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

Published online by Cambridge University Press:  24 May 2024

Klara Polackova Van der Ploeg*
Affiliation:
Assistant Professor, Head of the Business, Trade and Human Rights Unit of the Human Rights Law Centre, School of Law, University of Nottingham, Nottingham, United Kingdom
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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.

Type
Scholarly Article
Creative Commons
Creative Common License - CCCreative Common License - BY
This is an Open Access article, distributed under the terms of the Creative Commons Attribution licence (http://creativecommons.org/licenses/by/4.0), which permits unrestricted re-use, distribution and reproduction, provided the original article is properly cited.
Copyright
© The Author(s), 2024. Published by Cambridge University Press

I. Introduction

Business and human rights (BHR) scholars and practitioners have recently taken significant interest in investment treaties,Footnote 1 regularly seeing them as a threat to the BHR project and the enjoyment of human rights more broadly.Footnote 2 A flagship initiative in this respect has been the United Nations Working Group on Business and Human Rights (UN Working Group)Footnote 3 process that resulted in its 2021 report on ‘Human rights-compatible international investment agreements’ (the ‘WG Report’).Footnote 4 Provisions on the relationship between investment treaties and human rights have also appeared in subsequent drafts of the BHR treaty,Footnote 5 and commitments relating to investment treaties have been a regular component of national action plans on BHR.Footnote 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 consultationFootnote 7 and a working paper entitled ‘Business Responsibilities and Investment Treaties’ (the ‘OECD Report’).Footnote 8

Investment treatiesFootnote 9 have been the subject of major criticism in the last 15 years or so,Footnote 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.Footnote 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)Footnote 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.Footnote 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.Footnote 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.Footnote 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.Footnote 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;Footnote 17 however, as a consequence, the BHR framework involves no strict international legal obligations of business enterprises at the international level.Footnote 18

In contrast, some recent investment treaties, including treaties already in force, have imposed direct international legal obligations on investorsFootnote 19 (‘investor obligations’), including human rights-related obligations.Footnote 20 This article explores this practice, the understanding and appreciation of which has been limited in the literature.Footnote 21 While initially introduced as part of endogenous reform efforts within the investment regime,Footnote 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 treatiesFootnote 23 covering only defined business enterprises (‘investors’ and ‘investments’ under the treaties).Footnote 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 responsibilityFootnote 25—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.Footnote 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’Footnote 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.Footnote 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,Footnote 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’Footnote 30 and its precise normative character was deliberately left ambiguous:Footnote 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.Footnote 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,Footnote 33 and in the European Union.Footnote 34 International organizations, including the OECDFootnote 35 and the International Finance Corporation (IFC),Footnote 36 have incorporated UNGPs into their policies and guidelines, as have major business corporations and industry organizations.Footnote 37 The draft BHR treatyFootnote 38 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.Footnote 39 The Vedanta, Okpabi and the Milieudefensie (Shell Nigeria) cases particularly stand out in terms of shifting legal boundaries.Footnote 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.Footnote 41 Similar cases are pending elsewhere.Footnote 42 The linking of human rights with the environment and climate changeFootnote 43 has expanded the BHR notions of business accountability, including legal liability, to wider contexts.Footnote 44 Given the contemporary preeminence of the human rights-based approach to global issues,Footnote 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 EnterprisesFootnote 46 and the UN Global Compact.Footnote 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 frameworkFootnote 48 and for home states to play their part in facilitating good and responsible investment.Footnote 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),Footnote 50 although the actual text of the instrument has not been made publicly available.Footnote 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.Footnote 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’.Footnote 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’.Footnote 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’;Footnote 55 through their ‘imbalance’ and ‘inconsistency’ contribute to ‘irresponsibility on the part of investors’;Footnote 56 and ‘undermine affected communities’ quest to hold investors accountable for human rights abuses and environmental pollution.’Footnote 57

Modern investment treaties have existed since the late 1950sFootnote 58 but have attracted more widespread attention and controversy only with the boom of investor–state arbitrations in the late 1990s and 2000s.Footnote 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,Footnote 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.Footnote 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.Footnote 62

Many states, stakeholders and commentators have consequently grown concerned about expansive interpretations of investment treaties by arbitral tribunalsFootnote 63 and have started viewing investment treaties as conferring unduly privileged, overly broad legal protections to investors and investments.Footnote 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 asymmetryFootnote 65 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.Footnote 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.Footnote 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,Footnote 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,Footnote 69 BHR critiques have highlighted investment treaties’ failure to adequately constrain corporate conduct detrimental to human rights.Footnote 70 The WG Report outright accused investment treaties of ‘facilitat[ing]’ and ‘incentivizing’ irresponsible conduct by investors.Footnote 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,Footnote 72 BHR contributions have predominantly focused on mitigation of risks posed by investment treaties to human rights.Footnote 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’,Footnote 74 and outlined a series of recommendations for states, investors, adjudicators of investment-related disputes and civil society organizations.Footnote 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,Footnote 76 thereby contrasting and complementing a leading international investment law notion of a host state’s ‘right to regulate’.Footnote 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,Footnote 78 investor conduct featured only to a limited extent in so-called legality and denial of benefits clauses.Footnote 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,Footnote 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.Footnote 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.Footnote 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.Footnote 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.Footnote 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 treatiesFootnote 85 and the advent of what the United Nations Conference on Trade and Development (UNCTAD) called the ‘era of re-orientation’ of investment treaties.Footnote 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.Footnote 87 One such strategy—included in the UNCTAD 2015 reform packageFootnote 88 as well as advocated in scholarshipFootnote 89 and by vocal non-governmental organizations such as the International Institute for Sustainable Development (IISD)Footnote 90—has been to include clauses on investor conduct within investment treaties, including provisions imposing international legal obligations directly on investors.Footnote 91

The topic of investor obligations has recently attracted considerable attention in the literature, including the pages of this journal.Footnote 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.Footnote 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.Footnote 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.Footnote 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.Footnote 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,Footnote 97 fail to appreciate their legal implications, question their international legal character,Footnote 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.Footnote 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.Footnote 100

However, contrary to some pervasive assertions that investment treaties prescribe only rights and no direct obligations for foreign investors,Footnote 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’),Footnote 102 including specific labour and human rights obligations,Footnote 103 as the subsequent sections demonstrate.

A. Treaty practiceFootnote 104

The investment treaty concluded among the members of the Economic Community of West African States (ECOWAS), the 2008 ECOWAS Supplementary Act on Investments,Footnote 105 provides some of the most developed elaboration of investor obligations among the publicly available investment treaties in force,Footnote 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.Footnote 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.Footnote 108

Africa has been the most progressive region in terms of the incorporation of investor obligations into regional and bilateral investment treaties.Footnote 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,Footnote 110 as do several African model BITs.Footnote 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.Footnote 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),Footnote 113 at times specifically referring to labour and human rights laws (for example, Turkey-Ghana BIT and Ethiopia-Qatar BIT);Footnote 114 (ii) refrain from corruption and complicity in corruption (for example, the Intra-MERCOSUR Cooperation and Facilitation Investment Protocol and the Indonesia-Switzerland BIT);Footnote 115 (iii) report a variety of information regarding their operations (for example, the Singapore-Myanmar BIT and many Azerbaijan BITs);Footnote 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).Footnote 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),Footnote 118 including compliance with the host state law,Footnote 119 anticorruption,Footnote 120 reporting,Footnote 121 and liability for injury.Footnote 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)Footnote 123 and are expressed in the language of a legal obligation.Footnote 124 The provisions that an investor ‘shall’ or ‘shall not’ engage in a particular conduct are clearly distinguishable from hortatory or aspirational provisions (‘should’),Footnote 125 and state-addressed provisions requiring states to take certain measures vis-à-vis investors.Footnote 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.Footnote 127 This intention has also been confirmed in statements of state representatives in international foraFootnote 128 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.Footnote 129

