsible for the acts of those to whom he or she has delegated responsibilities’.83 Since the duty of care refers to a standard of conduct, however, the director only has the duty to act in good faith and to exercise ‘reasonable care, skill and diligence’84 in making decisions aimed at promoting the success of the company. The 2018 OHCHR report further clarified the linkages between HRDD and legal liability, highlighting the conceptual distinction but also recognising the 78 Muchlinksi (n 66) 157. 79 UN Doc A/HRC/38/20/Add.2 (n 58) para 7. 80 ibid para 8. 81 Muchlinksi (n 66) 157. 82 ibid 159–64. See the example of s 172 Companies Act 2006, where the main duties of the directors have been amended from a duty to act in the best interest of the company and its shareholders to a duty ‘to promote the success of the company’, which includes taking into consideration the community and the environment in which the company operates. 83 Muchlinksi (n 66) 160. 84 ibid.

A Critical Appraisal of the Business and Human Rights Framework  201 importance of HRDD from a legal risk management perspective.85 As already indicated in the commentary to UNGP 17, HRDD should be an important tool to help businesses address the risk of legal claims ‘by showing that they took every reasonable step to avoid involvement in alleged human rights abuse’.86 It should not be assumed, however, that ‘by itself, this will automatically and fully absolve them from liability for causing or contributing to human rights abuses’.87 A thorough understanding of the linkages between HRDD and legal liability is thus important because it can also meaningfully inform proposals to strengthen both host and home states’ domestic legal regimes. More specifically, legal reforms at the domestic level can be guided by a clearer understanding of how ‘different legal rules and conditions can influence the extent to which, and the standards to which, companies are compelled or encouraged to carry out human rights due diligence’.88 Domestic regimes, for instance, can be designed in such a way that HRDD becomes a legal standard of behaviour that companies are then forced to treat as a legal compliance issue.89 As observed in the 2018 OHCHR report, ‘[u]nder such a regime (which declares certain human rights due diligence activities to be mandatory), non-observance of human rights due diligence raises the prospect of legal liability, regardless of whether, or the extent to which, damage flows form that non-compliance’.90 A key observation of the report relates to the different ways in which states can embed human rights concepts in legal regimes, that is by supporting, encouraging and/or compelling observance of HRDD. As I argue in this chapter, it is necessary to clarify at this point that a home state obligation to protect entails an obligation to introduce compulsory HRDD in their domestic framework, clarifying the scope and standard of meaningful91 HRDD to be carried out.92 In their work, Bonnitcha and McCorquodale further elaborated on the meaning of due diligence. They argue that the UNGP conflate two different meanings of the term: first, due diligence as a business process utilised for risk-management 85 UN Doc A/HRC/38/20/Add.2 (n 58) para 10. 86 Commentary to Guiding Principle 17 (n 2). 87 ibid. 88 UN Doc A/HRC/38/20/Add.2 (n 58) para 11 (emphasis added). 89 ibid para 15, where the report considers both the French duty of vigilance law and the Swiss Responsible Business Initiative as representative examples of such domestic reforms. 90 ibid para 12, where it is also explained that, depending on the context, the performance or not of HRDD may be one of ‘several threshold factual issues (eg in an assessment as to whether a duty of care was breached in a negligence case, where liability will ultimately hinge on whether this breach of duty was the cause of actual harm)’. 91 See further R Mares, ‘Human Rights Due Diligence and the Root Causes of Harm in Business Operation: A Textual and Contextual Analysis of the Guiding Principles on Business and Human Rights’ (2018) 10 Northeastern University Law Review 1–71. Also available at https://rwi.lu.se/ publication-authors/radu-mares/. In this article Mares focuses on the meaning of ‘mitigation’ to stress the importance of HRDD not as a tool to merely reduce abuses but to eliminate them from a company’s operations. 92 On the duty to regulate, see discussion in the remainder of this chapter. On meaningful HRDD, see ibid para 13.

202  Business and Human Rights in Conflict purposes; and second, due diligence as the standard of conduct to be discharged, for instance, to avoid infringing the rights of others.93 According to the authors, the UNGP impose a strict responsibility for a business enterprise’s own adverse human rights impacts,94 and a due diligence responsibility to prevent adverse human rights impacts caused by third parties with which the enterprise has business relationships.95 In other words, the standard-of-conduct meaning of due diligence only relates to a company’s responsibility for the human rights harm caused by third parties.96 This is also clarified in UNGP 13, which distinguishes between the two types of responsibility for adverse human rights impacts: [t]he responsibility to respect human rights requires that business enterprises: (a) Avoid causing or contributing to adverse human rights impacts through their own activities, and address such impacts when they occur; (b) Seek to prevent or mitigate adverse human rights impacts that are directly linked to their operations, products or services by their business relationships, even if they have not contributed to those impacts.

It is in relation to UNGP 13(b) that the responsibility to respect relates to a company’s responsibility to influence the conduct of third parties:97 in the language of UNGP 13 ‘seeking to prevent or mitigate adverse human rights impacts’; and in the language of UNGP 19 the action to be undertaken will vary according to ‘the extent of [the business enterprise’s] leverage in addressing the adverse impact’. In the commentary to UNGP 19, the SRSG admits 93 J Bonnnitcha and R McCorquodale, ‘The Concept of “Due Diligence” in the UN Guiding Principles on Business and Human Rights’ (2017) 28 European Journal of International Law 899, 900–01 explaining that ‘due diligence is normally understood to mean different things by human rights lawyers and by business people. This article argues that human rights lawyers understand “due diligence” as a standard of conduct required to discharge an obligation, whereas business people normally understand “due diligence” as a process to manage business risks. The Guiding Principles invoke both understandings of the term at different points, without acknowledging that there are two quite different concepts operating and without seeming to explain how the two concepts relate to one another in the context of business and human rights’. See also JG Ruggie and JF Sherman, ‘The Concept of “Due Diligence” in the UN Guiding Principles on Business and Human Rights: A Reply to Jonathan Bonnitcha and Robert McCorquodale’ (2017) 28 European Journal of International Law 921. 94 Bonnitcha and McCorquodale ibid 917. 95 ibid 914. 96 ibid 912–13. See also J Bonnitcha and R McCorquodale, ‘The Concept of “Due Diligence” in the UN Guiding Principles on Business and Human Rights: A Rejoinder to John Gerard Ruggie and John F Sherman, III’ (2017) 28 European Journal of International Law 929, 930: ‘We argue that the Guiding Principles implicitly invoke two different understandings of due diligence and that this results in confusion. Neither of these understandings has its origin in international human rights law. Much of our article is devoted to a discussion of the way that different regulatory schemes – some of which are polycentric – combine and develop the two concepts of due diligence in different ways. Our criticism is not that the Guiding Principles seek to develop a new concept of human rights due diligence. Our criticism is that their attempt to do so is not internally consistent, which gives rise to practical problems. It is in this context that we suggest that certain elements of international human rights law provide a useful analogy’. 97 ibid 914. See also D Bilchitz, ‘The Ruggie Framework: An Adequate Rubric for Corporate Human Rights Obligations?’ (2010) 12 SUR International Journal on Human Rights 199, 205.

A Critical Appraisal of the Business and Human Rights Framework  203 that ‘[w]here a business enterprise has not contributed to an adverse human rights impact, but that impact is nevertheless directly linked to its operations, products or services by its business relationship with another entity, the situation is more complex’.98 In such cases ‘the enterprise’s leverage over the entity concerned, how crucial the relationship is to the enterprise, the severity of the abuse, and whether terminating the relationship with the entity itself would have adverse human rights consequences’99 are all factors that will have to be taken into consideration.100 In relation to the relationship with third parties, Muchlinski suggested a duty of care based on tort jurisprudence, whereby the standard to be met would not be based on the success of the company but on avoiding harm which is reasonably foreseeable.101 Mares further developed this concept of a tort-based duty of care and applied it to the reality of business groups, where the responsibility to respect takes on a complex dimension.102 As already mentioned in this chapter, the main issue with business groups is the legal separation of the different companies belonging to the group. As a consequence of this legal separation and autonomy of action, liability for misconduct is usually localised with the subsidiary/affiliate company and, according to the corporate veil doctrine, it is only in extreme cases that judges are allowed to lift the corporate veil and find the parent company liable for acts or omissions of the affiliate.103 Proposals to provide a remedy through a tort-based duty of care, however, are not straightforward,104 as further discussed in the 2018 OHCHR report which considered how the test of negligence, for instance, varies depending on context and jurisdiction.105 Thus, whilst much attention is dedicated to developing the concept of HRDD under pillar two, perhaps is worth reflecting on Alston’s warning against ‘truckloads of guidelines’ which, for instance, have been adopted to ensure that public-private partnerships achieve the desired objectives.106 All of these guidelines ‘focus mainly on transactional aspects’ whilst ignoring human 98 UNGP (n 2) 18. 99 ibid (emphasis added). 100 Note the point made by Mares in relation to the concept of mitigation in relation to a company’s responsibility to influence the conduct of third parties. In his view this concept needs to be clarified since it is charged and the way in which it is used has wide ramifications for effective human rights protection. He further explains that the phrase mitigation of impacts can refer to ‘mitigation as aim (reduction as opposed to elimination) and mitigation as action (mitigatory measures to minimize impact as opposed to inaction). The problem with mitigation as aim is that in the human rights context, it is incompatible with the [responsibility to respect]’s aim of elimination of impact (human rights harm) from business operations’. See further Mares (n 91) 32–33. 101 Muchlinski (n 66) 161. 102 R Mares, ‘Responsibility to Respect: Why the Core Company Should Act When Affiliates Infringe Human Rights’ in Mares (n 22) 169. See also R Lindsay et al, ‘Human Rights Responsibilities in the Oil and Gas Sector: Applying the UN Guiding Principles’ (2013) 6 Journal of World Energy Law & Business 2. 103 Mares (n 22) 174. 104 Davitti (n 38). 105 UN Doc A/HRC/38/20/Add.2 (n 58) paras 19–24. 106 UN Doc A/73/96 (n 11) para 56.

204  Business and Human Rights in Conflict rights in  any comprehensive sense, including the way in which privatisation negatively impacts on poverty and inequality.107 This is why I argue that HRDD parameters that remain a matter of ‘encouragement’ by states and a matter of voluntary commitment by companies, will not bring improved access to remedy. I submit that it is necessary to return to the contents of pillar one and thereby identify a home state duty to regulate the cross-border conduct of companies domiciled in its territory and/or jurisdiction. A duty which, as I discuss below, would include an obligation to provide access to the courts of the home states and meaningful compensation to those who have suffered abuse. C.  First Pillar: The State’s Duty to Protect Human Rights The state duty to protect rights-holders against human rights abuses by corporate actors has been identified, from the outset, as the primary pillar of the Framework.108 As outlined by the SRSG this duty has its roots in international law.109 The Framework, in fact, often refers to the recommendations of regional bodies and UN treaty bodies, according to which states are required to take all necessary steps to protect against such [corporate] abuse, including to prevent, investigate, and punish the abuse, and to provide access to redress. States have discretion to decide what measures to take, but the treaty bodies indicate that both regulation and adjudication of corporate activities vis-à-vis human rights are appropriate. They also suggest that the duty applies to the activities of all types of businesses – national and transnational, large and small – and that it applies to all rights private parties are capable of impairing.110

The Framework focuses in particular on the state’s capacity to induce the establishment of a corporate culture ‘in which respecting rights is an integral part of doing business. This would reinforce steps companies themselves are asked to take to demonstrate their respect for rights’.111 Following the Council’s endorsement of the GPs in June 2011, the Office of the UN High Commissioner for Human Rights (OHCHR) issued a guide in which it elaborates on the contents of the UNGP,112 and builds upon the brief commentary which accompanies each UNGP. In UNGP 1 the SRSG clarified that the state’s duty to protect is a standard of conduct; as such, states are not considered responsible for the abuse committed by private actors. Yet, as discussed further in this chapter when analysing the international law principle of due 107 ibid. 108 UN Framework (n 33) 9. 109 ibid 18. 110 ibid. 111 ibid 29. 112 Note however that the guide focuses in particular on the UNGPs related to pillar two. OHCHR, The Corporate Responsibility to Respect Human Rights: An Interpretive Guide (OHCHR, 2012) UN Doc HR/PUB/12/02.

A Critical Appraisal of the Business and Human Rights Framework  205 diligence, this also means that states are required to act with due care and can be found in breach of their international obligations under international human rights law (IHRL) ‘where such abuse can be attributed to them, or where they fail to take appropriate steps to prevent, investigate, punish and redress private actors’ abuse’.113 UNGP 1, therefore, emphasises both preventative and remedial measures, such as policies, legislation, regulations and adjudication. However, when read in conjunction with UNGP 2, it becomes apparent that its focus is primarily on host states’ obligations, as according to the SRSG home states should encourage companies to respect human rights abroad but their duty to protect does not generally extend extraterritorially. The commentary to UNGP 2, in fact, explains as follows: At present States are not generally required under international human rights law to regulate the extraterritorial activities of businesses domiciled in their territory and/or jurisdiction. Nor are they generally prohibited from doing so, provided there is a recognized jurisdictional basis. Within these parameters some human rights treaty bodies recommend that home States take steps to prevent abuse abroad by business enterprises within their jurisdiction.114

The SRSG’s decision to adopt a conservative approach to ETOs, although clearly in line with his diplomatic stance, flies in the face of current developments in international law, especially in relation to jurisdiction, interference and human rights obligations.115 His conclusion, in fact, only portrays one side of the ongoing legal debate and crucially ignores, for instance, arguments on ETOs flowing from the state’s duty to take steps towards the full realisation of ESC rights, individually and through international cooperation and assistance. As discussed in chapter three, according to the CESCR states are under a duty to take steps ‘to prevent their own citizens and companies from violating the right to water of individuals and communities in other countries’.116 This duty extends to situations in which a state is ‘able to influence these third parties by way of legal and political means, in accordance with the Charter of the United Nations and applicable international law’.117 Moreover, General Comment 24118 on state obligations in the context of business activities, clarified the contents of the extraterritorial obligation to protect, thereby reiterating that a State party would be in breach of its obligations under the Covenant where the violation reveals a failure by the State to take reasonable measures that could have 113 UNGP 1, commentary (n 2) 7 (emphasis added). 114 ibid, UNGP 2, commentary. 115 See T Altwicker, ‘Transnational Rights: International Human Rights Law in Cross-Border Contexts’ (2018) 29 European Journal of International Law 581. See also ch 3, s VII on ETOs. 116 UN Committee on Economic, Social and Cultural Rights (hereinafter CESCR), ‘General Comment No 15: Arts 11 and 12 of the International Covenant on Economic, Social and Cultural Rights’ (20 January 2003) UN Doc E/C.12/2002/1, para 33. 117 CESCR, ‘General Comment No 14: The Right to the Highest Attainable Standard of Health’ (11 August 2000) UN Doc E/C.12/2000/4 (11 August 2000) para 39. 118 General Comment 24 (2017) (n 14).

