Investor Obligations: Transformative and Regressive Impacts of the Business and Human Rights Framework

Abstract

The business and human rights (BHR) framework has regularly been considered the superior legal regime of corporate accountability for business-related human rights abuses, which must be both protected from and incorporated into investment treaties. However, investment treaties have surpassed the BHR framework in an important respect: certain investment treaties impose strict international legal obligations, including human rights-related obligations, directly on investors, thereby going beyond the normatively ambiguous corporate responsibility to respect. Investment treaty reform initiatives, including those seeking to align investment treaties with the BHR agenda, should, therefore, take care to avoid inadvertently undoing this advance towards investors’ legal accountability.

I. Introduction

Business and human rights (BHR) scholars and practitioners have recently taken significant interest in investment treaties,¹ regularly seeing them as a threat to the BHR project and the enjoyment of human rights more broadly.² A flagship initiative in this respect has been the United Nations Working Group on Business and Human Rights (UN Working Group)³ process that resulted in its 2021 report on ‘Human rights-compatible international investment agreements’ (the ‘WG Report’).⁴ Provisions on the relationship between investment treaties and human rights have also appeared in subsequent drafts of the BHR treaty,⁵ and commitments relating to investment treaties have been a regular component of national action plans on BHR.⁶ The interplay between investment treaties and BHR was also examined in 2020-21 under the auspices of the Organization for Economic Cooperation and Development (OECD) through a public consultation⁷ and a working paper entitled ‘Business Responsibilities and Investment Treaties’ (the ‘OECD Report’).⁸

Investment treaties⁹ have been the subject of major criticism in the last 15 years or so,¹⁰ and concerns regarding their negative impact on the enjoyment of human rights in the state in which the foreign investment was made (the ‘host state’) have been central to this critique.¹¹ The BHR field has amplified rather than launched this controversy; however, it has made an important contribution to the critique by presenting the BHR framework with its three-pillar structure of the ‘state duty to protect’, the ‘corporate responsibility to respect’ and ‘access to remedy’—epitomized at the international level in the 2011 United Nations Guiding Principles on Business and Human Rights (UNGPs)¹²—as the superior legal regime of business accountability for adverse human rights impacts, which must be protected from and preferably incorporated into investment treaties.¹³ On one hand, investment treaties would be identified as posing a significant risk to human rights and business accountability projects, in particular by limiting states’ ability to regulate in the public interest, including for the protection of human rights.¹⁴ On the other hand, these treaties would be seen as a potential vehicle for enhancing the effects of the UNGPs by imposing human rights demands on (certain) business enterprises in a formal source of international law (rather than a soft law instrument), while the strong enforcement system of investment arbitration might possibly provide human rights victims with effective remedies.¹⁵

In international human rights law, the idea of imposing human rights obligations directly on business enterprises has been very controversial, and no such legally binding international regulation of business conduct has been possible to date.¹⁶ The BHR framework has circumvented the controversy by employing a conceptual and terminological distinction between the legally binding ‘obligations’ or ‘duties’ of states and the legally non-binding ‘responsibilities’ of business. This normative structure has facilitated the UNGPs’ adoption, broad acceptance, and some truly transformative impacts in relation to corporate accountability for business-related human rights abuses at national and EU levels;¹⁷ however, as a consequence, the BHR framework involves no strict international legal obligations of business enterprises at the international level.¹⁸

In contrast, some recent investment treaties, including treaties already in force, have imposed direct international legal obligations on investors¹⁹ (‘investor obligations’), including human rights-related obligations.²⁰ This article explores this practice, the understanding and appreciation of which has been limited in the literature.²¹ While initially introduced as part of endogenous reform efforts within the investment regime,²² investment treaty provisions on investor obligations demonstrate both the legal possibility of imposing direct international legal obligations on business corporations and the actual imposition of such obligations on defined investors, including direct human rights obligations—something that has so far been denied in international human rights law.

Investment treaties certainly do not and cannot comprehensively regulate business conduct at the international level, not least because of the fragmented nature of the investment treaty regime, which consists of a grid of thousands of bilateral and some regional treaties²³ covering only defined business enterprises (‘investors’ and ‘investments’ under the treaties).²⁴ However, the imposition of investor obligations—which are generative of rights opposable against investors under international law and the violation of which triggers investors’ international responsibility²⁵—provides distinct opportunities for legally binding regulation of adverse investor conduct, including business conduct detrimental to human rights.

In the efforts to align investment treaties with the BHR agenda of human rights protection and accountability for business-related human rights abuses, care should therefore be taken to avoid undoing—perhaps inadvertently—the normative advances already made in the investment treaty regime towards corporate accountability. In particular, the incorporation within investment treaties of the BHR notion of corporate or business ‘responsibilities’ would involve introducing an element of normative ambiguity into a body of law that has previously involved unequivocal direct international legal obligations of certain business enterprises. Scholars, advocates and policymakers should therefore pause before promoting or facilitating such incorporation, as this may undermine the progress towards corporate accountability and human rights protection produced as part of the ongoing investment treaty reforms.²⁶

This article elaborates on the above argument in four steps. First, it outlines the main features of the BHR framework and briefly discusses its transformative impacts on foreign investors’ accountability for their conduct in the host state (Section II). Second, the article explores the concerns that investment treaties enable conduct detrimental to the enjoyment of human rights, as expressed in the UN Working Group’s and OECD’s reports (Section III). The discussion then proceeds to analyse the phenomenon of direct investor obligations under investment treaties to demonstrate that despite the continuing widespread impression to the contrary, certain investment treaties have imposed strict international legal obligations on investors, including some explicitly human rights and environmental obligations (Section IV). The final section considers the significance of the treaty practice on investor obligations for the protection of human rights in the context of foreign investments and the ongoing efforts to transplant the BHR framework into investment treaties, cautioning against the potentially significant negative impacts of such incorporation (Section V).

II. The BHR Framework and its Transformative Impacts

The BHR framework, initially introduced in the 2008 ‘Protect, Respect and Remedy Framework’²⁷ and subsequently embodied at the international level in the UNGPs, has had a profound effect on the law, as it has provided a normative frame of reference and vocabulary to demand accountability from business corporations (in the language of the UNGPs, ‘business enterprises’) for business-related human rights abuses businesses that goes beyond the positive obligation of states to protect against corporate abuse.²⁸ Central to this framework has been the conceptual and terminological distinction between the state ‘duty’ to ‘protect’ and the business or corporate ‘responsibility’ to ‘respect’ human rights. As the idea of direct, legally binding corporate human rights obligations has been highly contentious in international human rights law,²⁹ thereby stalling normative developments towards corporate accountability for human rights abuses, the UNGPs circumvented the issue by distinguishing between the restated, legally binding ‘obligations’ or ‘duties’ of states and the newly articulated ‘responsibilities’ of business enterprises. The corporate ‘responsibility’ to respect human rights was defined as a ‘global standard of expected conduct’³⁰ and its precise normative character was deliberately left ambiguous:³¹ while ‘responsibility’ involves an external normative demand vis-à-vis businesses that goes beyond a mere suggestion for voluntary action, the UNGPs also make it clear that ‘responsibility’ does not entail a strict international legal obligation, unlike the state’s duty to ‘protect’.