In Al-Warraq v Indonesia,Footnote 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 AgreementFootnote 131 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’.Footnote 132 The Al-Warraq arbitral tribunal had no doubt that the ‘shall’ provision imposed a direct obligation on the investor,Footnote 133 ‘[bound] an investor to observe certain norms of conduct’Footnote 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”.’Footnote 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’.Footnote 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’,Footnote 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).Footnote 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.Footnote 139 Some commentators have considered that investor obligations would bring an unwelcome expansion of the personal scope of international law.Footnote 140 Investment law practitioners most frequently argue that no legally binding obligations can arise without the investors’ consent to such obligations.Footnote 141 Still, for others, treaty provisions need to be clearer, more precise and more comprehensive to qualify as international legal obligations.Footnote 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.Footnote 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.Footnote 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,Footnote 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.Footnote 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’,Footnote 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.Footnote 148 Investment treaties impose obligations on investors of both conduct and result.Footnote 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.Footnote 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,Footnote 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;Footnote 152 or that a breach will remove the investor’s access to investor–state arbitration.Footnote 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),Footnote 154 and the limited practice relating to the international responsibility of corporations and other collective non-state entities in other areas of international law.Footnote 155

In the context of state responsibility, James Crawford explained that responsibility involves substantive and procedural corollaries.Footnote 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.Footnote 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.Footnote 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,Footnote 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.Footnote 160 Having noted that art 9 of the OIC Investment Agreement did not specify the legal consequences of the investor’s breach,Footnote 161 the tribunal considered that, first, art 9 provided a legal basis for a (counter)claim against the investorFootnote 162 (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 violationFootnote 163 (in Crawford’s terms, there was a substantive corollary of reparationFootnote 164). 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.Footnote 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.Footnote 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,Footnote 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).Footnote 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.Footnote 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.Footnote 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,Footnote 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.Footnote 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 mainstreamFootnote 173 and host states gain experience in how to present and sufficiently develop the cause of action.Footnote 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,Footnote 175 and through nonjudicial means.Footnote 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.Footnote 177 In the end, any enforcement can only be as effective and established as the underlying obligation involved.Footnote 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.Footnote 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.Footnote 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).Footnote 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.Footnote 182 Additionally, the widespread appearance of investor obligations in the latest model BITsFootnote 183 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 collectionFootnote 184 and the limitations of available search engines and computational models.Footnote 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,Footnote 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.Footnote 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.Footnote 188 This opposition has been bolstered by notions of human rights as a concept relating to the relationship between the government and the governed,Footnote 189 and by various assertions of legal impossibility under international law to impose direct obligations on corporations.Footnote 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.Footnote 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,Footnote 192 even if the practice is more prevalent in some regions than others.Footnote 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.Footnote 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.Footnote 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.Footnote 196

Despite their flaws,Footnote 197 investment treaties have been seen as involving not only risks but also a degree of potential for the realization of the BHR project.Footnote 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.Footnote 199 Commentators have similarly sought to align investment treaties with human rights by conceptually joining investment treaties with the BHR framework.Footnote 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.Footnote 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;Footnote 202 formally nonbinding norms may also generate legal effects. However, the legally binding quality is essentialFootnote 203—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 practiceFootnote 204—in that, a (binding) rule communicates that adherence is a matter of obligation and not of benevolence. As the literature on ‘focal points’ explains,Footnote 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.Footnote 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.Footnote 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,Footnote 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,Footnote 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 treatiesFootnote 210 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’).Footnote 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.Footnote 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,Footnote 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)Footnote 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.Footnote 215 In later papers, which prominently refer to the UNGPs and ‘the wide recognition of investors’ responsibility to respect human rights’,Footnote 216 the UNCTAD Secretariat primarily refers to ‘investor responsibilities’.Footnote 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.Footnote 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.Footnote 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.Footnote 220 Additionally, the experience of investor–state arbitration has politicized investment treaties domestically and has fueled legitimacy challenges to the investment treaty regime.Footnote 221 The idea of which types of foreign investments should enjoy special international protections has changed,Footnote 222 and states have been looking for new ways to design their investment treaties.Footnote 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.Footnote 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.Footnote 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.Footnote 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 phenomenaFootnote 227—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’.Footnote 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.

Acknowledgements

I am grateful to Robert McCorquodale and Dominic McGoldrick for their comments on an earlier draft, and to Jakub Mikulski and Hwee Teo for their assistance with the preparation of this article. I also thank the peer reviewers and the journal’s Editors-in-Chief for thoroughly engaging with my manuscript. Funding provided by the University of Nottingham School of Law Research Fund.

Competing interest

The author declares no conflict of interest.

References

1 ‘Investment treaties’ are also referred to synonymously as ‘international investment agreements’.

2 See, e.g., Barnali Choudhury, ‘Spinning Straw into Gold: Incorporating the Business and Human Rights Agenda into International Investment Agreements’ (2017) 38:2 University of Pennsylvania Journal of International Law 425; Ludovica Chiussi, ‘The Role of International Investment Law in the Business and Human Rights Legal Process’ (2019) 21:1 International Community Law Review 35; Deva, Surya and Birchall, David, Research Handbook on Human Rights and Business (Cheltenham: Edward Elgar, 2020)CrossRefGoogle Scholar; Deva, Surya, ‘International Investment Agreements and Human Rights: Assessing the Role of the UN’s Business and Human Rights Regulatory Initiatives’ in Chaisse, Julien, Choukroune, Leïla and Jusoh, Sufian (eds.), Handbook of International Investment Law and Policy (Singapore: Springer Singapore, 2021)Google Scholar; Steininger, Silvia, ‘The Role of Human Rights in Investment Law and Arbitration: State Obligations, Corporate Responsibility and Community Empowerment’ in Bantekas, Ilias and Stein, Michael Ashley (eds.), The Cambridge Companion to Business and Human Rights Law (Cambridge: Cambridge University Press, 2021)Google Scholar. However, the relationship between international investment law and human rights has been discussed for much longer. See, e.g., Dupuy, Pierre-Marie, Francioni, Francesco and Petersmann, Ernst-Ulrich, Human Rights in International Investment Law and Arbitration (Oxford: Oxford University Press, 2009)CrossRefGoogle Scholar.

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6 Deva (2021), note 2, 1743–8.

7 OECD, ‘Public consultation on business responsibilities and investment treaties’, OECD (May 2021), (https://www.oecd.org/investment/public-consultation-on-business-responsibilities-and-investment-treaties.htm (accessed 19 June 2022).

8 David Gaukrodger, ‘Business responsibilities and investment treaties’, OECD Working Papers on International Investment, No. 2021/02, https://doi.org/10.1787/4a6f4f17-en (accessed 19 June 2022).

9 This article adopts the definition of investment treaties proposed by Bonnitcha et al as ‘treaties between two or more states that have the protection of foreign investment as the primary, or only, subject matter’. Bonnitcha, Jonathan, Poulsen, Lauge and Waibel, Michael, The Political Economy of the Investment Treaty Regime (Oxford: Oxford University Press, 2017) 3CrossRefGoogle Scholar. This definition covers bilateral investment treaties (BITs), regional investment treaties and investment chapters and protocols in free trade agreements.

10 See Section III.

11 See Section III.

12 Human Rights Council, ‘Guiding Principles on Business and Human Rights: Implementing the United Nations “Protect, Respect and Remedy” Framework’, A/HRC/17/31 (21 March 2011) (‘UNGPs’).

13 See, e.g., WG Report, note 4; Barnali Choudhury, ‘Investor Obligations for Human Rights’ (2020) 35 ICSID Review 82, esp 82–87; Deva (2021), note 2; Gaukrodger (2021), note 8, 9.