206  Business and Human Rights in Conflict prevented the occurrence of the event. The responsibility of the State can be engaged in such circumstances even if other causes have also contributed to the occurrence of the violation, and even if the State had not foreseen that a violation would occur, provided such a violation was reasonably foreseeable. For instance, considering the well-documented risks associated with the extractive industry, particular due diligence is required with respect to mining-related projects and oil development projects.119

The SRSG decided, however, to interpret these statements by the CESCR not as defining legal obligations but as expressing an invitation for states to clarify their expectations towards companies.120 This decision also runs counter to the approach of the OHCHR which has read the treaty body’s general comments as referring to extraterritorial legal obligations to ‘take measures to prevent third parties (eg, private companies) over which they hold influence from interfering with the enjoyment of human rights in other countries’.121 The views of UN Treaty Bodies such as the CESCR are, of course, not legally binding but they still hold significance as pronouncements of the only interpretative bodies of relevant human rights instruments. Hence, it would have been more appropriate for the SRSG to present the views of the treaty bodies, special procedures and experts in favour of ETOs alongside those who resist their applicability to home states, clearly outlining recent developments on the matter.122 In order to identify which companies home states are allowed (in the SRSG’s words, ‘not prohibited’) to regulate, it would have also been helpful to clarify, inter alia along the lines of the Human Rights Committee (HRC),123 that state jurisdiction does not refer to the place where the violation occurs but to the relationship between the state and the individual,124 and to whether the state holds

119 ibid para 32 (emphasis added). 120 UNGP 1, commentary (n 2) 7 (emphasis added): ‘There are strong policy reasons for home States to set out clearly the expectations that business respect human rights abroad, especially where the State itself is involved in or support those businesses. The reasons include insuring predictability for business enterprises by providing coherent and consistent messages, and preserving the State’s own reputation.’ 121 UN Human Rights Council, ‘Report of the Office of the United Nations High Commissioner for Human Rights on the Relationship Between Climate Change and Human Rights’ (15 January 2009) UN Doc A/HRC/10/61 para 86. 122 The former UN Special Rapporteur on the Right to Food, Professor Olivier De Schutter, prepared a report on ETOs for the SRSG in which he agreed that the issue remains unsettled in international law. He further noted, however, that ‘[t]his classical view may be changing, however, especially as far as economic and social rights are concerned. There is a growing recognition that the fact of the interdependency of States should lead to impose an extended understanding of State obligations, or an obligation on all States to act jointly in face of collective action problems faced by the international community of States’. O De Schutter, Extraterritorial Jurisdiction as a Tool for Improving the Human Rights Accountability of Transnational Corporations (2006) 19, at www. business-humanrights.org/en/pdf-extraterritorial-jurisdiction-as-a-tool-for-improving-the-humanrights-accountability-of-transnational-corporations. 123 See UN Human Rights Committee (HRC), ‘General Comment No 31: Nature of the General Legal Obligation on State Parties to the Covenant’, UN Doc CCPR/C/21/Rev.1/Add.13 (26 May 2004) para 10. 124 HRC, Lopez Burgos v Uruguay, Communication No 52/1979 (29 July 1981) UN Doc CCPR/C/ OP/1, para 12.1.

A Critical Appraisal of the Business and Human Rights Framework  207 and exercises de facto power of ‘authority or control over an individual’125 (also referred to as a personal notion of jurisdiction).126 As explained for instance in the Commentary to the Maastricht Principles on Extraterritorial Obligations of States in the area of Economic, Social and Cultural Rights127 [w]hen used to refer to the scope of application of human rights and comparable treaties, the term ‘jurisdiction’ refers to the territory and people over which a state has factual control, power or authority. It should not be confused with the limits imposed under international law to the ability of a State to exercise prescriptive (or legislative) and enforcement ‘jurisdiction’.128

As articulated in the next section, I contend that a clear identification of the international law principle of due diligence can help to delineate the applicability of ETOs to home states. It can also be seen as the coherent basis for the first pillar of the Framework, strengthened by the notion of international assistance and cooperation enshrined in, inter alia, Article 2(1) IESCR, Article 1(3) UN Charter, Articles 22 and 28 of the Universal Declaration of Human Rights (UDHR) and Articles 4, 42 and 44(6) of the Convention on the Rights of the Child (CRC).129 i.  The Principle of Due Diligence and its Relevance to Host States’ Obligations In international law the due diligence principle indicates conduct or behaviour that a state must follow in order to effectively protect other states from harm 125 M Milanovic, ‘Al-Skeini and Al-Jedda in Strasbourg’ (2012) 23 European Journal of International Law 121, 122. 126 Milanovic calls this notion the model of ‘state agent authority’: see M Milanovic, Extraterritorial Application of Human Rights Treaties: Law, Principles, and Policy (Cambridge, Cambridge University Press, 2011) at 127ff. The ECtHR in the case of Al-Skeini refers to ‘state agent authority and control’: App No 55721/07, Al-Skeini v Others v United Kingdom, 7 July 2011, paras 135–37: ‘The Court does not consider that jurisdiction in the above cases arose solely from the control exercised by the Contracting State over the buildings, aircraft or ship in which the individuals were held. What is decisive in such cases is the exercise of physical power and control over the person in question.’ 127 As explained in ch 3, the Maastricht Principles are not binding in nature, but they represent significant expert interpretations of international law in this area, and as such they can be of guidance in outlining the content of states’ extraterritorial obligations in relation to ESC rights. See O De Schutter et al, ‘Commentary to the Maastricht Principles on Extra-Territorial Obligations of States in the area of Economic, Social and Cultural Rights’ (2012) 34 Human Rights Quarterly 1084. 128 ibid, Commentary to Maastricht Principle 8 ‘Definition of Extraterritorial Obligations’ 1102 (notes omitted). Arguably, the SRSG conflated these two different meanings of jurisdiction when stating that home states are not required to regulate, nor are they prohibited to do so ‘provided there is a recognized jurisdictional basis’. See also ICJ, Advisory Opinion, Legal Consequences of the Construction of a Wall in the Occupied Palestinian Territory, 9 July 2004, para 109; ICJ, Armed Activities on the Territory of the Congo (Democratic Republic of the Congo v Uganda) 19 ­December 2005, paras 178–80 and 216–17; and in general M Milanovic, ‘From Compromise to Principle: Clarifying the Concept of State Jurisdiction in Human Rights Treaties’ (2008) 8 Human Rights Law Review 411–48. 129 For an analysis of the notion of international assistance and cooperation and of the extraterritorial obligations flowing from it, see ch 3.

208  Business and Human Rights in Conflict through legislative and administrative action.130 As such, it represents ‘a flexible reasonableness standard adaptable to particular facts and circumstances’, which amounts to ‘due, or merited, care’.131 Now accepted as a requirement under customary international law,132 the due diligence principle is one of two broader principles of the law of state responsibility,133 according to which states can be held responsible for acts or omissions of individuals exercising state’s powers (principle of attribution);134 and for a state’s failure to ‘­exercise due diligence in preventing or reacting to such acts or omissions’.135 The first cases on state responsibility arising from a failure by the state to ensure a sufficient level of protection for foreign nationals,136 or to ‘diligently prosecute and properly punish’137 crimes committed against foreign nationals, date back to the 1920s. But it was not until 1941 that the International Court of Justice (ICJ) engaged with the due diligence principle for the first time in the Trail Smelter case,138 outlining the general rule that ‘[a] State owes at all times a duty to protect other States against injurious acts by individuals from within its jurisdiction’, later applied to various cases which also went beyond transboundary environmental harm.139 In 1949, with the Corfu Channel case, the ICJ considered Albania’s possible grounds of responsibility for the explosion of two British ships in its waters.140 After dismissing the possibility that Albania had directly laid the minefield or colluded with Yugoslavia by assisting or acquiescing to the laying of a minefield,141 the ICJ assessed whether Albania knew about the laying of the minefield and found that it did, thus failing to fulfil its due diligence duty to inform other states of the danger posed by the mines, a duty based on ‘every State’s obligation not to allow knowingly its territory to be used for acts contrary to the rights of other States’.142 130 A Birnie and A Boyle, International Law and the Environment (Oxford, Oxford University Press, 2002) 112. 131 RP Barnidge Jr, ‘The Due Diligence Principle Under International Law’ (2006) 8 International Community Law Review 81, 140. 132 A Reinisch, ‘The Changing International Legal Framework for Dealing with Non-State Actors’ in Alston (ed), Non-State Actors and Human Rights (Oxford, Oxford University Press, 2005). 133 JA Hessbruegge, ‘The Historical Development of the Doctrines of Attribution and Due Diligence in International Law’ (2003–04) 36 New York University Journal of International Law and Policy 265, 275. 134 ibid. 135 ibid. 136 Thomas H Youmans (USA) v United Mexican States (1926) 4 Reports of International Arbitral Awards 110, para 11. 137 Massey v United Mexican States (1927) 4 Reports of International Arbitral Awards 155, para 159. 138 Trail Smelter Arbitral Decision (United States v Canada) (1941) 35 American Journal of International Law 684, reprinted in Bratspies & Miller. 139 Corfu Channel Case (United Kingdom v Albania), ICJ Decision of 9 April 1949 [1949] ICJ Reports 4. On the legal obligations of occupying powers, see Legal Consequences of the Construction of a Wall (n 48) 136; and Armed Activities in the Territory of the Congo (Democratic Republic of Congo v Uganda), Judgment of 19 December 2005. 140 Corfu Channel Case, ibid at 14–17. 141 ibid. 142 ibid 22.

A Critical Appraisal of the Business and Human Rights Framework  209 More recently, in the Genocide case on the Srebrenica massacre,143 the ICJ recognised that Serbia, although not aware of the imminence of the genocide, had a presumptive awareness that there was a serious risk that genocide would occur, and also had influence over the extraterritorial non-state actors who perpetrated the genocide.144 With specific reference to the due diligence principle, the ICJ confirmed that the principle requires a state to employ all means reasonably available to them, so as to prevent genocide so far as possible. A State does not incur responsibility simply because the desired result is not achieved; responsibility is however incurred if the State manifestly failed to take all measures to prevent genocide which were in its power, and which might have contributed to preventing the genocide.145

There is wide acceptance in international law that a state’s obligation to protect rights holders within its territory or jurisdiction against violations by third parties also includes a duty to prevent such abuses. This position was addressed by the Inter-American Court of Human Rights in Velasquez ­Rodriguez v Honduras, where the Court found that [a]n illegal act which violates human rights and which is initially not directly imputable to a State (for example, because it is the act of a private person or because the person responsible has not been identified) can lead to international responsibility of the State, not because of the act itself, but because of the lack of due diligence to prevent the violation or to respond to it as required by the [American Convention on Human Rights].146

According to the HRC, a state can be found in breach of its obligations under Article 2 of the International Covenant on Civil and Political Rights (ICCPR) when ‘permitting or failing to take appropriate measures or to exercise due diligence to prevent, punish, investigate or redress the harm caused by such acts by private persons or entities’.147 This position was also confirmed by the HRC in the Herrera Rubio v Colombia case.148 The UN Committee on the Elimination of Discrimination Against Women reiterated this concept by stating that ‘[u]nder general international law and

143 Application of the Convention on the Prevention and Punishment of the Crime of Genocide (Bosnia and Herzegovina v Serbia and Montenegro), Judgment, ICJ Reports 2007, 43. 144 ibid para 436. 145 ibid para 430. 146 Velasquez Rodriguez v Honduras, Series C: Decisions and Judgments, Case No 04, InterAmerican Court of Human Rights 29 July 1988, para 172. For a similar stance by the European Court of Human Rights see Osman v United Kingdom 29 EHRR, para 115. 147 CCPR, ‘General Comment No 31: The Nature of the General Legal Obligation Imposed on States Parties to the Covenant’ (26 May 2004) UN Doc CCPR/C/21/Rev.1/Add. 13. 148 (161/1983) Joaquin David Herrera Rubio et al v Colombia, 2 November 1987, CCPR/C/OP/2 at 192 (1990), para 12: Colombia was under an obligation to take ‘effective measures to remedy the violations that Mr Herrera Rubio has suffered and further to investigate said violations, take action thereon as appropriate and to take steps to ensure that similar violations do not occur in the future’.

210  Business and Human Rights in Conflict specific human rights covenants, States may also be responsible for private acts if they fail to act with due diligence to prevent violations of rights or to investigate and punish acts of violence, and for providing compensation’.149 And, in General Comment 14 the CESCR referred specifically to the state’s obligation to prevent corporate violations: Violations of the obligation to protect follow from the failure of a State to take all necessary measures to safeguard persons within their jurisdiction from infringements of the right to health by third parties. This category includes such omissions as the failure to regulate the activities of individuals, groups or corporations so as to prevent them from violating the right to health of others; … and the failure to enact or enforce laws to prevent the pollution of water, air and soil by extractive and manufacturing industries.150

In General Comment 15 on the right to water the CESCR further stated that the obligation to protect includes, inter alia, adopting the necessary and effective legislative and other measures to restrain, for example, third parties from denying equal access to adequate water; and polluting and inequitable extracting from water resources, including natural sources, wells and other water distribution systems.151

ii.  The Principle of Due Diligence and its Relevance to Home States’ Obligations The decisions by international and regional courts152 and the views of various UN treaty bodies leave no doubt on the relevance of the due diligence principle to host states. But, when it comes to ascertaining whether such principle might be used to delineate a home state obligation to regulate, agreement among scholars starts to wither. The key question to be addressed, therefore, is whether a home state’s failure to regulate a company’s activities abroad would result in a breach of its due diligence obligation, thereby engaging international responsibility. The normative content of the due diligence principle sheds light on the need – and I argue also the obligation – for home states to regulate the activities of corporations abroad. As seen above in the Trail Smelter and Corfu Channel decisions by the ICJ a state is required, as a minimum, ‘not to allow knowingly its territory to be used for acts contrary to the rights of other states’.153 By analogy, a state can

149 UN Committee on the Elimination of Discrimination Against Women, ‘General Recommendation No 19: Violence Against Women’ (1992) UN doc A/47/38, para 9. 150 CESCR, General Comment 14 (n 117) para 15 (emphasis added). 151 CESCR, General Comment 15 (n 116) para 23. 152 See generally A Nolan, ‘Addressing Economic and Social Rights Violations by Non-State Actors through the Role of the State: A Comparison of Regional Approaches to the Obligation to Protect’ (2009) 9 Human Rights Law Review 225. 153 Corfu Channel (n 139) 22.