Also thanks to this normative design, the BHR framework succeeded where previous, normatively more ambitious and unequivocal international human rights projects have failed.³² Significantly, the framework has generated certain foundational and transformative propositions that have grounded claims of legal accountability for corporate human rights abuses and have facilitated the development of law to substantiate such accountability, including the following: (1) Every business can detrimentally impact the enjoyment of all internationally recognized human rights and must be held accountable for its adverse human rights impacts. (2) There are external normative requirements on business conduct, which go beyond voluntary actions of corporate social responsibility. (3) Victims of business-related human rights abuses are entitled to have access to remedy in relation to the harm suffered. (4) Business activities need to be assessed in their totality, and the analysis cannot be constrained by traditional principles of corporate law on the corporate veil, separate legal personality and limited liability of a corporation.

The transformative force of the BHR framework has manifested in law at both domestic and international levels. Legislation imposing human rights-related obligations on business enterprises has been adopted—or is in the process of being adopted—in countries around the world, including the UK, France, Australia, the Netherlands, Germany, Switzerland and Norway,³³ and in the European Union.³⁴ International organizations, including the OECD³⁵ and the International Finance Corporation (IFC),³⁶ have incorporated UNGPs into their policies and guidelines, as have major business corporations and industry organizations.³⁷ The draft BHR treaty³⁸ builds on the UNGPs by incorporating their concepts, such as human rights and due diligence (even if it departs from the UNGPs in other important respects).

The BHR framework has also had transformative impacts through cases brought by victims of corporate misconduct against business corporations in a range of domestic jurisdictions, with human rights considerations either becoming an explicit part of the court’s reasoning or entering the proceedings through parties’ or amici submissions.³⁹ The Vedanta, Okpabi and the Milieudefensie (Shell Nigeria) cases particularly stand out in terms of shifting legal boundaries.⁴⁰ By establishing that a parent company may owe a duty of care to persons injured by operations of its subsidiary and therefore may be liable for such injuries, these cases exemplify indentations into traditional legal doctrines at the core of corporate activity—in particular, the principles of separate legal personality and limited liability—in a context in which these doctrines had previously been largely unassailable.⁴¹ Similar cases are pending elsewhere.⁴² The linking of human rights with the environment and climate change⁴³ has expanded the BHR notions of business accountability, including legal liability, to wider contexts.⁴⁴ Given the contemporary preeminence of the human rights-based approach to global issues,⁴⁵ the transformative force of the BHR framework may be expected to expand to additional issue areas as well.

These legal developments are significant for foreign investors: as business enterprises, they face the normative demands of the BHR framework and the changes in the law it has facilitated. The BHR framework has also exercised a degree of influence on investment treaty reform processes, even if investment treaties have so far typically utilized the concept of corporate social responsibility, and in this sense may be more closely linked to instruments such as the OECD Guidelines for Multinational Enterprises⁴⁶ and the UN Global Compact.⁴⁷ In addition to the demands to make human rights an essential concern in the establishment and operation of foreign investments and for legal accountability to ensue from investor misconduct, the BHR framework may particularly be traced in the calls for victims of investor misconduct to be brought within the investment law framework⁴⁸ and for home states to play their part in facilitating good and responsible investment.⁴⁹ A specific attempt at incorporating the BHR framework within an investment treaty has apparently also been made through a new model bilateral investment treaty (BIT) prepared for the Gambia, entitled the ‘Sustainable Investment Facilitation & Cooperation Agreement’ (SIFCA),⁵⁰ although the actual text of the instrument has not been made publicly available.⁵¹

III. Investment Treaties as a Risk to Human Rights Protection and the BHR Project

Many BHR scholars and practitioners have perceived investment treaties as a significant risk to human rights and business accountability projects, in particular, because of (1) their actual or potential detrimental effects on states’ ability to regulate in the public interest and (2) the imbalance between the rights and obligations of states and foreign investors.⁵² The UNGPs themselves demand that states ‘maintain adequate domestic policy space to meet their human rights obligations when pursuing business-related policy objectives …, for instance through investment treaties or contracts’.⁵³ The official commentary to the UNGPs caution that investment treaties ‘affect domestic policy space of States’ and ‘the terms of international investment agreements may constrain States from fully implementing new human rights legislation, or put them at risk of binding international arbitration if they do so’.⁵⁴ The WG Report (which was prepared as an elaboration of the implications for states of UNGP principle 9) concluded that ‘investment treaties constrain the regulatory ability of States to robustly discharge their international human rights obligations’;⁵⁵ through their ‘imbalance’ and ‘inconsistency’ contribute to ‘irresponsibility on the part of investors’;⁵⁶ and ‘undermine affected communities’ quest to hold investors accountable for human rights abuses and environmental pollution.’⁵⁷

Modern investment treaties have existed since the late 1950s⁵⁸ but have attracted more widespread attention and controversy only with the boom of investor–state arbitrations in the late 1990s and 2000s.⁵⁹ Arbitral tribunals have found states around the world to have violated their obligations under investment treaties and have ordered vast sums of compensation to be paid to investors,⁶⁰ often for taking general, non-discriminatory, good faith measures in the public interest, such as for the protection of health, environment, human and workers’ rights, or in situations of economic crises.⁶¹ Even those cases that host states have successfully defended have presented significant costs to public budgets and have exemplified the tension between the protection of private property and the host states’ ability to regulate.⁶²

Many states, stakeholders and commentators have consequently grown concerned about expansive interpretations of investment treaties by arbitral tribunals⁶³ and have started viewing investment treaties as conferring unduly privileged, overly broad legal protections to investors and investments.⁶⁴ In addition to critics portraying investment treaties as illegitimate regulatory straightjackets and calling for the reassertion of states’ ‘right to regulate’, the normative asymmetry built into the treaties’ normative design—the wide-ranging rights for foreign investors and obligations for host states—and arbitral tribunals’ expansive interpretation of this asymmetry⁶⁵ has become increasingly criticized as well. This asymmetry may have initially reflected an understanding of investment treaties as instruments aimed exclusively at comprehensive protection against expropriation and other governmental interference with foreign investments.⁶⁶ However, the design has become progressively more controversial, as significant negative effects of investor conduct on local populations and the environment have become more publicly known, and visions of how investment treaties should operate and what kinds of foreign investments they should protect have developed away from the initial singular conceptualization.⁶⁷