14 See WG Report, note 4, paras 18–27 and the sources cited therein.

15 Choudhury (2017), note 2, 481; see also, e.g., Working Group Report, Human Rights Council (2014), note 4 (summary); Gaukrodger (2021), note 8, 9; Choudhury (2020), note 13.

16 Rodley, Nigel, ‘Non-State Actors and Human Rights,’ in Sheeran, Scott and Rodley, Nigel (eds.), Routledge Handbook of International Human Rights Law (London: Taylor and Francis, 2014)Google Scholar; Eric De Brabandere, ‘Human Rights Obligations and Transnational Corporations: The Limits of Direct Corporate Responsibility’ (2010) 4 Human Rights & International Legal Discourse 66; Clapham, Andrew, Human Rights Obligations of Non-State Actors (Oxford: Oxford University Press, 2006) 195237.CrossRefGoogle Scholar For discussion, see notes 187190 and the accompanying text.

17 See Section II.

18 See Sections II and V.

19 Every investment treaty contains a definition of an ‘investor’, which delimits the personal scope of the treaty.

20 See Section IV.

21 Ibid. For an earlier consideration of treaty practice on investor obligations on which the present article builds, see Klara Polackova Van der Ploeg, ‘Protection of Regulatory Autonomy and Investor Obligations: Latest Trends in Investment Treaty Design.’ (2018) 51:1 International Lawyer 109.

22 See Sections IV and V.

23 See UNCTAD Investment Policy Hub, ‘International Investment Agreements Navigator’, https://investmentpolicy.unctad.org/international-investment-agreements (accessed 19 March 2023) and the Electronic Database of Investment Treaties (EDIT), ‘Home’, https://edit.wti.org/ (accessed 19 March 2023).

24 In investment treaties with an enterprise-based definition of investment, such as the 2016 Morocco-Nigeria BIT, the term ‘investment’ refers to a corporation—a legal person—not a thing (res), as Krajewski suggests in Markus Krajewski, ‘A Nightmare or a Noble Dream? Establishing Investor Obligations Through Treaty-Making and Treaty-Application’ (2020) 5 Business and Human Rights Journal 105, 114.

25 See Section IV.C.

26 See Section V.

27 Human Rights Council, ‘Protect, Respect and Remedy: A Framework for Business and Human Rights: Report of the Special Representative of the Secretary-General on the issue of human rights and transnational corporations and other business enterprises, John Ruggie’, A/HRC/8/5 (7 April 2008).

28 See, e.g., Human Rights Council, ‘Improving accountability and access to remedy for victims of business-related human rights abuse: Report of the United Nations High Commissioner for Human Rights’, A/HRC/32/19 (10 May 2016); Office of the United Nations High Commissioner for Human Rights, ‘Accountability and Remedy Project I: Enhancing effectiveness of judicial mechanisms in cases of business-related human rights abuse’, A/HRC/32/19 (10 May 2016).

29 See Rodley (2014), note 16, and notes 187190 and the accompanying text.

30 UNGPs, note 12, commentary to Principle 11.

31 See, e.g., Nolan, Justine, ‘The Corporate Responsibility to Respect Human Rights: Soft Law or Not Law?’ in Deva, Surya and Bilchitz, David (eds.), Human Rights Obligations of Business: Beyond the Corporate Responsibility to Respect? (Cambridge: Cambridge University Press, 2013) 138–161CrossRefGoogle Scholar.

32 See, e.g., UN Sub-Commission on the Promotion and Protection of Human Rights, ‘Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with Regard to Human Rights’, E/CN/Sub.2/2003/12 (26 August 2003).

33 See, e.g., Modern Slavery Act 2015 (UK); Code de commerce 2017, arts L225-102-4 and 5 (Duty of Vigilance Act) (France); Modern Slavery Act 2018 (Australia), see also the rationale for adoption: Australian House of Representatives, ‘Modern Slavery Bill 2018: Explanatory Memorandum’ (Parliament of Australia, 2018) 20, 38; Wet Zorgplicht Kinderarbeid 2019 (Child Labour Due Diligence Law) (Netherlands) Lieferkettensorgfaltspflichtengesetz 2019 (Act on Corporate Due Diligence Obligations in Supply Chains) (Germany); Code des obligations 2021, art 964 (amendment on conflict minerals and child labour due diligence law) (Switzerland); Åpenhetsloven 2021 (Transparency Act) (Norway).

34 See, e.g., Non-Financial Disclosure Directive 2014/95/EU; Conflict Minerals Regulation 2017/821; Taxonomy Regulation 2020/852; and the forthcoming Human Rights Due Diligence Directive—see European Commission, ‘Proposal for a Directive on Corporate Sustainability Due Diligence and Annex’, https://ec.europa.eu/info/publications/proposal-directive-corporate-sustainable-due-diligence-and-annex_en (accessed 22 March 2022).

35 OECD, OECD Guidelines for Multinational Enterprises: 2011 Edition (Paris: OECD, 2011).

36 IFC, Guidance Notes to Performance Standards on Environmental and Social Sustainability: 2012 Edition’ (Washington: IFC: 2012).

37 See, e.g., René Wolfsteller and Yingru Li, ‘Business and Human Rights Regulation After the UN Guiding Principles: Accountability, Governance, Effectiveness’ (2022) 23 Human Rights Review 1, fn 12; Alvise Favotto and Kelly Kollman, ‘When Rights Enter the CSR Field: British Firms’ Engagement with Human Rights and the UN Guiding Principles’ (2022) 23 Human Rights Review 21.

38 Open-ended intergovernmental working group on transnational corporations and other business enterprises with respect to human rights, Zero draft (2018), note 5; Revised draft (2019), note 5; Second revised draft (2020), note 5; Third revised draft (2012), note 5.

39 See, e.g., Dominic Liswaniso Lungowe and ors v Vedanta Resources Plc and Konkola Copper Mines Plc [2016] EWHC 975 (TCC); [2017] EWCA Civ 1528; [2019] UKSC 20 (‘Vedanta’); Okpabi and ors v Royal Dutch Shell Plc and Anor [2017] EWHC 89 (TCC); [2018] EWCA Civ 191; [2021] UKSC 3 (‘Okpabi’), esp para 73; Vereniging Milieudefensie v Royal Dutch Shell Plc and Shell Nigeria, Hague Court of Appeal, ECLI:NL:GHDHA:2021:134 (Judgment of 29 January 2021) (‘Milieudefensie (Shell Nigeria)’); Vereniging Milieudefensie v Royal Dutch Shell Plc, Hague District Court, C/09/571932 (Judgment of 26 May 2021) (‘Milieudefensie (Shell climate change)’); Choc v Hudbay Minerals Inc, [2013] ONSC 1414, paras 34 and 36; Das v George Weston Limited, [2017] ONSC 4129, para 133; Araya v Nevsun Resources Ltd, [2016] BCSC 1856, para 64; Nevsun Resources Ltd v Araya, 2020 SCC 5. For additional examples, see Debevoise and Plimpton LLP, UN Guiding Principles on Business and Human Rights at 10 (New York and London: Debevoise and Plimpton LLP, 2021).

40 Vedanta, note 39; Okpabi, note 39; Milieudefensie (Shell Nigeria), note 39.

41 See, e.g., Barnali Choudhury and Martin Petrin, Corporate Duties to the Public (Cambridge: Cambridge University Press, 2019) 95–105; Claire Bright et al, ‘Toward a Corporate Duty for Lead Companies to Respect Human Rights in Their Global Value Chains?’ (2020) 22 Business and Politics 667.