A Critical Appraisal of the Business and Human Rights Framework  211 be found to be under an obligation to protect154 human rights abroad against conduct which originates from companies registered or headquartered in its own territory.155 As confirmed by Brownlie, the home state is under the duty to ‘control the activities of private persons within its State territory and the duty is no less applicable where the harm is caused to persons or other legal interests within the territory of another State’.156 Restating this, Maastricht Principle 24 affirms that [a]ll States must take necessary measures to ensure that non-State actors which they are in a position to regulate, as set out in Principle 25, such as private individuals and organizations, and transnational corporations and other business enterprises, do not nullify or impair the enjoyment of economic, social and cultural rights. These include administrative, legislative, investigative, adjudicatory and other measures. All other States have a duty to refrain from nullifying or impairing the discharge of this obligation to protect.157

Recently the Committee on the Elimination of Racial Discrimination adopted a similar view in its concluding observations, where it recommended that state parties regulate the extraterritorial activities of companies registered in their territory/jurisdiction and hold them accountable for their violations.158 In other words: regulation by home states is, first, justified (as per SRSG ‘not prohibited’) since by doing so they seek to influence conduct that may otherwise result in the violation of human rights of individuals abroad. In adopting regulations they exercise their extraterritorial prescriptive jurisdiction. Second, home states are required to regulate because their international responsibility is engaged whenever nullification or impairment of the enjoyment of ESC rights is a foreseeable result of their conduct. In relation to this obligation to regulate, foreseeability is ascertained on the basis of what the authorities knew or ought to have known.159 For example: corporation X operates in the area of 154 By preventing, penalising and punishing conduct which may result in human rights harm. See T Becker, Terrorism and the State: Rethinking the Rules of State Responsibility (Oxford, Hart Publishing, 2006) 14–24 and 66. 155 F Coomans, ‘The Extraterritorial Scope of the International Covenant on Economic, Social and Cultural Rights in the Work of the United Nations Committee on Economic, Social and Cultural Rights’ (2011) 11 Human Rights Law Review 1, 31. 156 I Brownlie, System of the Law of Nations: State Responsibility (Oxford, Clarendon Press, 1983) 165. 157 Maastricht Principles (n 127) emphasis added. 158 See UN Committee on the Elimination of Racial Discriminaiton (CERD), ‘Concluding Observations: Canada’ (25 May 2007) UN Doc CERD/C/CAN/CO/18, para 17; CERD, ‘Concluding Observations: United Kingdom of Great Britain and Northern Ireland’ (14 September 2011) UN Doc CERD/C/GBR/CO/18-20, para 29; and ‘Concluding Observations: Australia’ (13 S­ eptember 2010) UN Doc CERD/C/AUS/CO/15-17, para 13. On the notion of influence, in addition to the Genocide case, see Maastricht Principle 26: ‘States that are in a position to influence the conduct of non-State actors even if they are not in a position to regulate such conduct, such as through their public procurement system or international diplomacy, should exercise such influence, in accordance with the Charter of the United Nations and general international law, in order to protect economic, social and cultural rights.’ 159 Commentary to Maastricht Principle 9 (n 127) para 8: ‘Principle 9(b) acknowledges that the obligations of a State under international human rights law may effectively be triggered when its

212  Business and Human Rights in Conflict iron extraction in country B (the host country). Corporation X is incorporated in country A, whereas the persons in control of its affairs are from country C. In this situation, there are two possible ways to determine the nationality of the corporation and therefore the home state required to regulate: in one scenario, on the basis of the country of incorporation or registration,160 whereby country A would thus be under an obligation to regulate the activities of corporation X in country B. In a parallel scenario, the nationality of the corporation could be determined on the basis of the nationality of the persons who own it, manage it or are otherwise deemed to be in control of its affairs,161 and country C would therefore be required to regulate the activities of corporation X in country B. Irrespective of the scenario, this approach to the nationality of the corporation only solves part of the problem: what happens in reality is that a corporation actually breaks down into a myriad of legal entities, incorporated in various different countries, depending on where the regulatory system is less stringent. Therefore, going back to our example, corporation X would probably set up an independent, limited liability company directly in country B, thus evading the regulations of both countries A and C.162 One way of ensuring compliance throughout the corporation would be for country A and/or C to impose on the parent/core company ‘an obligation to comply with certain norms wherever they operate (ie, even if they operate in other countries), or an obligation to impose compliance with such norms on the different entities they control (their subsidiaries, or even in certain cases their business partners)’.163 The home states’ obligation to regulate discussed so far finds support and justification in international law. Whether, in practice, it is going to be implemented by states is however an altogether different question: political pressures and policy reasons have so far resulted in a strong resistance to regulating the extraterritorial activities of corporations.164 Yet in relation to responsible authorities know or should have known that the conduct of the State will bring about substantial human rights effects in another territory. This element of foreseeability excludes that a State may be held liable for all the consequences that result from its conduct, no matter how remote.’ 160 This is common practice in the United States; see Restatement (Third) of the Foreign Relations of the United States (American Law Institute, 1987), 213, n 5. 161 This is already happening for the purposes of taxation; see ibid para 414. 162 A similar corporate setup was adopted by Shell in Ogoniland (Nigeria). In relation to the oil spills and environmental pollution that devastated the area, Shell argued that the parent company was a mere shareholder with no direct involvement in the operations of its subsidiaries and that, on the basis of the ‘separate entity doctrine’, the parent company can be found liable only if the corporate veil doctrine is deemed applicable. Instances in which courts lift the corporate veil, however, are extremely rare in the company case law of most countries. On Shell and the oil pollution in Ogoniland, see eg UNEP Ogoniland Oil Assessment Reveals Extent of Environmental Contamination and Threats to Human Health, at www.unep.org; TE Lambooy and MÈ Rancourt, ‘Shell in Nigeria: From Human Rights Abuse to Corporate Social Responsibility’ (2008) 2 Human Rights & International Legal Discourse 229–76. On the corporate veil doctrine, see P Muchlinski, ‘Human Rights and Multinationals: Is There a Problem?’ (2001) 77 International Affairs 31–48. 163 Commentary to Maastricht Principle 25 (n 127) para 6. 164 UN Human Rights Council, ‘Human Rights and Corporate Law: Trends and Observations from a Cross-National Study Conducted by the Special Representative (23 May 2011) UN Doc A/HRC/17/31/Add.2.

A Critical Appraisal of the Business and Human Rights Framework  213 ESC rights, a failure to prevent corporate abuse abroad could also be seen as contrary to the obligation of international cooperation and assistance enshrined in ­Article 2(1) ICESCR, in that ‘a possibility to influence the situation of economic and social rights in another state should be one of the factors in determining the extent of extraterritorial obligations under ICESCR, especially when such influence is decisive’.165 And, as argued by Gondek, military occupation is not the only way in which this possibility to influence ESC rights manifests itself,166 as economic means of impacting on the enjoyment of the rights abroad would also be included.167 The argument that an obligation of international cooperation and assistance flows from an ‘ability to influence’ reflects the views of the CESCR in General Comment 14, whereby States parties have to respect the enjoyment of the right to health in other countries, and to prevent third parties from violating the right in other countries, if they are able to influence these third parties by way of legal or political means, in accordance with the Charter of the United Nations and applicable international law.168

Similarly, in General Comment 15 on the right to water, the CESCR found that ‘international cooperation requires States parties to refrain from actions that interfere, directly or indirectly, with the enjoyment of the right to water in other countries’ and that they should therefore ‘prevent their citizens and companies from violating the right to water of individuals and communities in other countries where States parties can take steps to influence other third parties to respect the right, through legal or political means’.169 CESCR’s General Comment 24 also confirmed that the obligation to protect also ‘entails a positive duty to adopt a legal framework requiring business entities to exercise human rights due diligence in order to identify, prevent and mitigate the risks of violations of Covenant rights, to avoid such rights being abused’.170

165 For further contextualisation of this point, see ch 3. See generally Coomans (n 75) 16–26; M Gondek, The Reach of Human Rights in a Globalising World: Extraterritorial Application of Human Rights Treaties (Antwerp, Intersentia, 2000) 316–33. 166 See eg A Cahill-Ripley, The Human Right to Water and its Application in the Occupied Palestinian Territories (Abingdon, Routledge-Cavendish, 2011). See also Legal Consequences of the Construction of a Wall (n 48) 136. 167 Gondek (n 165) 364. 168 CESCR, General Comment 14 (n 117) para 39. 169 CESCR, General Comment 15 (n 116) paras 31–33. For a comprehensive analysis on the notion of international assistance and cooperation, see Maastricht Principles 29–39 and related commentary (N 127). See also M Salomon, Is There a Legal Duty to Address World Poverty? RSCAS Policy Paper 2012/03, at http://cadmus.eui.eu/handle/1814/22197. 170 General Comment 24 (n 14) para 15 (emphasis added). Para 15 also states that this legal framework should require business entities ‘to account for the negative impacts caused or contributed to by their decisions and operations and those of entities they control on the enjoyment of Covenant rights. States should adopt measures such as imposing due diligence requirements to prevent abuses of Covenant rights in a business entity’s supply chain and by subcontractors, suppliers, franchisees, or other business partners’.

214  Business and Human Rights in Conflict Thus, to conclude this part of the argument, whilst it is true that in IHRL host states have a primary obligation to respect, protect and fulfil human rights, this does not automatically imply that home states’ ETOs are engaged only when the host state is unable or unwilling to discharge this primary obligation. As observed by Gondek, the obligation to protect remains ‘in place for the “third state” in parallel with the territorial state’s obligation if a person in question is within the jurisdiction of the former state’.171 Moreover, by suggesting an increased focus on the ETOs of home states I do not propose that these should replace the host state’s duty to protect human rights. To my mind, an interpretation of the first pillar of the Framework informed by the due diligence principle clearly indicates that home state and host state obligations for corporate abuse fully reinforce each other, as part of a complementary continuum within the wider framework of international cooperation and assistance. The reflections made in this chapter are particularly relevant to contemporary complex scenarios of cross-border cooperation between states and companies (as private non-state actors) in which such cooperation has harmful impacts on the enjoyment of human rights abroad.172 Tilmann Altwicker aptly defines these types of cooperation leading to human rights violations abroad as phenomena of extraterritorial effect of domestic acts, which can be further categorised as ‘domestic acts with indirect extraterritorial effect on human rights and domestic acts with a more direct effect’.173 The first type of acts (with indirect extraterritorial effect) mainly ‘refers to the exposure of an individual to a human rights-infringing act or situation by a third state’.174 The second type of acts (with direct extraterritorial effect), refers instead ‘to situations where an act of a state has direct influence on the enjoyment of human rights by individuals in a third state’.175 Both Boyle176 and Altwicker177 contend that, drawing from transnational legal claims based on international environmental law and on private international law, the extraterritorial effect of domestic acts and omissions should give rise to a claim under international human rights law. After  identifying the problem posed by extraterritoriality as fundamentally 171 Gondek (n 165) 351: ‘[t]he obligations to respect economic and social rights, in particular, are always in place, no matter what the attitudes or abilities on the part of the national government … Only for the obligation to fulfil (provide) is it relevant whether the home state is unable or unwilling to realize it. This is so due to the fact that complementarity lies in the very nature of this obligation both in the territorial and extraterritorial contexts.’ 172 Altwicker (n 115) 584. As a way of example, think of situations in which private security contractors provide migration control and border management services resulting in human rights violations: D Davitti, ‘The Rise of Private Military and Security Companies in the European Agenda on Migration: Implications under the UNGP’ (forthcoming 2019) Business and Human Rights Journal. 173 Altwicker (n 115) 585. 174 ibid. Altwicker provides the example of situation of extradition, what he names ‘Soering constellation’. 175 ibid 586. 176 A Boyle, ‘Human Rights and the Environment: Where Next?’ (2012) 23 European Journal of International Law 613, 638–39. 177 Altwicker (n 115) 586, quoting Boyle at ibid.

A Critical Appraisal of the Business and Human Rights Framework  215 a problem of jurisdiction – questioning ‘under which circumstances states incur this responsibility through the extraterritorial effects of their domestic conduct’178 – Altwicker suggests addressing this problem by adding a third model of jurisdiction to the ones already identified by Milanovic of spatial model and personal model of jurisdiction.179 The third model proposed by Altwicker extends jurisdiction ‘to the (effective) “control over situations” (with extraterritorial effects on the enjoyment of human rights)’.180 In this model, the ‘control over situations’ test would shift the focus to the control that a home state has over harmful circumstances, rather than over territory or individuals. With a reasoning by analogy with Article 14 of the International Law Commission’s (ILC) Draft Articles on State Responsibility (ARSIWA), Altwicker reconceptualises international cooperation between states and private nonstate actors (including companies) as instances of ‘human rights interference by transnational composite acts’,181 whereby it is possible to identify the legal consequences of the aggregate effect of acts and omissions by the state. Referring to the case law of the European Court of Human Rights and its rendition cases, Altwicker discusses the possibility of a finding of a violation by the territorial state, inter alia, on the notion that the territorial state, while it had not itself been engaged in acts of torture, ‘facilitated the whole process, created the conditions for it to happen and made no attempt to prevent it from occurring’.182

Altwicker’s approach to jurisdiction, in my view, is suitable to capture crossborder activities by companies which negatively affect human rights and supports the argument, put forward in this chapter, that home states have an obligation to regulate the extraterritorial activities of companies domiciled in their territory and/or jurisdiction; at least while we wait for a codification, in a binding human rights instrument, of the obligations directly vested upon companies.183 As acknowledged by the SRSG himself,184 the ETOs debate is

178 ibid 588. 179 M Milanovic, Extraterritorial Application of Human Rights Treaties: Law, Principles and Policy (Oxford, Oxford University Press, 2011) at 127–72 and 173–208 respectively. 180 Altwicker (n 115) 590. 181 ibid 596. 182 ibid 597. Note that at 600 Altwicker also discusses issues of attribution to the home state of the conduct (acts or omission or a series of acts or omissions) by the company which will have to be based eg on the entity’s legal status, the nature of its activity, the context of its operation, its institutional independence; and its operational independence. 183 See Open-ended Intergovernmental Working Group on transnational corporations and other business enterprises with respect to human rights, mandated by the Human Rights Council, ‘Resolution 26/9: Elaboration of an international legally binding instrument on transnational corporations and other business enterprises with respect to human rights’ (14 July 2014) UN Doc A/HRC/RES/26/9, para 1. See also ‘First Draft of the Legally Binding Instrument to Regulate, in International Human Rights Law, the Activities of Transnational Corporations and Other Business Enterprises’ also known as Zero Draft (16 July 2018) www.ohchr.org/Documents/HRBodies/ HRCouncil/WGTransCorp/Session3/DraftLBI.pdf. 184 UN Framework (n 33) para 14.

216  Business and Human Rights in Conflict still unfolding: in my view the due diligence principle is a crucial link between the first two pillars of the Framework, whereby companies – once subject to the legally-binding regulation of home and host states – will find themselves unable to avoid compliance with their responsibility to respect human rights, irrespective of where they carry out their activities. This is particularly true in situations of armed conflict where, as discussed in the next section, it is possible to identify heightened obligations of the home state and heightened responsibility of companies. II.  THE FRAMEWORK AT THE INTERSECTION OF INTERNATIONAL HUMAN RIGHTS LAW AND INVESTMENT LAW IN ARMED CONFLICT

As mentioned earlier in this chapter, principles 7 and 23(c) of the UNGP refer to conflict-affected areas and to situations characterised by gross human rights abuses and expand on what is required of states and companies, respectively, in such contexts. The Organization for Economic Co-operation and Development (OECD) also refers to ‘conflict-affected and high-risk areas’ and defines them as follows: [c]onflict-affected and high-risk areas are identified by the presence of armed conflict, widespread violence or other risks of harm to people. Armed conflict may take a variety of forms, such as a conflict of international or non-international character, which may involve two or more states, or may consist of wars of liberation, or insurgencies, civil wars, etc. High-risk areas may include areas of political instability or repression, institutional weakness, insecurity, collapse of civil infrastructure and widespread violence. Such areas are often characterised by widespread human rights abuses and violations of national or international law.185

Similarly, the EU definition of ‘conflict-affected and high-risk areas’ characterises them as [a]reas in a state of armed conflict, fragile post-conflict areas, as well as areas witnessing weak or non-existing governance and security, such as failed states, and widespread and systematic violations of international law, including human rights abuses.186

If we apply the above conceptualisations to the context of extractive sector investment in Afghanistan (see Introduction and chapter one), there is little doubt that foreign companies investing in the Afghan extractive sector operate in a conflict-affected or high-risk area which entail high-risk operations. Irrespective of whether we consider Afghanistan as still in a situation of armed conflict or as already embarked in a post-conflict phase, the country would meet 185 ‘Conflict-Affected and High-Risk Areas (CAHRAs)’ (Conflict-Free sourcing initiative) www. conflictfreesourcing.org/training-and-resources/conflict-affected-and-high-risk-areas/. 186 ibid.