Because of the growing criticism of investment treaties and arbitration, reform initiatives have been ongoing since the mid-2010s both within individual states and under the auspices of international organizations with the aim to ‘re-balance’ the investment treaty system,⁶⁸ including the allocation of rights and obligations among states and investors. While critiques from within international investment law have primarily involved fairness-based arguments, with the imbalance in the rights and obligations of states and investors fundamentally presented as unfairness that undermines the legitimacy of the investment treaty system,⁶⁹ BHR critiques have highlighted investment treaties’ failure to adequately constrain corporate conduct detrimental to human rights.⁷⁰ The WG Report outright accused investment treaties of ‘facilitat[ing]’ and ‘incentivizing’ irresponsible conduct by investors.⁷¹

Commentators within both the BHR and investment law fields have proposed various solutions to the existing design and observed overreach of investment treaties, each approaching the matter from its distinct vantage point and value structure: while international investment lawyers have primarily sought to reconcile investor protection with human rights by including human rights among the considerations relevant for the determination of the substantive scope of standards of protection and access to and assessment of claims in investor–state arbitration,⁷² BHR contributions have predominantly focused on mitigation of risks posed by investment treaties to human rights.⁷³ The WG Report posited that investment treaties ‘ought to be compatible with States’ duty to respect, protect and fulfil human rights under international law’,⁷⁴ and outlined a series of recommendations for states, investors, adjudicators of investment-related disputes and civil society organizations.⁷⁵ The UN Working Group emphasized that states have a ‘duty to regulate’ investor conduct for the protection of human rights, including through investment treaties,⁷⁶ thereby contrasting and complementing a leading international investment law notion of a host state’s ‘right to regulate’.⁷⁷

BHR’s growing engagement with investment treaties is unsurprising. Despite their different histories, terminologies and normative features, investment treaties and the BHR framework share a paradigmatic preoccupation with an identical factual scenario. Although the BHR framework principally extends to all business enterprises and their conduct, its distinct matter of concern involves a foreign investment situation: the (mis)conduct of a subsidiary of a foreign company engaging in business activities in another state, characteristically in the Global South. A typical investment treaty then covers precisely the situation of an investor (a foreign parent company) making and operating an investment in a host state through a locally incorporated subsidiary (even though every investment treaty contains its own definitions of protected ‘investor’ and protected ‘investment’ and any legal analysis must always be carried out on the terms of the specific treaty). This essential overlap arguably explains the increased sensitivity to the interplay—and tension—between the BHR framework and investment treaties: while the BHR framework focuses on investor conduct and any adverse, human rights-related impacts of this conduct in the host state, investment treaties have conventionally been preoccupied with the protection of investors against negative interference with their investment by the host state, and investor (mis)conduct has until recently been of only peripheral concern.

IV. Investor Obligations under Investment Treaties

In the text of older, first- and second-generation treaties,⁷⁸ investor conduct featured only to a limited extent in so-called legality and denial of benefits clauses.⁷⁹ Given the historic origins of international investment law in the international law on the protection of nationals abroad and the preoccupations of Western capital-exporting states after World War II to ensure appropriate legal guarantees for their companies’ foreign operations,⁸⁰ the focus on host state’s conduct and the standards for such conduct (i.e., standards of protection, such as fair and equitable treatment, protection against unlawful expropriation, and full protection and security) was unsurprising. Regulation of investor conduct was not a part of the investment treaty programs, and business associations in fact worked hard to prevent the introduction of corporate international legal obligations across different post-WWII lawmaking processes.⁸¹

In arbitral practice, some investment arbitration tribunals have considered investor conduct when assessing the claims before them even in the absence of any specific treaty language. For example, in cases in which the investor contributed to the investment treaty breach by the host state, failed to mitigate losses incurred, or engaged in unlawful conduct that the tribunals viewed as contravening international public policy, such arbitral tribunals have drawn negative implications for their own jurisdiction, admissibility of investor claims, assessment of merits (considering investor conduct in delimiting the scope of investment protections or as a defense) and/or determination of quantum.⁸² However, many other tribunals have considered harmful and illegal investor conduct irrelevant from the perspective of the applicable treaties and the standards of protection they afforded to the investor and the investment.⁸³ Investment treaties would typically not provide a cause of action for claims against the investor for harm caused by the operation of an investment in the host state or for conduct generally considered illegal, such as corruption or non-compliance with environmental and labour standards—providing the host state with no opportunity to challenge the investor (mis)conduct and seek remedy in the context of international investor–state arbitration proceedings, not even through a counterclaim—a procedural option marked by peril.⁸⁴

States’ experience of investor–state arbitration and dissatisfaction with the application of second-generation investment treaties by arbitral tribunals has led to states terminating and renegotiating their investment treaties⁸⁵ and the advent of what the United Nations Conference on Trade and Development (UNCTAD) called the ‘era of re-orientation’ of investment treaties.⁸⁶ Investment treaty reform initiatives have introduced a range of treaty design strategies to safeguard host states’ regulatory space, limit investor rights and bring considerations of investor conduct firmly within the investment treaty regime.⁸⁷ One such strategy—included in the UNCTAD 2015 reform package⁸⁸ as well as advocated in scholarship⁸⁹ and by vocal non-governmental organizations such as the International Institute for Sustainable Development (IISD)⁹⁰—has been to include clauses on investor conduct within investment treaties, including provisions imposing international legal obligations directly on investors.⁹¹

The topic of investor obligations has recently attracted considerable attention in the literature, including the pages of this journal.⁹² However, explorations of this topic, including the considerations of investment treaty reform proposals relating to the regulation of investor conduct, have been complicated by definitional diversity and inconsistencies, with authors and stakeholders attributing the term ‘investor obligations’ different meanings and normative qualities. For example, both UNCTAD and some commentators sometimes employ the expression ‘investor obligations’ interchangeably with ‘investor responsibilities’ or ‘corporate social responsibility’ (CSR), while other times they use the three terms to refer to distinct concepts.⁹³ Similarly, the term ‘investor obligations’ has often referred only to legal norms addressed to investors (rather than states), while some authors have used it loosely to include provisions explicitly addressed to states and preambular provisions.⁹⁴