42 See, e.g., Lliuya v RWE Ag, Case No. 2 O 285/15 Essen Regional Court; Notre Affaire à Tous and Others v Total SA, Nanterre District Court, complaint of 28 January 2020; Metz v Wintershall, Regional Court of Kassel, complaint of 4 October 2021; Deutsche Umwelthilfe v BMW, Regional Court of Munich, Complaint of 20 September 2021.

43 See, e.g., UN Framework Convention on Climate Change, ‘Paris Agreement’, FCCC/CP/2015/10/Add.1 (12 December 2015), preamble; Human Rights Council, ‘The human right to a clean, healthy and sustainable environment’, A/HRC/RES/48/13 (8 October 2021); UN General Assembly, ‘Res. 76/300: The human right to a clean, healthy and sustainable environment’, A/76/L.75 (26 July 2022).

44 For example, in the Royal Dutch Shell climate change case, the court was prepared to treat the Shell global group as a single entity for the purposes of its emission reduction obligation. Milieudefensie (Shell climate change) (2021), note 39, para 4.4.23.

45 See, e.g., UN Sustainable Development Group, ‘Principle One: Human Rights-Based Approach’, https://unsdg.un.org/2030-agenda/universal-values/human-rights-based-approach (accessed 28 June 2022) (see esp para 67, which specifically refers to the UNGPs).

46 OECD (2011), note 35.

47 UN Global Compact, ‘The Ten Principles of the UN Global Compact’, https://www.unglobalcompact.org/what-is-gc/mission/principles (accessed 10 October 2022).

48 See, e.g., WG Report, note 4, paras 3 and 8; Steininger (2021), note 2, 422.

49 See, e.g., Muchlinski, Peter, ‘The Impact of a Business and Human Rights Treaty on Investment Law and Arbitration’ in Bilchitz, David and Deva, Surya (eds.), Building a Treaty on Business and Human Rights: Context and Contours (Cambridge: Cambridge University Press, 2017)Google Scholar.

50 See Robert Houston et al, ‘Notes From Practice: Announcing The SIFCA Framework’, Kluwer Arbitration Blog (26 November 2021), http://arbitrationblog.kluwerarbitration.com/2021/11/26/notes-from-practice-announcing-the-sifca-framework-is-the-confluence-of-investment-protection-with-business-and-human-rights-the-future-of-investment-treaties/ (accessed 10 October 2022).

51 Information as of 22 August 2022 (on file with author).

52 See WG Report, note 4, paras 18–27 and sources cited therein.

53 UNGPs, note 12, Principle 9.

54 Ibid, commentary to principle 9.

55 WG Report, note 4, para 74; see also ibid, paras 21, 23, 36, 42, 62.

56 Ibid, 2 and para 74. The WG Report outlines the concerns regarding investment treaties under the headings of: (i) regulatory constraints; (ii) investors’ rights without obligations; and (iii) privileged access to remedy for investors. Ibid, paras 15–27.

57 Ibid, para 3.

58 1959 Germany–Pakistan BIT was the first bilateral investment treaty (BIT) concluded.

59 Bonnitcha et al (2017), note 9, 1. See also Michael Waibel et al (eds.), The Backlash Against Investment Arbitration: Perceptions and Reality (Alphen aan den Rijn and Philadelphia: Kluwer, 2010).

60 Jonathan Bonnitcha et al, ‘Damages and ISDS Reform: Between Procedure and Substance’ (2023) 14:2 Journal of International Dispute Settlement 1; Rachel Wellhausen, ‘Recent Trends in Investor–State Dispute Settlement’ (2016) 7:1 Journal of International Dispute Settlement 117; Vera Weghmann and David Hall, ‘The Unsustainable Political Economy of Investor–State Dispute Settlement Mechanisms’ (2021) 87:3 International Review of Administrative Sciences 1.

61 See examples in Choudhury (2020), note 13, 86.

62 For a particularly poignant critique, see Daria Davitti et al, ‘COVID-19 and the Precarity of International Investment Law’, Medium (6 May 2020), https://medium.com/iel-collective/covid19-and-the-precarity-of-international-investment-law-c9fc254b3878 (accessed 28 June 2022).

63 Expansive interpretations have not been limited to substantive standards of protection. The current forceful enforcement mechanism of investor-state arbitration also had been far from a foregone conclusion: investors’ ability to unilaterally initiate arbitral proceedings against host states under investment treaties was only established by arbitral tribunals interpreting the treaties’ dispute settlement provisions as entailing the host state’s standing offer to arbitrate with the investor, which the investor could accept through a notice of arbitration. Asian Agricultural Products Ltd. v. Republic of Sri Lanka, ICSID Case no ARB/87/3, Award of 27 June 1990; Pauwelyn, Joost, ‘Rational Design or Accidental Evolution? The Emergence of International Investment Law’ in Douglas, Zachary, Pauwelyn, Joost and Viñuales, Jorge (eds.), Foundations of International Investment Law: Bringing Theory into Practice (Oxford: Oxford University Press, 2014)Google Scholar.

64 See, e.g., WG Report, note 4, para 3; Waibel et al (2010), note 59; Suzanne Spears, ‘The Quest for Policy Space in a New Generation of International Investment Agreements’ (2010) 13 Journal of International Economic Law 1037; Jean Kalicki and Anna Joubin-Bret (eds.), Reshaping the Investor-State Dispute Settlement System: Journeys for the 21st Century (Leiden: Brill Nijhoff, 2015); UNCTAD, ‘World Investment Forum 2014: Investing in Sustainable Development. IIA Conference – 16 October 2014. Technical Summary, Prepared by the UNCTAD Secretariat’, https://worldinvestmentforum.unctad.org/wp-content/uploads/2014/11/Summary_UNCTAD-secretariat_IIA_WIF-2014.pdf (accessed 28 June 2022); OECD, ‘Investment Treaties: The Quest for Balance—Summary’ (14 March 2016), https://www.oecd.org/daf/inv/investment-policy/OECD-investment-treaties-2016-summary.pdf (accessed 28 June 2022).

65 For example, arbitral tribunals have taken only limited regard of investors’ own conduct when assessing their claims against host states, while allowing investor-state claims to be brought even by minority shareholders. See, e.g., Stephan Schill, ‘Fair and Equitable Treatment under Investment Treaties as an Embodiment of the Rule of Law’ (2006) 3 Transnational Dispute Management; Gus Van Harten, ‘Leaders in the Expansive and Restrictive Interpretation of Investment Treaties: A Descriptive Study of ISDS Awards to 2010’ (2018) 29 European Journal of International Law 507.

66 See, e.g., Dolzer, Rudolf, Kriebaum, Ursula and Schreuer, Christoph, Principles of International Investment Law (Oxford: Oxford University Press, 2022) 68 Google Scholar.

67 Anne van Aaken, ‘Investment Law in the Twenty-First Century: Things Will Have to Change in Order to Remain the Same’ (2023) 26 Journal of International Economic Law 166; Bonnitcha et al (2017), note 9, 233–244, 257–260.

68 See, e.g., UNCTAD, Investment Policy Framework for Sustainable Development (New York: UNCTAD, 2015); UNCTAD, UNCTAD’s Reform Package for the International Investment Regime (New York: UNCTAD, 2018); UNCTAD, International investment agreements: Reform Accelerator (New York: UNCTAD, 2020); UN Commission on International Trade Law (UNCITRAL),’Working Group III: Investor-State Dispute Settlement Reform’, https://uncitral.un.org/en/working_groups/3/investor-state (accessed 24 May 2023); Mohammad Hamdy, ‘Redesign as Reform: A Critique of the Design of Bilateral Investment Treaties’ (2019) 51 Georgetown Journal of International Law 255, 267–270.