The Framework, IIL and IHRL  217 the criteria of both principle 7 and principle 23(c) of the UNGP and of the definitions outlined above. According to UNGP 7, home states of companies investing in Afghanistan (or in any other conflict or high-risk area) are expected to ‘help them identify, prevent and mitigate the human rights-related risks of their activities and business relationships’; and ‘to assess and address heightened risks of abuses’.187 As expanded in the commentary and in a report in an addendum to the UNGP,188 home states’ engagement is to be understood as in addition to the engagement of host states where the companies are operating. Home states’ engagement should be proactive and take place as early as possible because prevention is cheaper than reaction for both States and business enterprises. It is furthermore more likely that engagement can be effective in helping business enterprises to avoid involvement in human rights abuse if it takes place before violence becomes widespread. Nonetheless, prevention might not be enough, and States should remain engaged with the business enterprise through the conflict cycle.189

As convincingly argued by Mares, a close analysis of UNGP 7 and of its commentary reveals that this principle is ‘conceptually dependent on “gross abuses” and not on the conflict context’.190 Gross abuses are to be understood as more serious human rights abuses than ‘severe impacts’ or ‘significant risks’, referred to for instance in other principles.191 The first two provisions of the commentary to UNGP 7, Mares contends, ‘couple the increased likelihood of occurrence (high-risk areas) with the grossness of the abuse’ in order to ensure that home states are proactive and supportive of cooperative ­companies.192 Accordingly, the reference is to high risk of human rights abuse rather than to high risk of conflict.193 The last two provisions of the commentary, instead, ‘refer to gross abuses with no coupling to high probability of business involvement in such abuses. So even in this case the call towards home states is not dependent on conflict, merely on the grossness of the abuse’.194 Gross abuses, therefore, not only occur in situations of armed conflict but also in various other high-risk contexts.195 In these conflict and/or high-risk contexts,

187 UNGP (n 2) Principle 7 and related commentary. 188 See Business and Human Rights in Conflict-Affected Regions: Challenges and Options for State Responses, UN Doc. A/HRC/17/32, 27 May 2011. 189 ibid, para 10. 190 R Mares, ‘Corporate and State Responsibilities in Conflict-Affected Areas’ (2014) 83 Nordic Journal of International Law 293, 311. 191 See eg UNGP 14, 16, 17, 21. 192 Mares (n 190). 193 ibid. 194 ibid. 195 See also Special Representative of the Secretary-General, ‘Recommendations and Follow-Up to the Mandate’ 11 February 2011 at www.business-humanrights.org/sites/default/files/media/ documents/ruggie/ruggie-special-mandate-follow-up-11-feb-2011.pdf, where reference is made to ‘armed conflict and other situations of heightened risk’ (emphasis added).

218  Business and Human Rights in Conflict the provisions in UNGP  7 are forceful, as they require home states to ‘[deny] access to public support and services for a business enterprise that is involved with gross human rights abuses and refuses to cooperate in addressing the situation’. UNGP 7(d) also requires home states to ‘ensur[e] that their current policies, legislation, regulations and enforcement measures are effective in addressing the risk of business involvement in gross human rights abuses’.196 As further emphasised in the addendum report on conflict-affected areas, home states should ensure that their regulatory frameworks are adequate, the applicability to business entities is clarified and, for the most extreme situations, make sure that the relevant agencies are properly resourced to address the problem of business involvement in international or transnational crimes, such as corruption, war crimes or crimes against humanity.197

Thus, in contrast to objections regarding the existence of an obligation to regulate vested upon the home state,198 the nature of high risk of gross abuses is such that UNGP 7 demands the exceptional engagement of home states. This further supports the argument put forward in the preceding section that home states are indeed under an obligation to regulate the extraterritorial activity of companies domiciled in their territory and/or jurisdiction. The UNGP also provide that, in order to fulfil their responsibility to respect human rights, companies should avoid infringing on the rights of others and address negative impacts which they have caused or contributed to. As explained in this chapter, this is to be achieved specifically through HRDD.199 In high-risk context, such as that of extractive investment in Afghanistan, companies have a heightened responsibility, including in relation to the type of HRDD that they carry out and the remediation mechanisms that they provide. They should have a clearer understanding of the severity of the abuses that they become involved in and/or contribute to, in terms of scale and scope of the abuses but also in terms of trauma and irremediable nature of the harm.200 The focus of the HRDD process, therefore, is certainly not on the risk to the company, but

196 Emphasis added. This is also confirmed by the Commentary to UNGP 7 (n 2), which suggests that states should, inter alia, ‘consider multilateral approaches to prevent and address such acts, as well as support effective collective initiatives’. 197 Conflict-Affected Regions Report (2011) note 97, para 13. 198 As indicated in this chapter and pointed out by the SRSG, scholars disagree on whether home states indeed have an obligation to regulate companies domiciled in their territory and/or under their jurisdiction. As mentioned earlier in the chapter, commentary to UNGP 2, took a conservative stance in relation to this debate and stated that ‘[a]t present States are not generally required under international human rights law to regulate the extraterritorial activities of businesses domiciled in their territory and/or jurisdiction. Nor are they generally prohibited from doing so, provided there is a recognized jurisdictional basis’. The debate is therefore far from settled in international law. 199 See UNGP 17–21 and related commentary (n 2). 200 See eg UNGP 24 and related commentary (n 2).

The Framework, IIL and IHRL  219 on the higher risk to which individuals are exposed when extractive companies invest in Afghanistan. Companies should therefore consider both the likelihood and severity of the risk, and that this risk increases proportionally with the negative impact on the people affected, for instance, by a specific extractive project. Direct consultations with the population affected by the mining project would be vital to obtain a so-called ‘licence to operate’.201 The UNGP also recommend the use of expert resources to ascertain the human rights concerns related to the activities in which companies will be involved. Because of the high risk of gross abuses, UNGP 23(c) further provides that ‘businesses enterprises should treat the risk of causing or contributing to gross human rights abuses as a legal compliance issue wherever they operate’,202 that is to say regardless of any issues of jurisdiction. The commentary to UNGP 23(c) is particularly relevant as it clearly specifies the need to consider the risk of being involved in gross human rights abuses as a compliance issue. UNGP 23(c), Sherman posits recognizes that regardless of the uncertainty of the law in particular jurisdictions, a company’s involvement in gross human rights abuses would be such an egregious calamity for the company and society that its lawyers should proactively monitor the company’s efforts to prevent its involvement in such abuse, as they would do to prevent its involvement in any serious corporate crime.203

UNGP 23, therefore, should be read in conjunction with UNGP 24 which in turn stresses the need to prioritise actions aimed at preventing and addressing adverse impacts. Companies, therefore, should not only ascertain the ­likelihood of their contribution to gross abuses, but should also prioritise action to address (ie prevent and stop, as in the understanding of protection discussed in chapter one) their impacts, starting from the most severe.204 In light of the above, it is apparent that companies investing in the Afghan extractive sector are at risk ‘of causing or contributing to gross human rights abuses’ and as such they should treat such risk as a legal compliance issue, as envisaged in UNGP 23(c). As clarified in the commentary to the latter principle,

201 See the Dissenting Opinion by Professor Philippe Sands in Bear Creek award, where he concluded that the failure by the investor to meaningfully consult with the indigenous peoples affected by the project resulted in a failure to obtain a ‘licence to operate’, which should have significantly reduced the quantum of the compensation to the investor. 202 UNGP 23(c) (n 2) emphasis added. See also R Davies, ‘The UN Guiding Principles on Business and Human Rights and Conflict-Affected Areas: State Obligations and Business Responsibilities’ (2012) 94 International Review of the Red Cross 961, 976–77. 203 JF Sherman, ‘The UN Guiding Principles: Practical Implications for Business Lawyers’ (2013) In-House Defense Quarterly at 55 http://shiftproject.org/sites/default/files/Practical%20 Implications%20for%20Business%20Lawyers.pdf, as referenced in ibid (emphasis added). 204 See Davies (n 202) 977. UNGP 24 (n 2) reads: ‘Where it is necessary to prioritize actions to address actual and potential adverse human rights impacts, business enterprises should first seek to prevent and mitigate those that are most severe or where delayed response would make them irremediable’.

220  Business and Human Rights in Conflict complex operating environments (such as the one characterising Afghanistan) may increase the risk of being complicit in gross human rights abuses by other actors, therefore business enterprises should ensure that they do not exacerbate the situation. In assessing how best to respond, they will often be well advised to draw on not only expertise and cross-functional consultation within the enterprise, but also to consult externally with credible, independent experts, including from Governments, civil society, national human rights institutions and relevant multi-stakeholder ­initiatives.

Home states, on the other hand are expected, UNGP 7, to ‘help [investors] identify, prevent and mitigate the human rights-related risks of their activities and business relationships’ (as per subsection (a) of the principle); and ‘to assess and address heightened risks of abuses, paying special attention to both genderbased and sexual violence’ (as per subsection (b)).205 Since extractive projects are often undertaken by consortia which include state-owned enterprises (SOE), home states of SOE are also required to take ‘additional’ steps to protect against human rights abuses by their own companies, as envisaged in principle 4 of the UNGP. These ‘additional’ steps are complementary to the international obligations reflected in principles 1–3 of the UNGP, and in line with the need to achieve policy coherence (principle 8 of the UNGP). The need for such additional measures to be taken by states that own or control business enterprises was also recognised by the Council of Europe Committee of Ministers. In its recommendations the Committee specified that Member States should apply additional measures to require business enterprises to respect human rights, including, where appropriate, by carrying out human rights due diligence, that may be integrated into existing due diligence procedures, when member States … own or control business enterprises.206

There is little doubt that the provisions discussed in this section support my argument that a heightened home state obligation entails, at a minimum, an obligation to regulate so as to introduce, in its domestic legal framework,

205 UNGP (n 2) Principle 7 and related commentary. UNGP 7 refers specifically to situations in which business may become involved in conflict-affected areas, and it has two other subsections. For the purposes of completeness, however, these subsections refer to ‘denying access to public support and services for a business enterprise that is involved with gross human rights abuses and refuses to cooperate in addressing the situation’; and ‘ensuring that their current policies, legislation, regulations and enforcement measures are effective in addressing the risk of business involvement in gross human rights abuses’. 206 See recommendation CM/Rec(2016)3 on human rights and business, para 22, as quoted in UN Doc A/HRC/32/45 (4 May 2016), note 95. See also Directive 2014/24, of the European Parliament and of the Council of 26 February 2014 on public procurement and repealing Directive 2004/18, 2014 OJ (L 94) 65; Directive 2014/25 of the European Parliament and of the Council of 26 February 2014 on procurement by entities operating in the water, energy, transport and postal services sector and repealing Directive 2004/17/EC, 2014 OJ (L 94) 243.

Preliminary Conclusions  221 a requirement for compulsory HRDD for companies domiciled in its territory and/or under its jurisdiction; access to the courts of the home states for those who have suffered human rights abuse because of a breach of these domestic obligations; and the imposition of meaningful compensation for such breaches. Similarly, for a company investing in Afghanistan treating the risk of causing or contributing to gross human rights abuses as a legal compliance issue should mean, at a minimum, ongoing monitoring and assessment of its adverse impacts, compulsory public notification, and, crucially, immediate action to prevent or (if already ongoing) stop such harm. Under this heightened approach, as discussed in this chapter, non-compliance would lead to processes informed by the judicial remedies provided for under a ‘heightened’ version of pillar one. III.  PRELIMINARY CONCLUSIONS

In this chapter I have analysed the Framework for business and human rights, its normative contents and its status as the starting point for further discussion on business and human rights. During the analysis I have focused on what I consider the main weaknesses of the Framework, that is the need to clarify that the state obligation to protect includes an obligation for home states to regulate the extraterritorial activities of companies domiciled in their territory and/or under their jurisdiction. In the chapter I have explained how this argument can be supported in international law by the principle of due diligence and by Altwicker’s alternative approach to jurisdiction, which would extend the concept to a state’s control over situations, rather than only over territory (spatial mode of jurisdiction) or individuals (personal mode of jurisdiction). This home state obligation finds particular application for home states of companies investing or operating in conflict-affected areas and/or high-risk areas. As already discussed in chapter one and as I further discussed in this chapter, conflict areas present complex challenges, which are often exacerbated by the arrival of foreign extractive companies. The way in which these foreign investors will be reined in and regulated to protect the human rights of the local population and to redress harm when these rights are abused is directly dependent on the way in which home states will regulate their investors. Home states, which often actively support their investors in accessing the host country, for instance by offering financial support and political risk insurance, do have a role to play in such contexts. As I have argued in this chapter, a joint reading of the provisions under the UNPG, in particular principles 7, 23(c) and 24, clearly indicates that home states have heightened obligations and that companies have a heightened responsibility. Such heightened obligations and responsibility entail, at a minimum, a home state obligation to regulate so as to introduce, in its domestic legal framework, a requirement for compulsory HRDD for companies domiciled in

222  Business and Human Rights in Conflict its territory and/or under its jurisdiction; access to the courts of the home states for those who have suffered human rights abuse because of a breach of these domestic obligations; and the imposition of meaningful compensation for such breaches. Company investing or operating in conflict-affected or high-risk areas, on the other hand, have a heightened responsibility to treat the risk of gross human rights abuses as a legal compliance issue, and thus to seriously engage in ongoing monitoring and assessment of its adverse impacts; of publicly notifying harm and violations when encountered; and to promptly intervene to prevent or (if already ongoing) stop such harm. As I further discuss in the concluding chapter, anything short of this would otherwise enable abuse to continue, business as usual.