The terminological inconsistencies and differences have obscured the investment treaty developments relating to the regulation of investor conduct, as they conflate normatively discrete phenomena that have distinct conceptual histories and legal implications.⁹⁵ In international law, an ‘obligation’ refers to a strict, legally binding duty, while corporate ‘responsibility’ in the sense of a primary rule, as used in the BHR framework (rather than in the sense of the legal consequences flowing from violations of international law as in the law of international responsibility), has signified an absence of a legally binding character. The term ‘corporate social responsibility’ then typically refers to actions voluntarily undertaken by companies for public benefit.⁹⁶

In particular, confusion seems to persist regarding the practice of using investment treaties to impose strict international legal obligations directly on investors (‘investor obligations’ as used in this article)—that is, of legally binding, obligatory as opposed to optional requirements, created through an investment treaty and addressed and applied to investors directly rather than to a state. Authors and stakeholders regularly do not account for the full extent of the contemporary practice,⁹⁷ fail to appreciate their legal implications, question their international legal character,⁹⁸ or, conversely, declare as legally binding on investors treaty provisions that are clearly addressed to states or are mere preambular declarations or soft-law provisions, thereby further confounding the matter.⁹⁹ Indeed, the WG Report and important scholarly writings published in this journal have discussed the topic in a manner that might create the impression that there are currently no investor obligations in existing investment treaties.¹⁰⁰

However, contrary to some pervasive assertions that investment treaties prescribe only rights and no direct obligations for foreign investors,¹⁰¹ at least three dozen investment treaties, including investment treaties already in force, have imposed international legal obligations directly on foreign investors and their local corporate vehicles (‘investments’),¹⁰² including specific labour and human rights obligations,¹⁰³ as the subsequent sections demonstrate.

A. Treaty practice¹⁰⁴

The investment treaty concluded among the members of the Economic Community of West African States (ECOWAS), the 2008 ECOWAS Supplementary Act on Investments,¹⁰⁵ provides some of the most developed elaboration of investor obligations among the publicly available investment treaties in force,¹⁰⁶ and may therefore serve as a useful example of the use and potentially broad array of investor obligations in investment treaties. In its third chapter, entitled ‘Obligations and Duties of Investors and Investments’, the treaty imposes obligations on ‘Investors’ and ‘Investments’ (defined, e.g., as a ‘company’ or ‘a corporate entity constituted or organized under the applicable law of any ECOWAS Member State’). In addition to obligations relating to compliance with the host state’s law and reporting obligations (art 11), the ECOWAS Supplementary Act articulates extensive obligations for investors before and after investing. Pre-establishment, ‘Investors and Investments shall conduct environmental and social impact assessment’ (art 12(1)) and ‘shall apply the precautionary principle to their environmental and social impact assessment’ (art 12(3)). Post-establishment, Investors and Investments must comply with extensive social impact, labor and human rights obligations (art 14), as well as corporate governance requirements (art 15). For example, ‘Investors shall uphold human rights in the workplace and the community in which they are located … shall not undertake or cause to be undertaken acts that breach such human rights … shall not manage or operate their investments in a manner that circumvents human rights obligations …’ (art 14(2)). ‘Investors and Investments shall act in accordance with fundamental labour standards as stipulated in the International Labour Organization (ILO) Declaration on Fundamental Principles and Rights of Work, 1998’ (art 14(3)), and throughout the lifespan of the investment, ‘shall … refrain from involving themselves’ or ‘be complicit in’ corruption (art 13). The ECOWAS Supplementary Act also imposes liability for significant damage, personal injury or death for which victims may sue in the host state’s courts (art 17). In December 2019, an updated ECOWAS investment treaty entered into force—the ECOWAS Common Investment Code.¹⁰⁷ The Code further expanded the subject matter scope of investor obligations to include environmental obligations and the transfer of environmentally sound management practices, sociopolitical obligations and consumer protection.¹⁰⁸

Africa has been the most progressive region in terms of the incorporation of investor obligations into regional and bilateral investment treaties.¹⁰⁹ The Morocco-Nigeria BIT and the Democratic Republic of the Congo-Rwanda BIT also contain numerous, even if less detailed, provisions imposing obligations to comply with the host state’s law, refrain from corruption, and submit reports regarding their operations,¹¹⁰ as do several African model BITs.¹¹¹ The final draft of the African Continental Free Trade Area (AfCFTA) Investment Protocol goes beyond the existing instruments in the region by incorporating additional types of investor obligations, such as those relating to indigenous peoples and local communities.¹¹²

Despite the observable geographical imbalance, other investment treaties have also prescribed investor obligations, even if more limited. These treaties demand that investors (i) comply with the host state’s law (for example, the Organization of Islamic Conference (OIC) Investment Agreement and the China-Namibia BIT),¹¹³ at times specifically referring to labour and human rights laws (for example, Turkey-Ghana BIT and Ethiopia-Qatar BIT);¹¹⁴ (ii) refrain from corruption and complicity in corruption (for example, the Intra-MERCOSUR Cooperation and Facilitation Investment Protocol and the Indonesia-Switzerland BIT);¹¹⁵ (iii) report a variety of information regarding their operations (for example, the Singapore-Myanmar BIT and many Azerbaijan BITs);¹¹⁶ and (iv) seek implementation of internationally recognized CSR standards, including those relating to human rights and the environment (for example, some of the recent Indian BITs and the Uruguay-Turkey BIT).¹¹⁷

In addition, many recent model bilateral investment treaties (model BITs) incorporate one or more provisions prescribing (an) investor obligation(s). Of the 16 publicly known model BITs adopted between 2015 and 2021, more than half contain one or more provisions prescribing (an) investor obligation(s),¹¹⁸ including compliance with the host state law,¹¹⁹ anticorruption,¹²⁰ reporting,¹²¹ and liability for injury.¹²²

B. The legally binding nature of investor obligations

The investment treaty provisions mentioned in the previous section are all explicitly addressed to ‘investors’ and/or ‘investments’ (the term ‘investment’ refers to the local corporate vehicle)¹²³ and are expressed in the language of a legal obligation.¹²⁴ The provisions that an investor ‘shall’ or ‘shall not’ engage in a particular conduct are clearly distinguishable from hortatory or aspirational provisions (‘should’),¹²⁵ and state-addressed provisions requiring states to take certain measures vis-à-vis investors.¹²⁶ In treaty-making and international diplomacy more broadly, ‘shall’ formulations have consistently been used—and understood—to express the imposition of a legal obligation, and the formulations thus clearly express the state parties’ intention to create international legal obligations for foreign investors operating within their territories.¹²⁷ This intention has also been confirmed in statements of state representatives in international fora¹²⁸ or the text of the treaties themselves: both the ECOWAS Common Investment Code and the AfCFTA Investment Protocol explicitly state that they set out the rights and obligations of both states and investors.¹²⁹