69 See, e.g., Patrick Dumberry and Gabrielle Dumas-Aubin, ‘How to Impose Human Rights Obligations under Investment Treaties? Pragmatic Guidelines for the Amendment of BITs’ (2011) 4 Yearbook on International Investment Law and Policy 569; Choudhury (2020), note 13, 103; Stephan 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; David Schneiderman, ‘International Investment Law’s Unending Legitimation Project’ (2017) 49 Loyola University Chicago Law Journal 229; Kelsey, Jane, ‘The Crisis of Legitimacy in International Investment Agreements and Investor-State Dispute Settlement’ in Ekins, Richard and Gee, Graham (eds.), Judicial Power and the Left (London: Policy Exchange, 2017) 97 Google Scholar; Behn, Daniel, Fauchald, Ole Kristian and Langford, Malcolm, ‘Introduction: The Legitimacy Crisis and the Empirical Turn’ in Behn, Daniel, Langford, Malcolm and Fauchald, Ole Kristian (eds.), The Legitimacy of Investment Arbitration: Empirical Perspectives (Cambridge: Cambridge University Press, 2022)CrossRefGoogle Scholar.

70 See, e.g., Deva (2021), note 2; Nicolas Bueno, Anil Yilmaz Vastardis and Isidore Ngueuleu Djeuga, ‘Investor Human Rights and Environmental Obligations: The Need to Redesign Corporate Social Responsibility Clauses’ (2023) 24 The Journal of World Investment & Trade 179.

71 WG Report, note 4, paras 3 and 74.

72 See, e.g., Dupuy et al (2009), note 2; Ursula Kriebaum, ‘Human Rights and International Investment Law’ in Yannick Radi (ed.), Research Handbook on Human Rights and Investment (Cheltenham: Edward Elgar, 2018); EU Petersmann and Vivian Kube, ‘Human Rights Law in International Investment Arbitration’ in Andrea Gattini, Attila Tanzi and Filippo Fontanelli (eds.), General Principles of Law and International Investment Arbitration (Leiden: Brill Nijhoff, 2018); Kabir Duggal and Nicholas Diamond, ‘Human Rights and Investor–State Dispute Settlement Reform: Fitting a Square Peg into a Round Hole?’ (2021) 12 Journal of International Dispute Settlement 291.

73 See, e.g., WG Report, note 4; Choudhury (2020), note 13; Markus Krajewski, ‘Ensuring the Primacy of Human Rights in Trade and Investment Policies: Model Clauses for a UN Treaty on Transnational Corporations, Other Businesses and Human Rights’ (Brussels: CIDSE, 2017) 11; Deva, Surya, ‘International Investment Agreements and Human Rights: Assessing the Role of the UN’s Business and Human Rights Regulatory Initiatives’ in Chaisse, Julien, Choukroune, Leïla and Jusoh, Sufian (eds.), Handbook of International Investment Law and Policy (Singapore: Springer, 2021) 1734 Google Scholar.

74 WG Report, note 4, para 11.

75 Ibid, paras 76–79.

76 Ibid, paras 22, 26 and 57.

77 The notion of a ‘duty to regulate’ ensues from states’ international human rights obligation to protect persons within their territory and/or jurisdiction from human rights abuses by third parties, including business enterprises. The ‘right to regulate’ in the context of international investment law involves host states’ sovereign competence to regulate in the public interest: this ‘right’ has been juxtaposed with the ‘rights’ of investors under investment treaties. See UN Committee on Economic, Social and Cultural Rights (UNCESCR), ‘Statement on the obligations of States Parties regarding the corporate sector and economic, social and cultural rights’, UN Doc E/C.12/2011/1 (20 May 2011), para 5; UNCESCR, ‘General Comment No. 24’, UN Doc E/C.12/GC/24 (10 August 2017), para 14; Vera Korzun, ‘The Right to Regulate in Investor-State Arbitration: Slicing and Dicing Regulatory Carve-Outs, (2017) 50 Vanderbilt Journal of Transnational Law 50 355.

78 First generation investment treaties provided for basic investor protections and a state-state dispute settlement. Second generation investment treaties have typically involved extensive investor protections, both investor-state and state-state dispute settlement, and preambular language highlighting the objective of promotion of investments and the need for investors to enjoy protection from host state interference. See Schefer, Krista Nadakavukaren, International Investment Law: Texts, Cases and Materials, 3rd edn. (Cheltenham: Edward Elgar, 2020) 3536 Google Scholar.

79 The term ‘legality clause’ refers to a definition of an ‘investment’ or a scope of application provision that limits the subject matter scope of an investment treaty to those investments that were made in accordance with the law of the host state (for example, 2004 Azerbaijan-Greece BIT, art 1.1; Oman-Switzerland BIT, art 2). Occasionally, this requirement could extend beyond the establishment to the operation of the investment (for example, 1998 Canada-Costa Rica BIT art I(g)). Rahim Moloo and Alex Khachaturian, ‘The Compliance with the Law Requirement in International Investment Law’ (2011) 34 Fordham International Law Journal 1473. Denial of benefits clauses provide for a right of the host state to deny the protection of the investment treaty to certain categories of investors, such as those that have no substantial activity in the home state; however, the host state must actively exercise this right (for example, 2002 Austria-Guatemala BIT, art 10).

80 See, e.g., Dolzer et al (2022), note 66, 1–10.

81 Perrone, Nicolás, ‘Bridging the Gap between Foreign Investor Rights and Obligations: Towards Reimagining the International Law on Foreign Investment’ (2022) 7 Business and Human Rights Journal 375, 378391 CrossRefGoogle Scholar.

82 For example, see Jorge Viñuales, ‘Investor Diligence in Investment Arbitration: Sources and Arguments’ (2017) 32 ICSID Review – Foreign Investment Law Journal 346; Sattorova, Mavluda, The Impact of Investment Treaty Law on Host States: Enabling Good Governance? (London: Bloomsbury, 2018) 155156 Google Scholar.

83 See Sattorova (2018), note 82, 156–157.

84 For the latest consideration of the law, see Mees Brenninkmeijer and Fabien Gélinas, ‘Counterclaims in Investment Arbitration: Towards an Integrated Approach’ (2023) ICSID Review 567.

85 Langford, Malcolm, Behn, Daniel and Fauchald, Ole Kristian, ‘Backlash and State Strategies in International Investment Law’ in Tanja Aalberts and Thomas Gammeltoft-Hansen (eds.), The Changing Practices of International Law (Cambridge: Cambridge University Press, 2018) 70102 Google Scholar.

86 See, e.g., UNCTAD (2018), note 68, 14.

87 See, e.g., UNCTAD documents listed in note 68; WG Report, note 3, paras 28–51, 52–78.

88 UNCTAD (2015), note 68, 85, 109–111.

89 Choudhury (2017), note 2; Choudhury (2020), note 13.

90 IISD, ‘Harnessing Investment for Sustainable Development: Inclusion of investor obligations and corporate accountability provisions in trade and investment agreements’, https://www.iisd.org/system/files/meterial/harnessing-investment-sustainable-development.pdf (accessed 10 October 2022). Provisions on investor obligations appeared already in the 2005 IISD Model BIT. IISD has worked closely with UNCTAD and advised many African governments on investment treaties, exercising significant influence.

91 The WG Report, note 4, also mentions the imposition of obligations on investors as a way for states to implement their duty to regulate (para 26) and a key element of a ‘desirable’ reform agenda (paras 63–66).