Conclusion: Implications for Afghanistan

T

he tension between the need for Afghanistan to attract much-needed foreign investment and, at the same time, preserve its capacity to respect, protect and fulfil the human rights of its population emerges clearly from the analysis carried out in chapters one to four of this thesis. Crucially, as outlined in these chapters, the arrival of foreign investment in the extractive sector risks exacerbating the already precarious human rights situation in which the civilian population finds itself in the midst of armed conflict. As I argued in chapters one and four, the joint impact of extractive activities and of the international investment law (IIL) protections extended to them have far reaching implications from a human rights protection perspective, especially if we consider what this will entail in terms of preventing violations of the right to water. A renewed focus on prevention, I have argued, is essential for two reasons: first, to avoid negative human rights impacts caused by extractive sector investments flowing into Afghanistan;1 and second to catalyse energies towards pre-empting (rather than ex post resolving) clashes between IIL and IHRL. These prevention efforts are particularly necessary in order to ensure that human rights considerations are taken away from the remit of investment treaty arbitration, and to resist cosmetic calls for its reform.2 I am fully aware, however, that there will be circumstances in which prevention efforts will not succeed and, for instance, clashes between IIL and IHRL will continue to occur. In addressing the way in which IHRL is (vel non) brought to bear in IIL, in chapter four I discussed two specific entry points identified by Simma and have explained why, ultimately, they do not appear to work. The first entry point contemplates a systemic integration of human rights through treaty interpretation, by recourse to Article 31(3)(c) VCLT.3 According to those who support systemic integration through treaty interpretation, this approach would enable a reading of relevant standards of investment protection in light of the host state’s obligations flowing from the International Covenant on Economic, Social and Cultural Rights (ICESCR) (eg, in relation to minimum core obligations and other obligations of immediate effect, including non-discrimination). The second entry point relates to a different approach in 1 For a further elaboration of this argument, see ch 1. 2 For a discussion of this point, see ch 4. 3 B Simma, ‘Foreign Investment Arbitration: A Place for Human Rights?’ (2011) 60 International and Comparative Law Quarterly 573, 584.

224  Conclusion drafting investment contracts.4 Simma argues, and various scholars have agreed with him, that if the host state’s obligations are clarified from the outset, it is possible to recast an investor’s ‘legitimate expectations’. In other words, foreign investors and the host state should carry out a joint human rights assessment in order to have a clear picture of relevant obligations and of how these will influence future changes to the investment’s regulatory environment. In putting forward this second entry point Simma suggests the adoption of human rights audits rather than human rights impact assessments (HRIAs). The latter, in his view, are ‘of a much broader scope’, ‘very detailed and fact-intensive’.5 These two entry points, at first sight, may seem appealing and worth pursuing. HRIAs have been identified by the former UN Special Representative of the Secretary-General on business and human rights (SRSG) as a key tool for companies to assess and address any adverse human rights impact of their activities, both ex ante and during a project cycle.6 As such, HRIAs form part of the human rights due diligence processes (HRDD) envisaged to fulfil the responsibility to respect under pillar two of the ‘Protect, Respect and Remedy’ Framework for Business and Human Rights (UN Framework). As such, HRIAs have been promoted as a key tool for both investors and host states when entering into contracts, not least to ascertain whether the investor has obtained a ‘social licence’ to operate before entering into the investment agreement and maintained it throughout the investment project. Should investors fail to obtain such a ‘social licence’, it would become untenable for them to rely on overbroad legitimate expectations, and for the investment tribunals to validate their claim and overstretch the scope of fair and equitable ­treatment (FET).7 As discussed in chapter five and evidenced in both chapters four and five, however, these axiomatic arguments are mainly based on false premises. Proposals to draft human rights-compatible clauses in international investment agreements (IIA) have been embraced by the United Nations Working Group on Business and Human Rights (UNWG) and by the wider business and human rights (BHR) community of scholars and practitioners. These proposals are based on the assumption that a state can maintain the necessary regulatory space by drafting clearer (ie more precise) substantive clauses that a) provide a state with more policy flexibility; b) increase the predictability of judicial outcomes 4 See UN Human Rights Council, ‘Principles for Responsible Contracts: Integrating the Management of Human Rights Risks into State-Investor Contract Negotiations: Guidance for Negotiators’ (25 May 2011) UN Doc A/HRC/17/31/Add.3; UN Office of the High Commissioner for Human Rights, ‘Training Modules on the Principles for Responsible Contracts’ at www.ohchr.org/EN/ Issues/Business/Pages/trainingmodules.aspx. 5 Simma (n 3) 594. 6 UN Human Rights Council, ‘Protect, Respect and Remedy: A Framework for Business and Human Rights’ (7 April 2008) UN Doc A/HRC/8/5, paras 56 and 63. 7 For an in-depth discussion on the doctrine of legitimate expectations see chs 2 and 4. See also D Davitti, ‘On the Meaning of International Investment Law and International Human Rights Law: The Alternative Narrative of Due Diligence’ (2012) Human Rights Law Review 421, 436.

Conclusion  225 for states and investors alike;8 and c) enable an international investment tribunal to balance conflicting host state obligations flowing from IIL and international human rights law IHRL. In other words, better drafting will provide more regulatory flexibility, increase the predictability of arbitral decisions, and guide the ‘balancing’ exercise carried out by tribunal. As my analysis of international investment awards and of the interpretation of substantive standards of investment protection in chapters two and four has demonstrated, however, there is no evidence that strategic IIA design will automatically lead to better (ie ‘human rights-compatible’) interpretation by international investment tribunals. So far, the introduction in IIA of public policy exceptions or similar carve-out clauses, and of legality requirements (such as the ‘clean hands’ doctrine) has not led to a systematic ‘human rights-compatible’ judicial interpretation.9 An emblematic example of this maladroit assumption is the attempt by state parties to the North American Free Trade Agreement (NAFTA) to restrain tribunals’ interpretation of the FET standard through a binding interpretation. This attempt has brought, at best, mixed results, with investment tribunals attempting to limit and/or distinguish the customary law interpretation of the state parties. Similarly, treaty drafting aimed at introducing greater clarity and determinacy into substantive IIA obligations has not been too successful in ensuring ‘human rights-compatible’ interpretation. One of the most concerning consequences of these proposals, as I have argued throughout this book, is that a focus on IIA design and on IIL reform implicitly contributes to legitimising the role of investment tribunals and/or courts in reviewing public policy decisions by states, a role that, as examined in chapter four, they are fundamentally unsuitable to play. Reform debates, crucially, also shift the attention away from much-needed challenges to the ideological and constitutive underpinnings of IIL, which de facto continue to enable substantive inequality and corporate abuse, as denounced by Philip Alston in the context of neoliberal reforms aimed at privatisation.10 In this conclusion, however, let me return to Afghanistan to discuss the implications that the main claims put forward in this book may have for this country. At the moment of sending this book to press, the people of ­Afghanistan had just gone to vote to elect a new parliament. This election was held after a 8 See TL Berge and W Alschner, ‘Reforming Investment Treaties: Does Treaty Design Matter?’ Investment Treaty News, International Institute for Sustainable Development (17 October 2018) www. iisd.org/itn/2018/10/17/reforming-investment-treaties-does-treaty-design-matter-tarald-laudalberge-wolfgang-alschner/?utm_source=Investment+Treaty+News&utm_campaign=33388461c5EMAIL_CAMPAIGN_2018_04_24_COPY_01&utm_medium=email&utm_term=0_ce99edb66e33388461c5-225591741#_ftn6. 9 See eg Copper Mesa Mining Corporation v Republic of Ecuador (15 March 2016) Award, PCA No 2012-2; and Bear Creek Mining Corporation v Republic of Peru (30 November 2017) Award, ICSID Case No ARB/14/2. 10 UN General Assembly, ‘Report of the Special Rapporteur on extreme poverty and human rights’ (26 September 2018) UN Doc A/73/396, para 2, where Alston states defines privatisation as ‘an ideology of governance’.

226  Conclusion delay of almost four years. As for previous elections, claims were made that anti-fraud and transparency measures would ensure ‘free and fair’ elections, no matter how poorly implemented these measures were in practice.11 In the meantime, the parliamentary elections mobilised the most influential leaders and warlords in the country who, in July 2018, announced the Grand National Coalition of Afghanistan (GNCA) to offer an alternative to the perceived monopoly of power of President Ashraf Ghani.12 Against the backdrop of the elections and the various allegations of corruption, it is appropriate to recall that 2014 saw the withdrawal of the majority of international military forces and international aid from Afghanistan (the so-called 2014 ‘transition’).13 At the time, the country’s extractive sector was presented by many as the only possible solution to an otherwise bleak ‘development’ scenario.14 A World Bank report predicted a persistent post-2014 financing gap for Afghanistan, mainly due to the country’s high aid dependency, with foreign aid at USD 15.7 billion in 2010/2011, equal to the country’s total GDP.15 The report also linked foreign aid to ‘corruption, fragmented and parallel delivery systems, poor aid effectiveness, and weakened governance’,16 and concluded that the only way for the ‘transition’ to be successful and peaceful was for it to be accompanied by ‘a reconciliation process, cessation of hostilities, and ultimately a peace agreement with the Taliban’.17 Failing that, the dramatic decline in international military presence and foreign aid would have occurred without the elements of a conventionally defined post-conflict transition being in place. Experts of Afghanistan’s political and economic context knew that the latter scenario was the most likely to develop, given the escalating armed conflict, a strengthening of the opposition forces across the country, growing political instability and rampant impunity.18 Whilst World Bank’s projections also clearly revealed

11 See eg AY Adili, ‘Election Day Two: A First Hand Account of the Trials and Chaos of Second Day Voting’ (23 October 2018) at www.afghanistan-analysts.org/election-day-two-a-first-handaccount-of-the-trials-and-chaos-of-second-day-voting/. 12 For the membership of the coalition, see www.afghan-bios.info/index.php?option=com_­ afghanbios&id=4023&task=view&total=3781&start=1168&Itemid=2. 13 The implication of the term ‘transition’ was that all control of security and political stability would be successfully handed over to the Afghan government, although concerns were expressed at the time, even by the World Bank, over the feasibility of this plan. See The World Bank, ‘Afghanistan in Transition: Looking Beyond 2014’, Volume 1: Overview and Volume 2: Main Report, (May 2012) Doc No 70851. 14 See The World Bank, ‘Afghanistan: From Transition to Transformation. The Afghanistan Resource Corridor’, July 2012, at www.worldbank.org/en/news/2012/07/01/afghanistan-transitiontransformation. See also the ‘New Silk Road’ strategy, launched by US State Secretary Hillary Clinton in 2011: RD Hormats, ‘The United States’ “New Silk Road” Strategy: What is it? Where is it Headed?’ 29 September 2011, at www.state.gov/e/rls/rmk/2011/174800.htm. 15 Afghanistan in Transition Report (n 5) volume 1, iv. 16 ibid. 17 ibid, volume 2, 4. 18 For a detailed appraisal of the situation on the ground, see the analyses by Thomas Ruttig and Martine van Bijlert in Afghanistan Analysts Network, at http://aan-afghanistan.com.

Conclusion  227 that rapidly falling aid was inevitable, international experts and politicians increasingly turned to what they describe as the only possible alternative to the country’s collapse: the extractive sector. Ensuring that the two already started major mining investments were successful,19 and that the remaining extractive sites planned for further development also materialised, became a top priority for donor governments and Afghan ministries alike. By 2013 a ‘gold-rush’ to Afghanistan’s natural resources was well under way, with aid money increasingly devoted to strengthening the Ministry of Mines and Petroleum and to providing advisors to streamline tendering processes and support transparency initiatives.20 Meanwhile, Afghanistan remains one of the poorest countries in the world, with a poverty rate of 42 per cent and a further 20 per cent of the Afghan population living just above the poverty line.21 Living standards across the country remain extremely low with access to clean water representing one of the main problems for both rural and urban Afghans. With one of the world’s lowest levels access to an improved water resource (only 22 per cent of the population) and 80 per cent of the farms affected by drought, Afghanistan has an infant mortality rate of 110 per 1000 live births, whereby many of the deaths are directly related to contaminated water and inadequate sanitation.22 In 2009 Afghanistan adopted a new Water Law which, at least on paper, prioritised the use of water for drinking and livelihood purposes.23 The problem, however, is fundamentally one of irregular water geographical distribution, non-existent water storage infrastructures, land degradation and, crucially, inequitable allocation.24 It is this latter aspect that risks being particularly exacerbated by the rise of extractive sector foreign investors in Afghanistan.

19 The copper deposit in Mes Aynak, Logar province, and the Hajigak iron deposit in Bamyan province. According to the World Bank, potential revenue from these mines amount to approximately $900 million per year until 2031. See Global Witness, Getting to Gold: How Afghanistan’s First Mining Contracts Can Support Transparency and Accountability in the Sector (Global Witness, 2012) at www.globalwitness.org. 20 According to the Afghan Ministry of Mines and Petroleum, the World Bank, the Asia ­Development Bank, US, UK, Germany and Australia all provided technical, legal and financial support to the Afghan government to attract international investment in the extractive sector and, inter alia, to obtain validation from the Extractive Industries Transparency Initiative (EITI). See www.mom.gov.af/en. 21 Afghanistan has an estimated population of 34.12 million, with an approximately equal distribution between men and women and the majority of the population below the age of 24. See Afghanistan Demographics Profile 2018, at www.indexmundi.com/afghanistan/demographics_ profile.html. 22 ibid. See also P Constable, ‘In Kabul access to safe drinking water is a matter of money’ (4 September 2017) The Washington Post at www.washingtonpost.com/world/asia_pacific/ in-kabul-access-to-safe-drinking-water-is-a-matter-of-money/2017/08/31/714ea228-8124-11e7-9e7a20fa8d7a0db6_story.html?noredirect=on&utm_term=.023a6a8936b1. 23 The Water Law, arts 1 and 6, 26 April 2009. 24 Centre for Policy and Human Development (CPHD), ‘Afghanistan Human Development Report: The Forgotten Front – Water Security and the Crisis in Sanitation’ (2011) 15–20, http:// re.indiaenvironmentportal.org.in/files/Complete%20NHDR%202011%20final.pdf.

228  Conclusion As outlined in chapter three, the multi-purpose use of water means that this is a highly contested resource, and that its allocation and prioritisation are intrinsically characterised by tensions between conflicting interests and competing user groups.25 Afghanistan’s extant water crisis is bound to deepen given the growing interest in extractive sector investments and the exclusive focus on the maximisation of economic return when extractive concessions are granted. The ensuing competition over diminishing water resources will exacerbate a fragile situation, where water access is already characterised by unequal distribution and great disparity.26 Thus, marginalised Afghans who already are unable to access clean water will find it even more difficult to meet their most basic needs, as their interests will be weighed against the competing water demands of extractive companies. Furthermore, extraction activities are notorious for their devastating impact on water sources and the related health problems caused to local populations by water contamination.27 Water pollution caused by naturalresources extraction triggers a reduction in the amount of water suitable for personal and household use, and consequently a further deterioration of living standards. The chances that the extractive sector will be adequately regulated are very slim. Many mines in Afghanistan are under the direct or indirect control of criminal organisations and anti-government elements,28 whilst powerful warlords are already vying to gain control over resource-rich areas and access routes to extractive sites.29 With such conditions on the ground, local grievances in relation to access to water and basic standards of living are unlikely to be addressed by the Afghan government, and the Afghan households living in poverty are not set to benefit from the USD 300 million that the Afghan authorities are aiming to generate from mining projects.30 The national and international push to attract foreign investment in the extractive sector went hand in hand with the consolidation of a legal framework conducive for investment, whereby investors’ interests were afforded paramount protection. As discussed in chapters two and four, the investment protection provisions enshrined in IIA can significantly affect a host state’s (both present

25 IT Winkler, The Human Right to Water: Significance, Legal Status and Implications for Water Allocation (Oxford, Hart Publishing, 2012) 31. 26 As explained by Winkler, ‘[w]ater consumption patterns and inequalities tend to reflect society in general: those stakeholders and groups that are marginalised in society at large also become marginalised in water management, and are particularly disadvantaged as far as access to water is concerned’. See Winkler, ibid, 34. 27 See eg the examples of India, Ecuador and Nigeria in Winkler, ibid, 33–35. 28 Global Witness, Copper Bottomed? Bolstering the Aynak Contract: Afghanistan’s First Major Mining Deal (Global Witness, 2012) 15, at www.globalwitness.org/copper_bottomed/index.html. 29 G Bowley, ‘Potential for a Mining Boom Splits Factions in Afghanistan’ (8 September 2012) The New York Times. 30 See eg Global Witness, ‘At Any Price We Will Take the Mines: The Islamic State, the T ­ aliban and Afghanistan’s Talc Mountains’ (May 2018) at www.globalwitness.org/en/campaigns/afghanistan/ talc-everyday-mineral-funding-afghan-insurgents/.