In Al-Warraq v Indonesia,¹³⁰ an investment arbitration tribunal was called to interpret and apply precisely this kind of investment treaty provision when dealing with art 9 of the OIC Investment Agreement¹³¹ According to the treaty text, ‘[t]he investor shall be bound by the laws and regulations in force in the host state and shall refrain from all acts that may disturb public order or morals or that may be prejudicial to the public interest and refrain from exercising restrictive practices and from trying to achieve gains through unlawful means’.¹³² The Al-Warraq arbitral tribunal had no doubt that the ‘shall’ provision imposed a direct obligation on the investor,¹³³ ‘[bound] an investor to observe certain norms of conduct’¹³⁴ and ‘prevent[ed] the investor from taking any actions that would disrupt the public interest … [and] from “trying to achieve gains through unlawful means”.’¹³⁵ The tribunal reasoned that the provision ‘impose[d] a positive obligation on investors to respect the law of the Host State, and public order and morals, … rais[ing] this obligation from the plane of domestic law (and jurisdiction of domestic tribunals) to a treaty obligation binding on the investor in an investor state arbitration’.¹³⁶ Having established on the facts that the investor engaged in acts of fraud, the tribunal concluded that ‘the Claimant ha[d] breached art 9 of the OIC Investment Agreement by failing to uphold the Indonesian laws and regulations and in acting in a manner prejudicial to the public interest’,¹³⁷ thereby finding a violation by the investor of its international legal obligations under this treaty provision.

The vast majority of investment arbitration tribunals have favoured the interpretative approach to investment treaties adopted by the Al-Warraq tribunal, which places a key emphasis on the ‘ordinary meaning’ element of art 31(1) of the Vienna Convention on the Law of Treaties (VCLT).¹³⁸ It may be expected that other investment tribunals and investment treaty interpreters will interpret and apply treaty provisions on investor obligations analogously to Al-Warraq as imposing direct international legal obligations on investors. After all, it was precisely this interpretative approach that had translated into investment tribunals’ broad interpretations of standards of treatment and their unwillingness to read into investment treaties non-economic considerations, such as human and labour rights and environmental protection, unless such limitations were explicitly mentioned in the treaty text.

The proposition that investment treaties impose strict international legal obligations on investors has certainly been controversial. Public international lawyers often protest that such investor obligations would be at odds with some key characteristics of international law, given its conventional conceptualization as an inter-state legal order and its consequent doctrines of subjects, treaty law and international responsibility.¹³⁹ Some commentators have considered that investor obligations would bring an unwelcome expansion of the personal scope of international law.¹⁴⁰ Investment law practitioners most frequently argue that no legally binding obligations can arise without the investors’ consent to such obligations.¹⁴¹ Still, for others, treaty provisions need to be clearer, more precise and more comprehensive to qualify as international legal obligations.¹⁴²

However, these objections are misplaced, even if direct investor obligations might seem to challenge some leading tenets of treaty law and international law more broadly.¹⁴³ International law has already changed in its personal scope and imposes obligations on collective entities other than states and their international organizations in a range of areas, including the law of international peace and security, international humanitarian law, the law of the sea and international aviation law.¹⁴⁴ International investment law is not unique in this respect. Treaty law does not prevent corporations or other nonstate entities from becoming addressees of treaty obligations in the absence of their consent, as the pacta tertiis rule, codified in art 34 of the VCLT,¹⁴⁵ only applies to states. Rather, it is within states’ sovereign prerogative to use their treaties to impose obligations on corporations and other nonstate entities (as long as the international law on the jurisdiction of states is observed), and the legal validity of such obligations is not dependent on the consent of each investor. The proposition that investor consent is required conflates the fundamental distinction between the creation of international legal obligations (which falls within states’ lawmaking prerogatives and does not require investor consent) and the resolution of disputes relating to those obligations (for which the consents of both the state and investor(s) involved are required in contemporary international law). Finally, scepticism about investor obligations goes too far when it asserts that there are no investment treaty provisions sufficiently specific to create an international legal obligation for investors.

In international law, the determination of whether a norm is legally binding is based on considerations of both form and content.¹⁴⁶ Any rule must be expressed in a recognized source of international law and must clearly articulate the intention of the states to create an international legal obligation. In the case of investor obligations under an investment treaty, no issue of form arises. In terms of content, brevity has traditionally been a leading characteristic of investment treaties. The entire edifice of investment treaty protection has been built on brief formulations such as that the host state ‘shall provide fair and equitable treatment’,¹⁴⁷ which have left the particulars of the obligations to interpretation. Investors and states have disagreed on the precise scope of standards of protection, and this manner of treaty drafting arguably simultaneously provides too little guidance for the obligation-holder and too much leeway for an adjudicator. However, the legally binding character of such treaty clauses has never been challenged, and it is difficult to understand why different validity thresholds should apply to investor obligations.

Objections to the existence of investor obligations based on the wording (content) of the respective rule may arise from confusion regarding the different types of investor obligations appearing in investment treaties.¹⁴⁸ Investment treaties impose obligations on investors of both conduct and result.¹⁴⁹ Provisions according to which an investor ‘shall endeavor’ to take certain action are examples of the former, while the prohibition against corruption is an example of the latter. Obligations of conduct are still legally binding as a matter of international law, and the investor is not at liberty to ignore them (unlike in cases of ‘should’ clauses, which merely recommend acting in a certain manner). To remain compliant, the investor must, in good faith, take reasonable steps towards the stated objective. Similarly, a treaty provision requiring the investor to comply with the host state’s domestic law creates an obligation under international law—just as an umbrella clause creates an international legal obligation for the host state to comply with its domestic law undertaking. The determination of the content of the investor obligation by reference to the host state’s domestic law does not deprive the obligation of its legally binding character under international law.¹⁵⁰

C. Legal consequences of investor obligations

The imposition of investor obligations through investment treaties removes from arbitral tribunals much of the discretion to consider or disregard investor conduct when assessing investment claims. It may also be expected to inspire more restrained arbitral interpretations of standards of investment protection by bringing within the treaty text considerations other than merely the property interests of the investor. More fundamentally, the international legal nature of investor obligations means that investor conduct becomes regulated at the level of international law (even if it will also simultaneously be regulated by commercial, administrative and other domestic law). Consequently, if an investor fails to comply with its treaty obligation(s), the basic principle applies that a violation of international law entails international responsibility,¹⁵¹ and the breach will trigger the investor’s international responsibility.