92 E.g., Krajewski (2020); Perrone (2022), note 81; Anne Peters, Beyond Human Rights: The Legal Status of the Individual in International Law (Cambridge: Cambridge University Press 2016) 339–346; Choudhury (2020), note 13; Barnali Choudhury, ‘Human Rights Provisions in International Investment Treaties and Investor-State Contracts’, UCL Working Paper Series (2020), https://papers.ssrn.com/abstract=3643407 (accessed 19 August 2022); Yueming Yan, ‘Anti-Corruption Provisions in International Investment Agreements: Investor Obligations, Sustainability Considerations, and Symmetric Balance’ (2020) 23 Journal of International Economic Law 989; Bernasconi-Osterwalder, Nathalie, ‘Inclusion of Investor Obligations and Corporate Accountability Provisions in Investment Agreements’ in Chaisse, Julien, Choukroune, Leïla and Jusoh, Sufian (eds.), Handbook of International Investment Law and Policy (Singapore: Springer Singapore 2021)Google Scholar; Nicholas Diamond and Kabir Duggal, ‘Adding New Ingredients to an Old Recipe: Do ISDS Reforms and New Investment Treaties Support Human Rights?’ (2021) 53 Case Western Reserve Journal of International Law 117, 129–133; Ranjan, Prabhash, ‘Investor Obligations in Investment Treaties: Missing Text or a Matter of Application?’ in Ho, Jean and Sattorova, Mavluda (eds.), Investors’ International Law (London: Bloomsbury 2021)Google Scholar; see also chapters by Ranjan, Pereira de Andrade and Monebhurrun and Choudhury in ibid; Abdurrahman Erol, ‘A Noble Effort or Window Dressing? Computational Analysis of Human Rights-Related Investor Obligations in International Investment Agreements’ (2022) 15 Erasmus Law Review 12; Bueno et al (2023), note 70.

93 See, e.g., UNCTAD (2014 and 2016), note 64; UNCTAD (2015), note 68, 19, 30, 77–78; Deva (2021), note 2; International Institute for Sustainable Development and Friedrich Ebert Stiftung, Integrating Investor Obligations and Corporate Accountability Provisions in Trade and Investment Agreements: Report of the Expert Meeting Held in Versoix, Switzerland, January 11–12, 2018 (Geneva: IISD and Friedrich Ebert Stiftung, 2018) 18.

94 Choudhury (2020), note 13, esp 88–92; Erol (2022), note 92.

95 Wettstein, Florian, Business and Human Rights: Ethical, Legal and Managerial Perspectives (Cambridge: Cambridge University Press, 2022) 25 CrossRefGoogle Scholar.

96 See, e.g., Anita Ramasastry, ‘Corporate Social Responsibility Versus Business and Human Rights: Bridging the Gap Between Responsibility and Accountability’ (2015) 14 Journal of Human Rights 237.

97 E.g., WG Report, note 4, paras 41–47 and 63–66; Gaukrodger (2021), note 8, 100–109; Krajewski (2020), note 92, esp 114; Steininger (2021), note 2, 419; Choudhury (2020), note 13; Diamond and Duggal (2021), note 92, 129–33; Peters (2016), note 92, 339–46; Seif, Isabella, ‘Business and Human Rights in International Investment Law: Empirical Evidence’ in Chaisse, Julien, Choukroune, Leïla and Jusoh, Sufian (eds.), Handbook of International Investment Law and Policy (Singapore; Springer Singapore, 2020)Google Scholar.

98 E.g., Krajewski (2020), note 92; OECD, ‘OECD Public Consultation – Jan–Feb 2020: Business Responsibilities and Investment Treaties, Compilation of Comments Received’, 25 (Muchlinski), 77–78 (Paparinskis), https://www.oecd.org/investment/OECD-Investment-treaties-Public-consultation-2020.pdf (accessed 27 June 2022).

99 E.g., Choudhury (2020), note 13, 88–92; Ranjan (2021), note 92; Yannick Radi, Rules and Practices of International Investment Law and Arbitration (Cambridge: Cambridge University Press, 2020) 226–230; WG Report, note 4, para 24 (with respect to the draft European Union–China Comprehensive Agreement on Investment); van Aaken (2023), note 67, 173 (with respect to 2021 Canada Model BIT art 16).

100 WG Report, note 4, paras 63–66; Krajewski (2020), note 92, 106 (asserting ‘lack of investor obligations in international investment law’); Perrone (2022), note 81, 375–377 (describing ‘lack’ and ‘inexistence’ of investor obligations’ and asserting that ‘investors have responsibilities under international law, not fully fledged obligations’).

101 WG Report, note 4, e.g. paras 7, 17, 41 and 47; Pablo Agustín and Escobar Ullauri, ‘Reconciling the Rights of Multinational Companies under IIAs with the Tort Liability Caused by Their Subsidiaries’, Investment Treaty News (19 December 2020), https://www.iisd.org/itn/en/2020/12/19/reconciling-the-rights-of-multinationals-companies-under-iias-with-the-tort-liability-caused-by-their-subsidiaries-pablo-agustin-escobar-ullauri/ (accessed 22 July 2022); Perrone, Nicolás, Investment Treaties and the Legal Imagination: How Foreign Investors Play By Their Own Rules (Oxford: Oxford University Press, 2021)CrossRefGoogle Scholar.

102 See note 24. Note that both Erol (2022), note 92, and Bueno et al (2023), note 70, adopted broader definitions of ‘investor obligations/responsibilities’ than the present article, and therefore their overall ‘count’ is higher than that in this article.

103 See Section IV.A.

104 See also Van der Ploeg (2018), note 21, 114–117.

105 2008 ECOWAS Supplementary Act on Investments (in force). The Act is an annex and integral part the 1993 Revised ECOWAS Treaty.

106 This article works with instruments published in the UNCTAD and EDIT databases, note 23, as of 19 May 2023. On the problem of ‘missing’ investment treaties, see Rodrigo Polanco Lazo et al, ‘Missing Investment Treaties’ (2018) 21 Journal of International Economic Law 703.

107 2018 ECOWAS Common Investment Code (in force). The Code is also an annex and integral part the 1993 Revised ECOWAS Treaty.

108 Ibid, arts 15(5) and (6), 27(1), 29, 30(3) and (4), 31(3), 32, and 33(7).

109 The activities of the legal profession are also notable: the 2022 Model Bilateral Investment Treaty for African States published by the African Arbitration Academy provides for a broad range of investor obligations. See Francis Ojok, ‘The African Arbitration Academy’s Model Bilateral Investment Treaty for African States’, Kluwer Arbitration Blog (26 January 2023), https://arbitrationblog.kluwerarbitration.com/2023/01/26/the-african-arbitration-academys-model-bilateral-investment-treaty-for-african-states/ (accessed 17 June 2023). Copy of the model text on file with author.

110 2016 Morocco–Nigeria BIT, arts 14, 17(2) and (3), 18, 19(1)(a) and (b), 20, 21(1); 2021 Democratic Republic of the Congo–Rwanda BIT, Ch III.

111 2012 Southern African Development Community (SADC) Model BIT, arts 10–19; 2016 East African Community (EAC) Model BIT, arts 10–12, 14; 2016 Pan–African Investment Code, Ch 4; 2019 Morocco Model BIT, arts 18–20; and apparently also the 2016 Nigeria Model BIT (as presented by Ms. Sadiku from the Nigerian Investment Promotion Commission (NIPC) at the UNOC–UNCTAD Expert Meeting on Corruption and International Investments, 18 May 2021—this document is not available in the UNCTAD and EDIT databases and the author has been unable to obtain a copy of the document). See also 2008 Ghana Model BIT, art 12.

112 AfCFTA Investment Protocol, Final Draft (2023), art 35. However, an important caveat applies: these groups need to be recognized in the host state’s law. Ibid, art 3(6)

113 1981 OIC Investment Agreement (in force), art 9; 2005 China–Namibia BIT, art 10; 2007 Common Market for Eastern and Southern Africa (COMESA) Investment Agreement, art 13. See also 2006 SADC Protocol, art 10 (in force); 2013 Amended Arab Investment Agreement, art 13 (in force).

114 2016 Turkey–Ghana BIT, art 13(1); 2017 Ethiopia–Qatar BIT, art 14.