Conclusion  229 and future) capacity to regulate in the area of public interest, for instance in order to strengthen the protection of the human right to water, access to which is becoming a growing problem in drought-prone Afghanistan. In the Afghan capital, Kabul, private water supply companies are expanding rapidly, profiting from a combination of water scarcity (due to groundwater depletion and severe contamination) and overpopulation in this water-stressed urban area.31 These tensions bring us back full circle to the two main claims advanced in this book, based on the findings of this project. The first claim is that, at the moment, with few exceptions,32 most of the research efforts on the relationship between IIL and IHRL fail to challenge the status quo. Authors’ contributions mainly focus on strategies aimed at harmonising the two legal projects, overcoming the problem of fragmentation of international law, constitutionalising international law or legitimising international investment arbitration. In my view, whilst all of these projects may follow their own rationality, the risk is that once the assumptions embedded in the status quo are accepted, the opportunity for resistance and change is lost – or at least radically curtailed.33 Acceptance of the status quo, usually, also goes hand in hand with attempts to depoliticise the debate, and therefore normalise, formalise and otherwise legitimise the current role of IIL and IHRL. What emerges from my research is that the way in which IIL and IHRL are currently deployed in conflict areas needs to be fundamentally challenged, the shortcomings emphasised and alternative narratives sought. This requires a deeper understanding of the current relationship between IIL and IHRL in conflict areas which, in turn, may inspire the confidence to identify ways of preventing clashes between conflicting state obligations. It is important to emphasise, however, that by calling for a focus on preventing clashes I am not suggesting that the push for radical changes to the two legal projects as a whole should be relinquished. As discussed in chapters three and four, within this context, it is crucial to re-politicise IIL and IHRL, not least by enabling an analysis of the violations of economic, social and

31 According to available data, Kabul city has 4.5 million dwellers and is expected to reach 8 million by 2050.See SR Kazemi, ‘Blue Gold: The Quest for Household Water in Kabul City’ (30 August 2018) www.afghanistan-analysts.org/blue-gold-the-quest-for-household-water-in-kabulcity/, explaining that most of the 70 private suppliers operate illegally, extracting groundwater from deep wells (which is prohibited) and then sell it to the public. 32 See eg N Tzouvala, ‘The Academic Debate about Mega-Regionals and International Lawyers: Legalism as Critique?’ (2018) 6 London Review of International Law 189, 194; J Linarelli et al, The Misery of International Law: Confrontations with Injustice in the Global Economy (Oxford, Oxford University Press, 2018); M Sornarajah, Resistance and Change in the International Law on Foreign Investment (Cambridge, Cambridge University Press, 2015); K Miles, The Origins of International Investment Law: Empire, Environment and the Safeguarding of Capital (Cambridge, Cambridge University Press, 2013); G Van Harten, Sovereign Choices and Sovereign Constraints: Judicial Restraint in Investment Treaty Arbitration (Oxford, Oxford University Press, 2013). 33 This reflection largely reflects Lang’s argument in the similar, yet different locale, of world trade law: A Lang, World Trade Law after Neoliberalism: Reimagining the Global Economic Order (Oxford, Oxford University Press, 2011).

230  Conclusion cultural rights (including the right to water) informed by the way in which power, in its constitutive and structural forms, influences such violations as well as the solutions currently identified to address them. It is essential to understand the political implications of the interplay between IIL and IHRL, so that the terms of the dispute can be redefined and potential for change rediscovered. For this reason, in my view, prevention and re-politicisation of the debate should be conceived of as complementary: as two tools that delineate themselves on different sites of resistance.34 The second claim I advance in this thesis follows directly from the first. It is based, in part, on the realisation that the way in which IIL and IHRL are currently deployed in conflict countries does not enable effective protection of the right to water (or of any other human right). In part, it also acknowledges that, if there is no single ‘silver-bullet’ solution to business and human rights dilemmas,35 addressing the problematic issues which currently lie at the intersection between IIL and IHRL in conflict countries with procedural fixes will certainly not bring change. My analysis of the ‘Protect, Respect and Remedy’ framework and of the Guiding Principles for Business and Human Rights (jointly the Framework) has revealed that, in their current form, these instruments can do little but maintain and/or reinforce the substantive inequality and violent structures which enable corporate abuse in conflict countries such as Afghanistan. Moreover, an overemphasis on the Framework also precludes alternative approaches to justice for such abuses, since the debate is now mainly articulated at a systemic and procedural level, whereby the tracking, monitoring and reporting throughout a company’s due diligence processes have taken priority over the substantive scope and content of the legal obligations, at the expenses of effective remedies. As I discuss in chapter five, various solutions which have been advanced as possible entry points to counter the imbalances of IIL and render IIA ‘human rights-compliant’, would actually do very little to either mitigate adverse human rights impacts caused by extractive sector investors in conflict countries or to ‘rebalance’ IIL itself. A re-politicisation of the business and human rights discourse – taking on board, for instance, the critique levelled by Philip Alston36 in the context of privatisation – and of the IIL/IHRL debate within it, in turn, would redefine key issues and enable space for change, not least in the way in which obligations and responsibilities (of both states and business actors) are conceptualised.

34 See eg D Schneiderman, Resisting Economic Globalization: Critical Theory and International Investment Law (Basingstoke, Palgrave Macmillan, 2013). 35 In his address to the International Labour Conference in June 2010, the former SRSG explained that ‘[t]here is no single silver bullet solution to business and human rights challenges. As the current economic crisis has underscored starkly, all social actors must learn to do many things differently. But those things must cohere and generate cumulative progress’. See J Ruggie, ‘The “Protect, Respect and Remedy Framework: Implications for the ILO”, International Labour Conference, Geneva, 3 June 2010, at www.ilo.org. 36 UN Doc A/73/396 (n 10).

Conclusion  231 The example of Afghanistan, exemplified throughout this book, reveals clearly the complexity of the elusive intersection between IIL and IHLR as currently conceptualised in conflict areas. I do not underestimate this complexity: at the same time, however, I see a re-conceptualisation of home state obligations (and in turn of the business responsibility to respect) as a way to address at least some of the issues that arise. I have submitted, in particular, that the principle of due diligence illuminates the duties of both host and home states. Accordingly, home states are under an obligation to regulate the extraterritorial activities of foreign investors which they are in a position to regulate. As demonstrated in chapter five, this obligation is supported by international law as well as by current alternative approaches to jurisdiction, like the one elaborated by Altwicker, that extends jurisdiction to cases of ‘control over a situation’.37 It is also supported, in my view, by current calls for state and corporate accountability for the ecologically sound management of the global Commons, of which of course water is a constitutive part.38 The application of this home state obligation would ensure that foreign investors operating in the Afghan mining sector are not left to their own devices and it would complement Afghanistan’s obligation to regulate foreign investors operating on its territory. It would also ensure that the majority of Afghans living in poverty do not see their chance to access potable water nullified by the encroaching interests of the mining sector. It is apparent, however, that no matter how sophisticated the articulation of home and host states’ obligations to regulate foreign investors, these per se will not be sufficient to ensure that foreign investors respect human rights. If we are serious about protecting the human rights of local populations affected by extractive activities and about redressing harm when these rights are abused, further loopholes will have to be closed. One of these loopholes relates, of course, to the notion of legal separation between a parent company and its subsidiaries, which could perhaps be closed through access to the courts of the home state (see chapter five). I am aware that the enabling potential of the two claims I put forward in this book is contingent upon many fragile variables, not least the willingness of states to meet their obligation to regulate under the protect pillar. Regulation is resisted by many on the basis of perceived loss of competitiveness vis-à-vis companies who have not been regulated by their own home states. A nonhomogenous regulation, undoubtedly, would be insufficient, at least in the short term, to effectively tackle corporate human rights abuse, and this is why the

37 See T Altwicker, ‘Transnational Rights: International Human Rights Law in Cross-Border Contexts’ (2018) 29 European Journal of International Law 581. 38 See the concept of public trusteeship for the Commons as elaborated by Peter Sand and other scholars. See PH Sand, ‘Accountability for the Commons: Reconsiderations’ in L Westra et al (eds), The Role of Integrity in the Governance of the Commons (Berlin, Springer, 2017).

232  Conclusion efforts towards a treaty on business and human rights binding on companies currently attract much attention. As recent developments in the area of business and human rights have demonstrated (the drafting of the binding treaty most apparently, but also as mentioned above the call for a public trusteeship for the Commons), the status quo can and should be challenged, not least when it comes to the intersection of IIL and IHRL, so as to potentially roll back the ‘astigmatic’ reach of these two legal projects. As long as we are able to reach beyond procedural fixes, the role of various actors in enabling change cannot be underestimated. Indigenous peoples, in particular, are coming forward with suggestions on how the global Commons could be preserved and harm to them prevented, including in conflict countries like Afghanistan.

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Index AAAQ framework, 120, 127 acceptability and quality, 131–32 accessibility and non-discrimination: affordability, 131 distance from water supply, 130–31 economic accessibility, 131 physical accessibility, 130–31 availability in sufficient quantities: Mazibuko case, 128–30 quantity of water needed, 128–29 uses of water necessary for survival, 127 right to water, 127 acceptability and quality, 131–32 accessibility and non-discrimination, 130–31 availability in sufficient quantities, 127–30 accountability: accountability and judicial independence, 174–75 Afghanistan, failures in, 33, 36–37, 39–43 Framework, 190–93, 194 OHCHR Accountability and Remedy Project, 196–97 due diligence, 200 legal accountability for corporate violations, 198 Afghan National Development Strategy (ANDS), 29–30 Afghanistan, 3, 16 accountability concerns, 42 Afghan National Development Strategy, 29–30 Afghanistan/USA trade and Investment Framework Agreement, 30 Afghanistan National Peace and Development Framework, 30 Afghanistan Pakistan Transit Trade Agreement, 30 Aynak concession, 5–6, 31, 98–99 bilateral investment treaties, 30 Bonn Agreement: Emergency Loya Jirga, 39 enforcement failures, 39–41

power-sharing agreement, 39 transparency concerns, 40–41 corporate abuse of human rights, 33 public/private divide, 34–35 soft law, reliance on, 33–34 current political and military situation, 225–26 exposure of population to rule of law abuses, 39–42 FDI, 9–10, 226–27, 228–29 Hajigak concession, 31, 98–99 home and host state obligations, 231–32 human rights protection and extractive industries: background, 29–33 corporate abuse and soft law, 33–35 deregulated approach to exploitation, 20–21, 28, 43, 228–29 political context, 39–43 prioritisation of rights, 35–39, 228–29 right to water, 223, 227–29 IIAs, 30, 31–32 informal justice mechanisms, failure to take into account, 41 interaction between IIL and IHRL, 229–30 political context and impact on human rights: Bonn Agreement for the Loya Jirga, 39–41 Emergency Loya Jirga, 39 lack of access to justice, 41 no means of redress, 41–42 rule of law concerns, 41–43 poverty reduction strategy, 29–31 prioritisation of rights: assumption that business is ‘good’, 37–38 emphasis on civil/political rights, 38–39 escalation of conflict, 36–37 neglection of social/human rights, 38–39 over-reliance on soft law, 35 right to water, 227 extractive industries, impact of, 228–29 preventing violations of, 223

256  Index rule of law concerns, 41–42 WTO membership, 30 Afghanistan/USA trade and Investment Framework Agreement (TIFA), 30 Afghanistan National Peace and Development Framework (ANPDF), 30 Afghanistan Pakistan Transit Trade Agreement, 30 amicus curiae submissions, 175–76 AWG and Suez Vivendi tribunals, 156–57 arbitration, see international investment arbitration AWG and Suez Vivendi tribunals, 143, 148 amicus curiae submissions, 156–57 background, 154–55 calculability approach, 156 defence of necessity, 156 estoppel, 157–59 legitimate expectations claim, 155–58 proportionality principle, 181–82 reliance, 157–58 tensions between IIL and IHRL and potential resolution, 159–60 balancing rights, 3, 15–16, 17, 114–15, 143–45 feasibility, 176–78 alternative approach, 183–84 IHRL in interpretation of treaty law, 178–79 recasting legitimate expectations, 179–83 Framework, 183–84 investment tribunals, 171–72, 176, 188, 224–25 Urbaser tribunal, 160–66 bilateral investment treaties (BITs), 12, 50–51, 145–46 Afghanistan, 30, 99 Argentine-Spain BIT, 85–86 Australia-Argentina BIT, 91 Chile-Spain BIT, 85–86 explicit expression of consent, 53 FET clauses, see fair and equitable treatment FPS clauses, see full protection and security Germany-Argentina BIT, 90 most-favoured nation clauses, see mostfavoured nation treatment non-discrimination, see non-discrimination Sri Lanka-UK BIT, 69–70

war clauses, see war clauses see also international investment agreements Bonn Agreement for the Loya Jirga: Emergency Loya Jirga, 39 enforcement failures, 39–41 failure, 42 power-sharing agreement, 39 transparency concerns, 40–41 Calvo doctrine: compensation for expropriation, 77–78 clean hands doctrine, 188–89, 225 co-option of human rights discourse: Afghanistan, 43 private sector, 21–22, 110 commercialisation of water, see privatisation and commodification of water Committee on Economic, Social and Cultural Rights (CESCR), 13–14 AAAQ Framework, 127 see also AAAQ Framework due diligence, 210 extraterritorial role of state parties, 137 General Comment 3, 112, 124 General Comment 14, 103–4, 131, 210, 213 General Comment 15, 102–3, 105–9, 114–15, 121–22, 127, 131–32, 137, 141–42, 164–65, 210, 213 General Comment 24, 110, 113–14, 116, 121, 137, 188, 205–6, 213 General Comments generally, 14, 118, 127 host state obligations, 210 human rights impact assessments: IIAs, 137–38 Framework, 205–6 non-discrimination principle: allocation and investment in water, 121–22 discrimination defined, 121 General Comment 15, 121–22 General Comment 24, 121 state obligations regarding business activities, 121 Urbaser tribunal: corporate social responsibility regarding right to water, 163–65 see also International Covenant on Economic, Social and Cultural Rights