Some investment treaties with investor obligations specify (some) legal consequences of their breach—such as that the legal consequences of a breach should be dealt with pursuant to the host state’s domestic law;¹⁵² or that a breach will remove the investor’s access to investor–state arbitration.¹⁵³ However, the general content and implementation of investor international responsibility are unclear, given the limited experience of enforcing investor obligations to date (the Al-Warraq case provides the only publicly known award in which an arbitral tribunal actually applied an investment treaty provision creating an investor obligation),¹⁵⁴ and the limited practice relating to the international responsibility of corporations and other collective non-state entities in other areas of international law.¹⁵⁵

In the context of state responsibility, James Crawford explained that responsibility involves substantive and procedural corollaries.¹⁵⁶ Although the law of state responsibility clearly cannot apply to non-state entities en bloc, some of the corollaries arguably also pertain to the non-state context: ‘cessation’ and ‘reparation’ as substantive corollaries, and ‘claim’ as the procedural corollary.¹⁵⁷ While substantive corollaries specify the content of international responsibility and the secondary obligations that arise by virtue of that responsibility, the procedural corollary enables the implementation of international responsibility—by way of a claim by an injured party.¹⁵⁸ Unless the relevant investment treaty specifies the legal consequences of a breach of an investor obligation, i.e., unless the lex specialis principle were to apply,¹⁵⁹ this general structure would generate (i) secondary obligations for the investor to cease any continuing wrongful conduct and to make reparation for any injury caused, and (ii) a procedural avenue to invoke the investor’s international responsibility by making a claim against it for a breach of its international obligation, including through any available dispute settlement procedure(s) (the investment treaty provision creating the investor obligation would provide the legal basis for such claim).

The Al-Warraq case supports this basic structure.¹⁶⁰ Having noted that art 9 of the OIC Investment Agreement did not specify the legal consequences of the investor’s breach,¹⁶¹ the tribunal considered that, first, art 9 provided a legal basis for a (counter)claim against the investor¹⁶² (in Crawford’s terms, there was an institutionalized dispute settlement mechanism to raise a claim as the procedural corollary of international responsibility), and, second, compensation was available for the violation¹⁶³ (in Crawford’s terms, there was a substantive corollary of reparation¹⁶⁴). The tribunal ultimately decided that the counterclaim had to fail on the merits because Indonesia did not substantiate the counterclaim, having conflated the actions of the claimant investor with those of other individuals who were not parties to the arbitration.¹⁶⁵ However, the tribunal had no doubt that art 9 could have supported the host state’s counterclaim against the investor had it been appropriately presented.¹⁶⁶

In addition to the above elements, the Al-Warraq tribunal also considered the breach of art 9 to have implications for the investor’s ability to bring its own successful claim in arbitration. Although the arbitral tribunal found a violation of the fair and equitable treatment standard by the host state, the art 9 violation rendered the investor’s claim inadmissible by virtue of the ‘clean hands’ doctrine,¹⁶⁷ preventing the investor from seeking reparation from the host state for that violation. That said, it is unclear whether the tribunal viewed the application of the ‘clean hands’ doctrine and the consequent inadmissibility of investor claims as a general legal consequence flowing from the breach of the investor obligation, or whether its application was fact-specific (the case centred on a bank bailout which took place because of the investor’s fraudulent conduct).¹⁶⁸

Another important and often underappreciated benefit of treaty-based investor obligations is that ensuing investment arbitration proceedings can, in principle, reach not only the local operating entity (the foreign investor’s subsidiary incorporated in the host state) but also the parent company of the investor. Underfunding of local subsidiaries and the lack of host state courts’ jurisdiction over the parent, together with the principles of separate legal personality and limited liability, have long been identified as major barriers in holding businesses accountable for the adverse impacts of their operations on people and the environment in the host state.¹⁶⁹ If a parent company were a party to investment arbitration proceedings, as parent companies regularly have been, it would open the door for the host state to counterclaim for investment treaty violations by the parent (the investor), thus providing an avenue for a potentially effective procedure for remedy by the host state.¹⁷⁰

That said, given that host states are currently generally unable to bring direct claims against investors in investment arbitration on the basis of an investment treaty alone,¹⁷¹ the enforcement of investor obligations certainly cannot compare with the potency of investment arbitration in the implementation of the host state’s responsibility for violations of investor rights.¹⁷² Still, despite their essential limitations, the possibility of using counterclaims is not trivial, and the Al-Warraq case illustrates the potential of investor obligations as the basis for host-state reparation claims against the investor in investor–state arbitration. Despite their limited use to date, counterclaims are bound to gain significance as a procedural mechanism and enforcement tool as they become increasingly mainstream¹⁷³ and host states gain experience in how to present and sufficiently develop the cause of action.¹⁷⁴

Investment arbitration is also not the only way in which an investor obligation might be enforced. Depending on the national constitutional framework, investor obligations may also be enforced by domestic courts, which have served as important enforcers of international law,¹⁷⁵ and through nonjudicial means.¹⁷⁶ As a practical matter, questions of implementation, compliance, enforcement, and effectiveness are crucial. However, these may only arise if there is a legal obligation to begin with, and the present article focuses precisely on this preceding question.¹⁷⁷ In the end, any enforcement can only be as effective and established as the underlying obligation involved.¹⁷⁸

V. Investor Obligations and the Potentially Regressive Impact of the BHR Framework

Only a small group of existing investment treaties currently impose investor obligations.¹⁷⁹ However, the existing practice on investor obligations is not negligible and demonstrates both the legal possibility and the existence of legally binding, direct regulation of investor conduct through investment treaties.¹⁸⁰ It is inaccurate as a matter of positive law to suggest—as much of the existing commentary does—that there are either no or only a few discreet investment treaties that contain investor obligations (even if there may be uncertainty as to their precise content).¹⁸¹ Section IV provided a range of examples that disprove the pervasive assertions that investment treaties either cannot or do not impose direct investor obligations in the strict sense of the term.¹⁸² Additionally, the widespread appearance of investor obligations in the latest model BITs¹⁸³ arguably signals an understanding of the best practice and suggests a growing interest among states in using investment treaties to regulate investor conduct.

The key reasons for the confusion regarding the use of investment treaties to impose investor obligations (and thus to regulate investor conduct in a legally binding manner) are likely to be twofold. First, there is the relative difficulty of comprehensively and accurately analysing the investment treaty system, given the absence of an official investment treaty collection¹⁸⁴ and the limitations of available search engines and computational models.¹⁸⁵ A laborious manual examination of treaty texts is still required for a precise analysis. Second, some commentators have amalgamated the legally different ways in which investor conduct has been or may be brought within investment treaties,¹⁸⁶ thereby obscuring the imposition of investor obligations as a distinct and existing practice.