115 2017 Intra–MERCOSUR Cooperation and Facilitation Investment Protocol (in force), art 14.1; 2017 Argentine–Chile FTA, art 8.15; 2022 Indonesia–Switzerland BIT, art 13.

116 E.g., Azerbaijan’s BITs with Croatia (2007, in force) art 3, Syria (2009, in force) art 3, Serbia (2011, in force) art 3, Czech Republic (2011, in force) art 3, Albania (2012, in force) art 3, San Marino (2015, in force) art 3; 2018 Singapore–Myanmar BIT, art 28.

117 E.g., 2018 India–Belarus BIT, art 12; 2019 India–Kyrgyzstan BIT, art 12; 2022 Uruguay–Turkey BIT, art 13.

118 2015 India Model BIT, art 11; 2016 Azerbaijan Model BIT, art 3(1); 2016 Nigeria Model BIT; 2017 Colombia Model BIT, art on Investor’s Social Responsibility, para 2; 2019 Netherlands Model BIT, art 7(1) and (4); 2019 Morocco Model BIT, arts 18–20; 2019 Belgium–Luxembourg Economic Union Model BIT, art 18(1); in contrast to 2016 Russian Federation Model BIT; 2016 Turkey Model BIT; 2016 Czech Republic Model BIT; 2016 and 2019 Slovakia Model BITs). 2015 Brazil Model BIT and 2021 Canada Model BIT are ambiguous.

119 E.g., 2015 India Model BIT, art 11(iv); 2019 Netherlands Model BIT, art 7(1); 2019 Belgium–Luxembourg Economic Union Model BIT, art 18(1); 2019 Morocco Model BIT, art 18(1).

120 E.g., 2019 Morocco Model BIT, art 19(1).

121 E.g., 2015 India Model BIT, art 11(iv); art 21; 2016 Azerbaijan Model BIT, art 3(1); 2019 Morocco Model BIT, art 18.3.

122 E.g., 2019 Netherlands Model BIT, art 7(4).

123 See note 24.

124 Aust, Anthony, Modern Treaty Law and Practice, 2nd edn. (Cambridge: Cambridge University Press, 2007) 33 CrossRefGoogle Scholar. For example, UNCTAD (2015), note 68, 77, also lists COMESA Investment Agreement art 13 as an example of a legally binding investor obligation.

125 E.g., 2015 Slovakia–Iran BIT, art 10(3); 2016 Argentina–Qatar BIT, art 12.

126 E.g., 2016 Nigeria–Singapore BIT, art 11; 2019 Netherlands Model BIT, art 7(2); 2021 Colombia–Spain BIT, art 17. In contrast, David R. Aven and Others v Republic of Costa Rica, ICSID case no UNCT/15/3, Award of 18 September 2018 (‘Aven’), provides an interesting example of an arbitral tribunal expressing—obiter—its readiness to derive investor obligations from a subparagraph clarifying the scope of the performance requirements permissible under the investment treaty (DR–CAFTA art 10.9.3c) and from a right to regulate provision (DR–CAFTA art 10.11), i.e., from treaty provisions, which would normally be understood as limitations on investor rights, rather than provisions creating investor obligations (paras 732–743).

127 The treaty templates recently used by several Latin American states and India unfortunately involve contradictory language, according to which investors and investments ‘shall endeavour to voluntarily incorporate’ internationally recognized standards of corporate responsibility …’ or ‘shall use their best efforts to comply with the following voluntary principles and standards for responsible corporate conduct’ (emphases added). Such drafting unhelpfully confuses the legal implications of the provisions. See e.g., 2016 Brazil–Peru ETEA, art 2.13; 2019 Brazil–Morocco BIT, art 13; 2018 India–Taiwan BIT, art 12; 2019 India–Kyrgyzstan BIT, art 12.

128 E.g., Sadiku Yewande, Executive Secretary/CEO of the Nigeria Investment Promotion Commission discussing the Nigeria Model BIT at the UNOC–UNCTAD Expert Meeting on Corruption and International Investment.19 May 2021.

129 2018 ECOWAS Common Investment Code art 3 (‘(1) This Code applies to the rights and obligations of Member States and investors. … (3) This Code does not create retroactive obligations for Member States and investors.’); AfCFTA Investment Protocol, note 112, art 3(1) (art 3 Scope of Application: ‘This Protocol sets out the rights and obligations for State Parties, investors and investments.’).

130 Hesham Talaat M Al-Warraq v The Republic of Indonesia (‘Al-Warraq’), ad hoc UNCITRAL, Final Award of 15 December 2014.

131 1981 OIC Investment Agreement.

132 Ibid, art 9 (emphases added). The OIC Agreement definition of ‘investor’ covers both physical and legal persons.

133 Literature on investor obligations has failed to consider the Al-Warraq case, as did the WG Report, note 4, and Gaukrodger (2021), note 8. Other cases—Urbaser and sometimes Aven, Burlington, Perenco and Bear Creek—are normally discussed in relation to the topic of investor obligations. However, none of these cases dealt with the issue of investor obligations prescribed in the text of an investment treaty. Urbaser stands for the obiter proposition that an investor might owe negative international obligations under international human rights law (that is, without an investment treaty creating a specific obligation itself) and positive human rights obligations under domestic law, and that these obligations might be actionable in the context of investor–state arbitration. Urbaser S.A. and Consorcio de Aguas Bilbao Bizkaia, Bilbao Biskaia Ur Partzuergoa v The Argentine Republic, ICSID case no ARB/07/26, Award of 8 December 2016 (‘Urbaser’), paras 1193–1210. On Aven, see note 126. Burlington and Perenco involved no allegation of a breach of an international legal obligation: the counterclaims were based on domestic law causes of action. Burlington Resources Inc. v Republic of Ecuador, ICSID case no ARB/08/5 Decision on Ecuador’s Counterclaims of 7 February 2017; Perenco Ecuador Ltd. v Republic of Ecuador and Empresa Estatal Petróleos del Ecuador (Petroecuador), ICSID case no ARB/08/6, Interim Decision on the Environmental Counterclaim of 11 August 2015 and Award of 27 September 2019. The Bear Creek case involved a claim of contributory fault by the investor (which Peru was found not to have proven) and a proposition by the dissenting arbitrator that International Labour Organization (ILO) Indigenous and Tribal People Convention produced legal effects for investors, i.e. again not a situation of an investor obligation as defined in this article. Bear Creek Mining Corporation v Republic of Peru, ICSID case no ARB/14/21, Award of 30 November 2017, Partly Dissenting Opinion of Professor Philip Sands QC, paras 10–2. This article therefore discusses the Al-Warraq case at some length to (i) show how an investment treaty provision imposing a direct obligation on investors was applied in arbitral proceedings; and (ii) bring the case within the investor obligations debate.

134 Al-Warraq (2014), Final Award, note 130, para 631.

135 Ibid, para 632.

136 Ibid, para 663.

137 Ibid, para 647, see also para 645.

138 1969 Vienna Convention on the Law of Treaties. According to VCLT art 31(1): ‘A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose.’

139 Karavias, Markos, Corporate Obligations under International Law (Oxford: Oxford University Press, 2013)CrossRefGoogle Scholar. These objections often make their way to other bodies of literature as well. See Choudhury, Barnali, ‘The Role of Soft Law Corporate Responsibilities in Defining Investor Obligations in International Investment Agreements’ in Ho, Jean and Sattorova, Mavluda (eds.), Investors’ International Law (London: Bloomsbury 2021)Google Scholar.