Index  257 commodification of water, see privatisation and commodification of water compensation: arbitration proceedings, 34–35, 204 expropriation, 70–71, 75–77 Calvo doctrine, 77–78 Chorzow Factory case, 79–83 Hull Rule, 77, 78 proportionality principle, 73–75, 83 sole effect doctrine, 150, 153–54 fair and equitable treatment, 55, 64, 93, 151 violations of IHRL standards, 22–23, 190, 210, 220–21 war clauses, 69 conflict countries, see conflict host countries conflict host countries: Afghanistan, 9, 32 see also Afghanistan extractive industries, 6–7 deregulated approach to exploitation, 20–21, 28 human rights impacts, 19–22, 28 FDI, 6–7, 9–10, 44, 46 IIAs, 49 non-judicial remedies, 194 conflict of law, 145–48 AWG and Suez Vivendi tribunals: amicus curiae submissions, 156–57 background, 154–55 defence of necessity, 156 estoppel, 157–59 legitimate expectations claim, 155–58 reliance, 157–58 tensions between IIL and IHRL and potential resolution, 159–60 Glamis tribunal: background, 149–50 FET claim, 151–53 indirect expropriation claim, 149–50 legitimate expectations, 153–54 sole effect doctrine, 150 IIAs and the protection of human rights, 145–48 AWG and Suez Vivendi tribunals, 154–60 Glamis tribunal, 149–54 Urbaser tribunal, 160–66 Urbaser tribunal: FET claim, 162–66 human rights counterclaim, 161–66 legitimacy debate, 160–61

conflicted countries, see conflict host countries constitutionalisation of international law, 199, 229 Convention on the Rights of the Child, see UN Convention on the Rights of the Child Convention on the Elimination of All Forms of Discrimination Against Women, see UN Convention on the Elimination of All Forms of Discrimination Against Women Convention on the Elimination of All Forms of Racial Discrimination, see UN Convention on the Elimination of All Forms of Racial Discrimination Convention on the Rights of Persons with Disabilities, see UN Convention on the Rights of Persons with Disabilities corporate social responsibility (CSR), 20–21, 165–66 accountability for human right violations, 190–91 extractive companies, 190 lack of robustness, 33 responsibility to respect human rights: avoid causing or contributing to harm, 202–3 criticisms of SRSG, 198–99 ‘do no harm’ principle, 198, 199 duty of care, 203–4 due diligence, 199–204 OHCHR due diligence report, 200–3 prevention and mitigation of harm, 202–3 soft-law instruments, 197–98 third parties, relationships with, 203 see also due diligence third-world clothing and footwear companies, 190 corporate veil doctrine, 203–4, 211–12 corruption, 5, 19–20, 21–22 Afghanistan, 29–30, 38, 40–41, 43, 226 national courts, 171–72 countries experiencing armed conflict, see conflict host countries counterclaims in investor-state arbitration: Urbaser tribunal, 143–44, 148, 160–66

258  Index deregulated approach to exploitation, 9, 10–11, 20–21, 28, 38, 43, 171 derogations: right to water as a non-derogable right, 140 discrimination, see non-discrimination principle due diligence: binding duty of care, relationship with, 199–200 CEDAW obligations, 209–10 CESCR, 210 corporate social responsibility, 199–200 OHCHR due diligence report, 200–3 definition: OHCHR definition, 200 risk-management definition, 201–2 standard of conduct definition, 202 external corporate regulations, 198 internal corporate governance, 198 FET standard, 64 Framework obligations, 198–99 home state obligations, 210–11, 214–16 CERD, 211 international cooperation and assistance obligation, 213 justification for home state regulation, 211–13 Maastricht Principles, 211 see also extraterritorial obligations host state obligations, 207–8 CEDAW obligations, 209–10 CESCR, 210 Corfu Channel case, 208 failure by state, 208 Genocide case, 209 ICCPR obligations, 209 Trail Smelter case, 208 ICCPR obligations, 209 legal separation and corporate veil doctrine, 203–4 OHCHR report on human rights due diligence, 200–4 human rights due diligence defined, 200 human rights due diligence and other due diligence distinguished, 200 human rights due diligence and legal liability, 200–1 third-party relationships: tortious duty of care, 203 UNGPs, 201–3

duty of care, 203–4 due diligence, relationship with, 199–200 third-party relationships: tortious duty of care, 203 economic independence: human rights obligations, 10–11 enforcement: Bonn Agreement, failure to enforce, 39–40, 197–98 home state obligations, 218 international investment arbitration, 12, 32, 33–34 estoppel doctrine: AWG and Suez Vivendi tribunals, 157–59 European Court of Human Rights (ECtHR): fair and equitable treatment margin of appreciation doctrine, 63–64 proportionality principle, 63–64, 73–74 exploitation of natural resources, see extractive industries expropriation, protection against: Calvo doctrine, 77–78 compensation, 70–71, 75–77 Calvo doctrine, 77–78 Chorzow Factory case, 79–83 Hull Rule, 77, 78 proportionality principle, 73–75, 83 sole effect doctrine, 150, 153–54 direct expropriation, 70 Glamis tribunal, 143 indirect expropriation, 70 see also indirect expropriation international law, under, 70–71 lawfulness criteria: compensation, 71 compliant with due process, 71 expropriation for public purpose, 71 non-discriminatory/non-arbitrary nature, 71 Urbaser tribunal, 162–66 extractive industries: Afghanistan: Aynak concession, 5–6, 31, 98–99 background, 29–33 corporate abuse and soft law, 33–35 deregulated approach to exploitation, 20–21, 28, 43, 228–29 Hajigak concession, 31, 98–99

Index  259 political context, 39–43 prioritisation of rights, 35–39, 228–29 right to water, 223, 227–29 armed conflict, link to, 6–7 conflicted host countries: human rights impacts, 19–22 corporate social responsibility, 190 Framework: causing/contributing to gross abuses, 219–20 consultations with affected populations, 219 home states, support from, 7 host states, support from, 7, 20–21 human rights impacts in conflict host countries, 19, 44 Afghanistan, 28–43 benefits, 19 contamination of fresh water, 20 displacement of communities, 20 environmental pollution, 20 increased corruption, 20 negative impacts, 19–20 preventative protection activities, 27–28 relationship with host countries, 21 international investment treaties, 21–22 right to water: Aynak concession, 98–99 Hajigak concession, 98–99 water security role, 98 extraterritorial obligations: CESCR, 137 due diligence obligations of home state, 210–11, 214–16 CERD, 211 international cooperation and assistance obligation, 213 justification for home state regulation, 211–13 Maastricht Principles, 211 international assistance and cooperation, 135–40 regulation by home states, 4, 96 UDHR, 135–36 UN Charter, 135 fair and equitable treatment (FET): autonomous standard, as a, 56, 58 background, 55 due diligence, 64 expansion of FET standard, 58–59, 181–82

FET clauses and NAFTA provisions compared, 58–59 FPS standard compared, 66–67 Glamis tribunal, 143 legitimate expectations, 151–54 minimum standard of treatment of aliens, 151–52 legitimate expectations doctrine, 59, 182–83 concerns regarding use, 63–64 expansive interpretation of legitimate expectations doctrine, 64 Glamis tribunal, 151–54 reliance, 60 substantive legitimate expectations, 62 Tecmed tribunal, 60–61 Thunderbird tribunal, 61–62 Metalclad tribunal, 56–57 NAFTA tribunals, 57 non-NAFTA tribunals, 57–58 Pope & Talbot tribunal, 57 recent developments, 55–56 Sempra tribunal, 58–59 Tecmed tribunal, 58, 60–61 transparency element, 56–57 Urbaser tribunal, 162–66 fairness, see fair and equitable treatment; procedural fairness foreign direct investment (FDI): Afghanistan, 9–10, 226–27, 228–29 aid-dependent countries, 7–9 conflict host countries, 6–7, 9–10, 44, 46 FDI, 46–48 IIAs, 12–13, 47–48 IIL protections, 1–2, 15, 16, 21–22, 45–46 IIAs, 47–48 investor-state arbitration proceedings, 47 legal briefings, 46–47 Libya: IIAs, 47–48 investor-state arbitration proceedings, 47 legal briefings, 46–47 stabilisation and development of host states, 7–8 sustainable development, 9–10, 22 Framework for business and human rights (Framework), 14–15, 192–93, 221–22 conflict states: consultations with affected populations, 219 definitions, 216–17

260  Index due diligence obligations, 218–19, 220–21 gross abuses, 217–18 home state responsibilities, 220–21 home states of investing companies, 217–18 balancing IIL and IHRL, 183–84, 186–87 concept of protection, 23–24 corporate responsibility to respect human rights: avoid causing or contributing to harm, 202–3 criticisms of SRSG, 198–99 ‘do no harm’ principle, 198, 199 duty of care, 203–4 due diligence, 199–204 OHCHR due diligence report, 200–3 prevention and mitigation of harm, 202–3 soft-law instruments, 197–98 third parties, relationships with, 203 see also due diligence definition, 1–2 effective remedial action: forum non conveniens, 194 ‘grievance’, 193–94 jurisdictional restrictions, 194 non-judicial remedies, 194 non-state-based non-judicial remedies, 195 OHCHR Accountability and Remedy Project, 196–97 ‘remedy’, 193 state-based non-judicial remedies, 195–96 extraction industries: causing/contributing to gross abuses, 219–20 consultations with affected populations, 219 interaction between IHRL and IIL: over-reliance on Framework, 4 shortcomings, 4–5, 101–3 state’s duty to protect human rights, 204 CESCR, 205–6 due diligence, 207–16 SRSG, 205 state jurisdiction, 206–7 UNGPs, 204–5 see also due diligence full protection and security (FPS) standard: customary international law requirement, as a, 68 due diligence, 66

FET standard compared, 66–67 inconsistencies in application by tribunals, 67 legal security obligations, 67 Azurix v Argentina, 67–68 CME v Czeck Republic, 67 standard of liability, 65–66 use, 65 Glamis tribunal: background, 149–50 FET claim: legitimate expectations, 151–54 minimum standard of treatment of aliens, 151–52 indirect expropriation claim, 149–50 legal uncertainty, 150 sole effect doctrine, 150 legitimate expectations: concerns, 152–54 specific assurances limitation, 152–53 global commons: state and corporate responsibility, 231–32 Guiding Principles for Business and Human Rights (UNGP), 1–2, 186–87, 192 shortcomings, 4–5 UNGP 23(3), 216–17, 219 UNGP 7, 216–19, 220 see also Framework for business and human rights Hull Rule: compensation for expropriation, 77–78 human rights protections, see international human rights law protections indirect expropriation, 70 Calvo doctrine, 77–78 Chorzow Factory case, 79–82 causation issues, 83 form of reparation, 83 principle of full reparation, 82–83 compensation, 70–71, 75–77 Calvo doctrine, 77–78 Chorzow Factory case, 79–83 Hull Rule, 77, 78 proportionality principle, 73–75, 83 sole effect doctrine, 150, 153–54 criteria, 150 definition, 71

Index  261 Glamis tribunal, 143, 149–50 intention of the state: sole effect doctrine, 73 police powers doctrine, 73 proportionality principle, 73–75 lawfulness criteria: compensation, 71 compliant with due process, 71 expropriation for public purpose, 71 non-discriminatory/non-arbitrary nature, 71 legal uncertainty, 150 permanency of: Tecmed tribunal, 72 proportionality principle, 73–75 Chorzow Factory case, 83 sole effect doctrine, 71–72 Biloune tribunal, 71–72 Glamis tribunal, 150 Urbaser tribunal, 162–66 Inter-Agency Standing Committee Task Force on Humanitarian Action (IASC): concept of protection, 24–25 interaction between IHRL and IIL, 184–85 Afghanistan, 229–30 failure to protect right to water, 230 AWG and Suez Vivendi tribunals, see AWG and Suez Vivendi tribunals balancing rights, 3, 15–16, 17, 114–15, 143–45 alternative approach, 183–84 feasibility, 176–84 Framework, 183–84 IHRL in interpretation of treaty law, 178–79 investment tribunals, 171–72, 176, 188, 224–25 recasting legitimate expectations, 179–83 Glamis tribunal, see Glamis tribunal IHRL in interpretation of treaty law, 178–79, 223 obtaining economic independence, 10–11 recasting legitimate expectations, 179–83, 223–34 Suez Vivendi tribunal, see AWG and Suez Vivendi tribunals tensions between, 3–4, 15–16, 18 Urbaser tribunal, see Urbaser tribunal

International Centre for Settlement of Investment Disputes (ICSID), 46 ICSID Convention: investment, meaning of, 49, 50–54 International Committee of the Red Cross (ICRC): concept of protection, 24–25 preventative protection, 26–27 International Court of Justice (ICJ), 13 due diligence principle, 208–9 International Covenant on Economic, Social and Cultural Rights (ICESCR), 13, 95–96 Art. 2(1), 142 limitations to economic, social and cultural rights, 141–42 progressive realisation, 119–20, 122–23 resource constraints due to war effort, 141–42 retrogressive measures, 141–42 Art. 2(2): non-discrimination principle, 121–22 Art. 4, 140–41 limitations of the minimum care, 141 concept of protection, 23 core obligations approach to right to water, 112–13 international assistance and cooperation, 136–37 good faith, 139 Limburg Principles, 138–39 Maastricht Principles, 138–40 respect, protect and fulfil, 139 non-discrimination principle, 121–22 progressive realisation, 119–20, 122–23 protection, concept of, 23 right to water, 101–2, 103–4 corporate social responsibility regarding right to water, 163, 164 see also Committee on Economic, Social and Cultural Rights International Covenant on Civil and Political Rights (ICCPR), 13–14 due diligence, 209 right to water, 104 international human rights law (IHRL) protections, 1–2 Art. 2(1) ICESCR, 142 limitations to economic, social and cultural rights, 141–42 progressive realisation, 119–20, 122–23

262  Index resource constraints due to war effort, 141–42 retrogressive measures, 141–42 international assistance and cooperation, 136–37 good faith, 139 Limburg Principles, 138–39 Maastricht Principles, 138–40 respect, protect and fulfil, 139 limitations to economic, social and cultural rights, 4, 27–28 Art. 2(1) ICESCR, 141–42 Art. 4 ICESCR, 140–41 derogations compared, 140 promotion of general welfare criteria, 140 rejection of economic development justification, 140–41 rejection of public order/public safety/public morals justification, 140 non-discrimination principle, 121–22 progressive realisation, 119–20, 122–23 right to water, see right to water international humanitarian law (IHL): right to water, 100–1 international investment agreements (IIAs), 12–13 carve-out clauses, 189 conflict of law, 145–48 AWG tribunal, see AWG and Suez Vivendi tribunals Glamis tribunal, see Glamis tribunal Suez Vivendi tribunal, AWG and Suez Vivendi tribunals Urbaser tribunal, see Urbaser tribunal explicit human rights protections, 114–15 FDI, 46–48 fight against corruption, 21–22 human rights protections, 145–46 increasing number, 145 public policy exceptions, 189 remedying human rights abuses, 187–88 international investment arbitration: confidentiality of proceedings, 174 public participation, 175–76 transparency, 174–75, 176 criticisms: confidentiality of proceedings, 174–76 judicial independence/bias, 171–73 impartiality of tribunals, 171–72

judicial independence, 172 criticism of arbitrators, 173 perception of bias, 173 proposals for tenured judges, 173 neoliberal origins, 171–72 proposals for tenured judges, 173 public/private divide, 34–35 public participation: amicus curiae submissions, 175 meaning, 175–76 shortcomings, 144–45 transparency, 174–76 international investment law (IIL) protections, 1–2, 15, 45–46 accountability for violations of treaty standards, 46–47 FDI protections: IIAs, 47–48 investor-state arbitration proceedings, 47 legal briefings, 46–47 legal history: neoliberal developments, 168–72 limitations, 166–68 competing interests, 169 IIL as a legal order, 168–69 standards, 46 fair and equitable treatment, see fair and equitable treatment full protection and security, see full protection and security most-favoured nation treatment, see most-favoured nation treatment protection against expropriation, see expropriation, protection against war clauses, see war clauses investment, meaning of: ICSID Convention, 49 lack of standard definition, 50–51 legal uncertainty, 54 jurisprudence constante, 54 objective approach/outer limits approach, 51 criteria approach, 52 liberal approach, 52 Salini test, 52 criticisms, 53 subjective approach/treaty approach, 51, 53 investment protection standards, 46, 93–94 fair and equitable treatment, 55–65, 93 see also fair and equitable treatment; legitimate expectations