The human rights movement had long sought to introduce direct, legally binding regulation of corporate human rights-related conduct into international law.¹⁸⁷ However, these efforts have been unsuccessful because of the opposition, primarily among Western states and by business corporations themselves, to the imposition of direct international legal obligations on the latter.¹⁸⁸ This opposition has been bolstered by notions of human rights as a concept relating to the relationship between the government and the governed,¹⁸⁹ and by various assertions of legal impossibility under international law to impose direct obligations on corporations.¹⁹⁰ As mentioned, because of how controversial the idea of direct, legally binding corporate human rights obligations had proved to be, the UNGPs did not seek to impose such obligations, resulting in the BHR framework being built on a conceptual and terminological distinction between legally binding, merely restated ‘obligations’ or ‘duties’ of states, and new legally non-binding ‘responsibilities’ of business enterprises that do not have the same legally binding character.¹⁹¹

In contrast to international human rights law, the creation of direct international obligations for investors through investment treaties has not met the same sustained resistance among states,¹⁹² even if the practice is more prevalent in some regions than others.¹⁹³ States have primarily introduced investor obligations as a way of reforming investment treaties (although the 1981 OIC Investment Agreement, which was the basis of the Al-Warraq case, notably predates the experience of investment arbitrations of the 1990s and the consequent debates on the legitimacy of investment treaties and investor–state dispute settlement). Treaty provisions creating investor obligations address many of the concerns expressed in the critiques of investment treaties, even if they certainly cannot resolve some of the more fundamental objections to the investment treaty regime as such.¹⁹⁴ By formally bringing investor conduct within the core of treaty relationships, investor obligations contribute to the rebalancing of the rights and obligations of states and investors and thus go some way towards correcting the normative asymmetry of the older treaties. The risk of an investment arbitration tribunal upholding a host-state counterclaim and awarding compensation against the investor on account of the investor’s violation of its treaty obligations disincentivizes abusive and extortionary uses of investment arbitration by investors.¹⁹⁵ Treaty provisions creating human rights-related investor obligations specify the conduct required of investors in relation to human rights while providing a legal basis for demanding compliance, including through institutional mechanisms as these may be available. Such treaty provisions clarify that human rights considerations and responsible business conduct are essential components of foreign investment and could also facilitate access to justice for victims of investor misconduct. These effects correspond to the investment treaty reform goals proposed in the WG Report.¹⁹⁶

Despite their flaws,¹⁹⁷ investment treaties have been seen as involving not only risks but also a degree of potential for the realization of the BHR project.¹⁹⁸ Various stakeholders have called for the incorporation of the BHR framework within investment treaties to ensure that the treaties do not undermine human rights and instead promote responsible investor conduct and business accountability for corporate human rights abuses.¹⁹⁹ Commentators have similarly sought to align investment treaties with human rights by conceptually joining investment treaties with the BHR framework.²⁰⁰ In these efforts, the BHR framework has characteristically been considered superior to investment treaties, despite the ambiguity surrounding the normative character of the demands that it places on business enterprises. However, by creating direct, legally binding investor obligations, investment treaties have arguably normatively surpassed the BHR framework in an important respect, and efforts to incorporate the BHR framework within the investment treaty regime may in fact be counterproductive to the aims of the BHR project of human rights protection and accountability in the business context.

Investment treaty-based investor obligations are certainly not a panacea for regulating and holding business corporations legally responsible for their misconduct, including their adverse impacts on the enjoyment of human rights and the environment. Aside from necessarily being a complement to, and not a substitute for, regulation under domestic law, the fragmented reality of several thousand bilateral and regional treaties covering only certain defined business corporations precludes comprehensive regulation. Design innovations in new treaties also cannot easily reform or undo the thousands of second-generation investment treaties.²⁰¹

Still, investor obligations have distinct benefits over non-binding and domestic law-based regulation of investor conduct. A legal norm certainly has multiple dimensions that impact its efficacy, of which the norm’s legally binding nature is only one;²⁰² formally nonbinding norms may also generate legal effects. However, the legally binding quality is essential²⁰³—as illustrated by the difficulty in creating direct corporate obligations in international human rights law and the observed challenges with the implementation of BHR due diligence in corporate practice²⁰⁴—in that, a (binding) rule communicates that adherence is a matter of obligation and not of benevolence. As the literature on ‘focal points’ explains,²⁰⁵ international legal rules retain their distinct regulatory quality even if sanctions or institutionalized enforcement mechanisms may be limited (as may be the case with investor obligations) or even absent. Investment treaty rules that create investor obligations thus embody values, commitments and demands regarding what investor conduct is (un)acceptable in ways that legally non-binding norms do not.

While host states also regulate investors in their domestic law, investor obligations under investment treaties and under domestic law are not equivalent. Owing to the generally high bar for treaty amendments, international rules are better insulated from domestic politics. Domestic law generally cannot provide a cause of action for claims (and counterclaims) against investors in a treaty-based investment arbitration, while a domestic court will not have jurisdiction over a foreign parent company even if the host state were to enact laws to regulate its conduct.²⁰⁶ Depending on the applicable constitutional framework, international rules may also apply domestically without the need for domestic legislative enactments and may thus make up for domestic law’s nonalignment with international standards caused, for example, by domestic capacity constraints.

Triggering international responsibility in the event of a breach distinguishes treaty-based investor obligations from other investment treaty provisions on investor conduct.²⁰⁷ In principle, all treaty rules on investor conduct attribute a degree of international legal relevance to investor (mis)conduct, and by providing avenues for denying or reducing the benefits of investment treaty protection,²⁰⁸ they set a valuable limit on what types of investments will enjoy protection under an investment treaty. However, only a breach of an investor obligation will generate an obligation under international law for the investor to cease wrongful conduct and make reparation for injury caused by the breach and will provide a basis for an international claim against the investor,²⁰⁹ thereby establishing a clear link between corporate misconduct and the corporate bottom line of net income (profit).