Index  263 full protection and security, 65–68, 93–94 see also full protection and security most-favoured nation treatment, 84–93 see also most-favoured nation treatment protection against expropriation, 70–83 see also protection against expropriation war clauses, 69–70 see also war clauses judicial discretion: international investment tribunals, 180 amicus curiae submissions, 175 expanding discretion of, 114–15, 138, 184 indirect expropriation, 150 lack of definition of investment, 50–51 judicial independence/bias, 171–73 accountability and judicial independence, 174–75 criticism of arbitrators, 173 perception of bias, 173 proposals for tenured judges, 173 judicial remedies: international investment arbitration: amicus curiae submissions, 175 confidentiality of proceedings, 174–76 criticisms, 171–76 impartiality of tribunals, 171–72 judicial independence/bias, 171–73 neoliberal origins, 171–72 perception of bias, 173 proposals for tenured judges, 173 public participation, 175–76 public/private divide, 34–35 shortcomings, 144–45 transparency, 174–75, 176 see also non-judicial remedies legal certainty: customary international law, 76 estoppel doctrine, 158–59 indirect expropriation, 150 investment, meaning of, 54 jurisprudence constante, 54 most-favoured nation clauses, 92

legal separation and corporate veil doctrine, 194, 203–4, 231 legitimate expectations doctrine, 59 AWG tribunal, 155–58 reliance, 157–58 see also AWG and Suez Vivendi tribunals concerns regarding use, 152–54 balance of power concerns, 63 regulatory freezes, 63–64 fair and equitable treatment, 59, 181–83 concerns regarding use, 63–64 expansive interpretation of legitimate expectations doctrine, 64 Glamis tribunal, 151–54 reliance, 60 substantive legitimate expectations, 62 Tecmed tribunal, 60–61 Thunderbird tribunal, 61–62 Glamis tribunal: concerns, 152–54 specific assurances limitation, 152–53 see also Glamis tribunal over-reliance on doctrine, 63 recasting doctrine to enhance ILL and IHRL interaction, 179–81, 224 regulatory freeze, 63–64 reliance, 60, 157–58 substantive legitimate expectations, 62 Suez Vivendi tribunal, 155–58 reliance, 157–58 see also AWG and Suez Vivendi tribunals Tecmed tribunal, 60–61 Thunderbird tribunal, 61–62 Libya: accountability for violations of treaty standards, 46–47 FDI protections: IIAs, 47–48 investor-state arbitration proceedings, 47 legal briefings, 46–47 uprising against Qaddafi regime, 46–47 Limburg Principles, 124, 132–33, 138 limitations to economic, social and cultural rights, 4, 27–28 Art. 2(1) ICESCR: resource constraints due to war effort, 141–42 retrogressive measures, 141–42

264  Index Art. 4 ICESCR, 140–41 limitations of the minimum care, 141 criteria for limitations: promotion of general welfare, 140 rejection of public order/public safety/public morals justification, 140 rejection of economic development justification, 140–41 derogations compared, 140 Loya Jirga, see Bonn Agreement for the Loya Jirga margin of appreciation, 63–64 market liberalisation, see deregulated approach to exploitation maximum available resources, 96, 132–34 all appropriate means compared, 122 domestically-available resources, 134 internationally-available resources, 135 see also extraterritorial obligations retrogressive measures, 124 minimum core obligations, 12, 223–24 AAAQ, 127 right to water, 111–12, 124–26, 132 most-favoured nation (MFN) treatment: applicability, 85, 86–87 extending applicability, 92–93 substantive and procedural applicability compared, 85–86, 88–89 Argentine-Spain BIT, 85–86 Australia-Argentina BIT, 91 Berschader tribunal, 91–92 Chile-Spain BIT, 85–86 criticisms, 84–85 Daimler Financial Services tribunal, 90–91 dynamic/fluid nature, 84 ejusdem generis principle, 84–85 Germany-Argentina BIT, 90 Hochtief tribunal, 89–90 ICS Inspection tribunal, 90 Impegilo tribunal, 88 legal uncertainty, 90–92 limitations, 84–85 Maffezini tribunal, 85–86 national treatment standard clauses: relationship with, 84 purpose, 84 Teinver tribunal, 91 treaty rights, 89

national emergency defence, 155 natural resources, see extractive industries necessity defence: AWG and Suez Vivendi tribunals, 156 negligence, 203 non-discrimination principle: AAAQ Framework: affordability, 131 distance from water supply, 130–31 economic accessibility, 131 physical accessibility, 130–31 CESCR, 121–22 expropriation, protection against, 71 ICESCR, 121–22 right to water: allocation and investment in water, 121–22 discrimination defined, 121 General Comment 15, 121–22 General Comment 24, 121 state obligations regarding business activities, 121 VCLT, 179 non-judicial remedies: Framework: non-judicial remedies, 194 non-state-based non-judicial remedies, 195 state-based non-judicial remedies, 195–96 non-state-based non-judicial remedies: due diligence, 195 OHCHR Accountability and Remedy Project, 196–97 operational-level grievance mechanisms, 195 state-based non-judicial remedies: access to remedies, 196 independent impact assessments, 195–96 monitoring and reporting, 195 national human rights institutions, 195–96 Organisation for Economic Co-operation and Development (OECD): conflict-afflicted areas defined, 216 Guidelines for Multinational Enterprises, 197–98

Index  265 prioritisation of rights, 33, 44, 119–20, 133–34 assumption that business is ‘good’, 37–38, 113 emphasis on civil/political rights, 38–39 escalation of conflict, 36–37 minimum core obligations, 124–26 neglection of social/human rights, 38–39, 113 obligation to take steps, 122–23, 147 over-reliance on soft law, 35 right to water, 96–97, 99, 101, 113–14, 127, 131–32, 227–28 UNGP, 166, 219 privatisation and commodification of water, 34, 106–10, 225, 230 CESCR approach, 107, 115, 163–64 extraction industries, 101 Aynak concession, 98–99 Hajigak concession, 98–99 water security role, 98 respect, protect and fulfil obligations, 118–19 aiding the water-deprived, 117–18 avoiding water deprivation, 111–15 protection from water deprivation, 115–17 see also right to water progressive realisation, 12 CRC Art. 4, 119 CRPD Art. 4.2, 119 ICESCR Art. 2(1), 96, 119–20, 142 obligation to take steps, 122–23 right to water, 122–23, 126 prohibition of retrogressive measures: right to water, 124, 141–42 proportionality principle, 73–75 AWG and Suez Vivendi tribunals, 181–82 Chorzow Factory case, 83 fair and equitable treatment, 63–64, 73–74 expropriation, protection against: compensation, 73–75, 83 legitimising IIL, 79, 180–81 assumptions, 181–82 Protect, Respect and Remedy Framework (UN Framework), 1–2, 191–92, 224 see also Framework for business and human rights

protection, concept of, 44 IHRL, 23 Framework, 23–24 ICESCR, 23 ICRC/IASC, 24–25 IIL, 22–23 public/private divide, 34–35 public goods: water as, 99–100, 105–7, 114, 138, 160–61 reasonableness, 75, 129, 207–8 reliance: legitimate expectations doctrine, 60 AWG tribunal, 157–58 remedies and effective remedial action: forum non conveniens, 194 Framework terminology, 193–94 ‘grievance’, 193–94 international investment arbitration: amicus curiae submissions, 175 confidentiality of proceedings, 174–76 criticisms, 171–76 impartiality of tribunals, 171–72 judicial independence/bias, 171–73 neoliberal origins, 171–72 perception of bias, 173 proposals for tenured judges, 173 public participation, 175–76 public/private divide, 34–35 shortcomings, 144–45 transparency, 174–75, 176 jurisdictional restrictions, 194 forum non conveniens, 194 non-judicial remedies, 194 non-state-based non-judicial remedies, 195 state-based non-judicial remedies, 195–96 state-based and non-state-based non-judicial remedies compared, 195–96 non-state-based non-judicial remedies: due diligence, 195 OHCHR Accountability and Remedy Project, 196–97 operational-level grievance mechanisms, 195 OHCHR Accountability and Remedy Project, 196–97 ‘remedy’, 193

266  Index state-based non-judicial remedies: access to remedies, 196 independent impact assessments, 195–96 monitoring and reporting, 195 national human rights institutions, 195–96 right to water, 1, 14, 96–97, 142 AAAQ framework, 127 acceptability and quality, 131–32 accessibility and nondiscrimination, 130 availability in sufficient quantities, 127–30 aiding the water-deprived, state’s obligation to: allocation of sufficient resources, 117–18 obligation to direct business entities’ activities, 117–18 avoid water deprivation, states’ obligations to, 111–12 core obligations approach, 112–13 dignity-based approach, 112 explicit human rights protections, 114–15 General Comment 24, 113–14 CESCR: adequate standard of living, 102 General Comment 14, 103–4 General Comment 15, 102, 105–6, 107–9 General Comment 24, 113–14 recognition of right in other treaties, 102–3 water as indispensable for dignity, 102 conflict host countries: inequalities and discrimination, 97–98 Convention on the Rights of the Child, 102–3 Convention on the Elimination of All Forms of Discrimination Against Women, 102 Convention on the Rights of Persons with Disabilities, 102 Dublin Principles, 105, 106 extraction industries: Aynak concession, 98–99 Hajigak concession, 98–99 water security role, 98 ICESCR, 101–2, 103–4 see also ICESCR

ICCPR, 104 interaction between IHRL and IIL: Afghanistan, 229–30 failure to protect right to water, 230 legal foundations: First Additional Protocol to the Geneva Conventions, 100 impact of armed conflict, 101 international instruments, 101–10 Rome Statute of the International Criminal Court, 101 Second Additional Protocol to the Geneva Conventions, 100–1 Third Geneva Convention, 100 non-discrimination principle: allocation and investment in water, 121–22 discrimination defined, 121 General Comment 15, 121–22 General Comment 24, 121 state obligations regarding business activities, 121 privatisation of water, see privatisation and commodification of water progressive realisation, 122–23 prohibition of retrogressive measures, 124 protection from water deprivation, states’ obligations to: duty to exercise human rights due diligence, 116 obligation to regulate business entities, 116–17 prevention of encroachment on enjoyment of right to water, 115 public good, water as, 99–100, 105–7, 114, 138, 160–61 respect, protect and fulfil obligations, 118–19 aiding the water-deprived, 117–18 avoiding water deprivation, 111–15 protection from water deprivation, 115–17 right to health, 109–10 standard of living, 106, 109–10 states’ obligations, 12 aiding the water-deprived, 117–18 avoiding water deprivation, 111–15 protection from water deprivation, 115–17 Stockholm Declaration, 104 UDHR, 104

Index  267 UN Charter, 104 UN General Assembly, 109 UN High Commission on Human Rights, 105, 108 UN Human Rights Committee, 104 water as an economic good, 105 rule of law, 19, 38, 41–42, 56, 159 Salini test, 52 criticisms, 53 sole effect doctrine, 71–73, 77, 150, 153–54 states’ obligations to protect human rights: IIA obligations and impact on human rights obligations, 145–48 AWG and Suez Vivendi tribunals, 154–60 Glamis tribunal, 149–54 Urbaser tribunal, 160–66 respect, protect and fulfil obligations, 119 aiding the deprived, 117–18 avoid depriving of water, 111–15 protection from deprivation, 115–17 right to water, 12 Suez Vivendi tribunal, see AWG and Suez Vivendi tribunals sustainable development: balancing human rights, 43, 98 FDI, 9–10, 22 legal instruments, 104–5 transparency: Bonn Agreement, 40–41 fair and equitable treatment, 56–57 international investment arbitration, 174–76 UN Charter: international cooperation: extraterritorial obligations, 135–36, 207 right to dignity, 104 third parties, 205 UN Convention on the Rights of the Child (CRC): international assistance and cooperation, 136–37, 207 progressive realisation, 119 right to water, 102–3 UN Convention on the Elimination of All Forms of Discrimination Against Women (CEDAW): right to water, 102

UN Convention on the Elimination of All Forms of Racial Discrimination (CERD): interpretation of discrimination, 179 UN Convention on the Rights of Persons with Disabilities (CRPD): progressive realisation, 119 right to water, 102 UN Development Program (UNDP): Afghan National Development Strategy, 30 UN Draft Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with Regard to Human Rights, 191 failure, 192 UN General Assembly (UNGA): Guiding Principles for Business and Human Rights, see Guiding Principles for Business and Human Rights UN Human Rights Council (UNHRC): Protect, Respect and Remedy Framework, see Protect, Respect and Remedy Framework UN Office of the High Commissioner for Human Rights (OHCHR), 25 Accountability and Remedy Project, 196–97 due diligence, 200 legal accountability for corporate violations, 198 due diligence report, 200–3 UN Special Rapporteur on extreme poverty and human rights, 187 UN Special Rapporteur on the right to water, 14–15, 104, 112–13 UN Special Rapporteur on the right to food, 14–15 UN Special Representative of the SecretaryGeneral (SRSG), 4 business and human rights challenges, 10, 15 criticisms, 198–99 human rights impact assessments, 224 mandate, 192 remedies, 194 states’ duty to protect human rights, 204–7 see also Framework on business and human rights

268  Index UN Working Group on Business and Human Rights (UNWG), 15 IIAs to remedy human rights abuses, 187–88, 224–25 Universal Declaration of Human Rights (UDHR): corporate obligations regarding right to water, 163–64 international cooperation and assistance, 135–36, 207 right to dignity, 104 Urbaser tribunal: corporate social responsibility regarding right to water: CESCR, 163–65 functional approach, 165–66 ICESCR, 163, 164 obligation not to destroy the right, 165 obligation not to violate human rights, 165 obligation of performance, 165 UDHR, 163, 164

expropriation claim, 162 FET claim, 162–66 human rights counterclaim, 161–63 investment tribunal jurisdiction, 162 legitimacy debate, 160–61 Vienna Convention on the Law of Treaties (VCLT), 13–14, 178–79 fair and equitable treatment, 182 integration of human rights through treaty interpretation, 13–14, 178–79, 223–24 non-discrimination, 179 war clauses, 45–46, 69 AMT v Zaire, 70 Sri Lanka-UK BIT, 69–70 World Health Organization (WHO): guidance on minimum quantity of water, 112–13, 128, 131