While well-intentioned, the calls to incorporate the BHR framework within investment treaties²¹⁰ imply introducing an element of normative ambiguity into a body of law that nowadays contains unequivocal direct international legal obligations of certain business enterprises (‘investors’ and ‘investments’).²¹¹ In particular, the transplantation of the concept of ‘corporate responsibility’ threatens to undo what is arguably a normative advance made towards business accountability, including for adverse human rights impacts, in the foreign-investment setting: the use of investment treaties to impose international obligations directly on investors, including some explicitly human rights obligations. As mentioned, the conceptual and terminological distinction between legally binding ‘obligations’ or ‘duties’ of states and legally non-binding ‘responsibilities’ of business has been a significant factor in the broad acceptance of the UNGPs and the subsequent transformative success of the BHR framework in advancing human rights protection in the business context.²¹² However, in the context of international investment law, the incorporation of the BHR notion of ‘corporate responsibility’ rather threatens to generate important regressive impacts.

Given the dominant approach of investment arbitration tribunals to the interpretation of investment treaties,²¹³ the terminological distinction between the ‘obligations’ of states and ‘responsibilities’ of investors will lead arbitral tribunals and other authoritative interpreters to interpret the term ‘responsibilities’ as signaling the absence of a strict international legal obligation. The use of the term ‘investor responsibilities’ for the direct international legal obligations of investors (and the use of the expression ‘investor responsibilities’ as the umbrella term for all the normative demands that investment treaties may place on investors)²¹⁴ will impede the application and enforcement of existing investor obligations by bringing into question their legally binding character. It will also hinder the imposition of investor obligations in future investment treaties either by reinforcing the impression that investment treaties have not imposed (and perhaps even may not impose) international legal obligations directly on investors or by obscuring the distinct legal characteristics of investor obligations. Considering their potential to enhance investor accountability in the foreign investment context by creating formal legal obligations, including human rights-related obligations, the conflation of investor obligations with other treaty provisions on investor conduct arguably runs counter to the BHR project’s goals of protecting human rights in the business context and ensuring corporate human rights accountability.

The influence and regressive impact of the BHR framework have arguably already manifested in what seems like a shifting attitude of UNCTAD towards investor obligations in the context of its investment treaty reform initiative. For example, in its earlier documents, UNCTAD listed investor obligations as one of the reform elements.²¹⁵ In later papers, which prominently refer to the UNGPs and ‘the wide recognition of investors’ responsibility to respect human rights’,²¹⁶ the UNCTAD Secretariat primarily refers to ‘investor responsibilities’.²¹⁷ With the exception of clauses on compliance with domestic laws, consideration is only given to provisions that would either be addressed to the treaty parties, rather than to investors, or that would contain ‘should’ rather than ‘shall’ language.²¹⁸

States and other stakeholders may certainly consider it undesirable to make investor obligations a part of investment treaty reform. For example, there may be legitimate arguments in favour of using domestic law rather than investment treaties to regulate investor conduct—such as that domestic standards may enjoy greater local legitimacy; that governmental agencies may find national laws more straightforward to implement and monitor; and that domestic law creates a level playing field for all investors—domestic and foreign.²¹⁹ There may also be well-founded concerns that investment arbitration tribunals are not an appropriate forum for interpreting and applying human rights law.

Some states will also continue to oppose the imposition of direct international legal obligations on their corporations as a matter of principle; however, the political economy of foreign investment has arguably changed over time, and the historical, political and economic contexts reflected in older-generation treaties no longer apply or do not apply in the same way. The division of states between capital-exporting and capital-importing is no longer clear-cut, and previously predominantly capital-exporting Western states that had shaped the investment treaty regime have also become prominent capital importers.²²⁰ Additionally, the experience of investor–state arbitration has politicized investment treaties domestically and has fueled legitimacy challenges to the investment treaty regime.²²¹ The idea of which types of foreign investments should enjoy special international protections has changed,²²² and states have been looking for new ways to design their investment treaties.²²³ These factors produce political dynamics and preferences different from those of the late 1950s and 1960s, when modern investment treaties emerged, or of the 1990s, when second-generation treaties proliferated, making the older-generation treaties—and the absence of investor obligations in them—an ill-advised benchmark for future developments.²²⁴

The point here is not to argue that every future investment treaty should or will include investor obligations. Rather, this article seeks to foster an understanding within the BHR field that investor obligations (direct international legal obligations of investors under investment treaties) exist as a matter of positive (existing) international law and possess distinct legal characteristics that may be of value to the aims of the BHR project. When seeking to align investment treaties with this project, scholars, advocates and policymakers should, therefore, take care to avoid inadvertently undoing this advance towards legal responsibility of (certain) business enterprises for adverse human rights impacts.

VI. Conclusion: Staying Truthful to Normative Plurality

The BHR framework has been transformative in facilitating legal developments towards corporate accountability for business-related human rights abuses around the world.²²⁵ However, as members of the BHR movement seek to align investment treaties with the BHR agenda, care needs to be taken to avoid undoing what is arguably an advance towards legal accountability of business enterprises made in the investment treaty practice of imposing direct international legal obligations on investors. While the BHR framework may be a superior regime of corporate accountability in other respects, certain investment treaties have normatively surpassed it by regulating investor conduct in a manner formally binding under international law.²²⁶ How BHR scholarship has related to this investment treaty practice—either by denying its existence or its full extent or by amalgamating legally different normative phenomena²²⁷—has hindered the recognition of treaty-based investor obligations as an existing, available and distinct tool for the regulation of corporate conduct. Commentators’ resistance to acknowledging treaty-based investor obligations has been curiously at odds with the clear intention of some states to use their treaties to regulate investor conduct in a legally binding manner, as is their sovereign prerogative. It also seems regrettable, given the past and ongoing efforts within international human rights law to impose direct corporate human rights obligations, because investment treaties with investor obligations demonstrate the possibility of directly using international law to regulate corporate conduct, including human rights-related conduct, in a legally binding manner, thus providing an example of a legal structure that could be replicated elsewhere.

A major strength of the BHR framework has been its commitment to normative plurality, which is reflected in the foundational premise that the realization of the BHR agenda requires a ‘smart mix of measures’.²²⁸ This feature has arguably been pivotal for the framework’s success, as it enabled the BHR movement to draw on and mobilize a variety of normative sources to support its endeavors. The BHR literature and wider discourse should maintain this normative plurality, which stands at the core of their project, in the context of investment treaties as well. Treaty-based investor obligations should be appreciated as a possible means to improve business conduct and to facilitate corporate accountability, and therefore as a potentially valuable component of the BHR ‘smart mix’. Accordingly, the BHR field and investment treaty reform proposals should pause before inadvertently undoing this advance towards the legal accountability of investors by putting in question the legally binding character of investor obligations. This is all the more so, given that investment treaties apply to the BHR’s paradigmatic case of foreign subsidiary operations and can therefore further the central interest of the BHR in ensuring parent company liability for human rights-related injuries.