140 E.g., OECD (2020), note 98, 77 (Paparinskis).

141 E.g., World Arbitration Update, ‘Incorporating Obligations on Investors in BITs’, conference panel organized in Washington DC/online on 15 October 2021; Naomi Briercliffe and Olga Owczarek, ‘Human-Rights-Based Claims by States and “New-Generation” International Investment Agreements’, Kluwer Arbitration Blog (31 July 2018), https://arbitrationblog.kluwerarbitration.com/2018/08/01/human-rights-based-claims-by-states-and-new-generation-international-investment-agreements/ (accessed 18 June 2023), fn 19 and the accompanying text.

142 Krajewski (2020), note 92, 128; Perrone (2022), note 81, 375.

143 Van der Ploeg, Klara Polackova, ‘Treaty Obligations of Collective Non-State Entities: The Case of the Deep Seabed Regime’ in Summers, James and Gough, Alex (eds.), Non-State Actors and International Obligations: Creation, Evolution and Enforcement (Leiden: Brill Nijhoff, 2018) 1538 CrossRefGoogle Scholar (using the example of ‘prospectors’ and ‘contractors’ operating in the deep seabed under the United Nations Convention on the Law of the Sea).

144 Klara Polackova Van der Ploeg, ‘The Functional Threshold: Direct International Legal Regulation of Collective Nonstate Entities and the Law of International Peace and Security’ (2020) 53:1 NYU Journal of International Law and Politics, 71, 73–75.

145 1969 Vienna Convention on the Law of Treaties, note 136, art 34.

146 See, e.g., the discussion in Emily Crawford, Non-Binding Norms in International Humanitarian Law: Efficacy, Legitimacy, and Legality (Oxford: Oxford University Press 2021) Chapter 2.

147 See, e.g., 1980 Sri Lanka–United Kingdom BIT (in force), art 2(2).

148 For example, Krajewski (2020), note 92, 116–120; Steininger (2021), note 2, 418–419. Certain domestic legal orders may contain doctrines on the direct applicability or effect of treaties, under which the content of an international legal norm must fulfil certain criteria to apply directly within the domestic sphere; however, this is not a requirement of international law.

149 Constantin Economides, ‘Content of the Obligation: Obligations of Means and Obligations of Result’ in James Crawford et al (eds.), The Law of International Responsibility (Oxford: Oxford University Press, 2010); Wolfrum, Rüdiger, ‘Obligation of Result Versus Obligation of Conduct: Some Thoughts About the Implementation of International Obligations’ in et, Mahnoush Arsanjani al (eds.), Looking to the Future: Essays on International Law in Honor of W. Michael Reisman (Leiden: Brill Nijhoff, 2010)Google Scholar.

150 Investment treaty provisions requiring the investor to comply with the host state’s domestic law are a specimen of so-called referral (renvoi) clauses, which determine the content of a treaty obligation by a reference to a law other than the treaty itself. See Case Concerning Pulp Mills on the River Uruguay Case (Argentina v Uruguay) (Judgment) [2010] ICJ Reports 14, paras 53–56. Referral clauses are legally distinct from legality clauses that limit the subject matter scope of the investment treaty (see note 79).

151 Crawford, James & Olleson, Simon, ‘The Nature and Forms of International Responsibility,’ in Evans, Malcolm, (ed.), International Law, (Oxford: Oxford University Press, 2010) 441 CrossRefGoogle Scholar; James Crawford et al (eds.), The Law of International Responsibility (Oxford: Oxford University Press, 2010), especially chapters by Cahin and Lindblom; Steven Ratner, ‘Corporations and Human Rights: A Theory of Legal Responsibility’ (2001) 111 Yale Law Journal 443–546; Karavias, Markos, Corporate Obligations under International Law (Oxford: Oxford University Press, 2013)CrossRefGoogle Scholar 66; Portmann, Roland, Legal Personality in International Law (Cambridge: Cambridge University Press, 2010) 276–277CrossRefGoogle Scholar.

152 See 1980 Unified Agreement for the Investment of Arab Capital in the Arab States, art 14(2); 2013 Amended Arab Investment Agreement, art 13(2).

153 2017 Colombia Model BIT art on Investor’s Social Responsibility, para 2; 2019 Morocco Model BIT, art 19.4,

154 See note 133.

155 Klara Polackova Van der Ploeg, ‘Collective Non-State Entities in International Law’, PhD thesis, Graduate Institute of International and Development Studies (2018) 277–280.

156 Crawford, James, State Responsibility: The General Part (Cambridge: Cambridge University Press, 2013) 9495.CrossRefGoogle Scholar

157 Ibid.

158 Ibid, 95.

159 See ibid, 103–104.

160 Al-Warraq (2014), Final Award, note 131.

161 Al-Warraq, ad hoc UNCITRAL, Award of 21 June 2012 (on Respondent’s Preliminary Objections to Jurisdiction and Admissibility of the Claims), para 97.

162 Al-Warraq (2014), Final Award, note 131, 663, 667.

163 Ibid, 668.

164 There did not seem to be a continuing breach involved on the facts, and so cessation would not apply as a secondary obligation.

165 Ibid, paras 669–672.

166 The tribunal was satisfied that it had jurisdiction to hear the counterclaim by virtue of OIC Investment Agreement art 17, whose broadly worded clause ‘envisag[ed] claims by the State party’. Ibid, para 660. According to the tribunal, OIC Investment Agreement art 17 even went as far as to ‘contemplate that a State Party initiates arbitration as a Claimant against an investor’. Ibid.

167 Ibid, paras 645–648 and 654. However, only a majority of the tribunal believed that the ‘clean hands’ doctrine applied and rendered the investor’s fair and equitable treatment claim inadmissible. To the extent that the ‘clean hands’ doctrine covered situations of illegality, it only applied to illegality in relation to the acquisition, not the operation of the investment. Ibid, note 217 in the Final Award.

168 Ibid, para 667.

169 See, e.g., Skinner, Gwynne, McCorquodale, Robert and Schutter, Olivier De, The Third Pillar. Access to Judicial Remedies for Human Rights Violations by Transnational Business (Washington, Los Angeles, and Brussels: ICAR, CORE and ECCJ, 2013)Google Scholar.

170 The increasing occurrence of requirements of substantive business operations for a business enterprise to qualify as an ‘investor’ under an investment treaty limits its ability to reap benefits of investment treaty protection while avoiding applicable investor obligations through corporate structuring.

171 Urbaser (2016), note 133; Aven (2018), note 126; Al-Warraq (2014), Final Award, note 131.

172 See, e.g., Anna De Luca and Crina Baltag, ‘Counterclaims in Investment Arbitration: Reflections on UNCITRAL WG III Reform’, Kluwer Arbitration Blog (5 November 2021), http://arbitrationblog.kluwerarbitration.com/2021/11/05/counterclaims-in-investment-arbitration-reflections-on-uncitral-wg-iii-reform/ (accessed 14 September 2022).

173 Even if the treaty’s dispute settlement clause is broad enough to accommodate both investors and the host state as claimants, these clauses have been understood as supplying the host state’s but not the investor’s consent with the dispute settlement procedure (while the consent of both is required for arbitral jurisdiction to arise). See Dolzer et al (2022), note 66, 360.

174 However, the strength of investment arbitration as an institutionalized enforcement mechanism of host state investment protection obligations is comparatively unusual in the context of international law, which has generally weaker institutionalized enforcement than domestic law. See, e.g., Stephan, Paul, ‘Enforcement of International Law’ in Parisi, Francesco (ed.), The Oxford Handbook of Law and Economics: Volume 3: Public Law and Legal Institutions (Oxford: Oxford University Press, 2017)Google Scholar.

175 See, e.g., Antonios Tzanakopoulos, ‘Domestic Courts in International Law: The International Judicial Function of National Courts’ (2011) 34 Loyola of Los Angeles International and Comparative Law Review 133; Robert Jennings, ‘The Judicial Enforcement of International Obligations’ (1987) 47 Zeitschrift für ausländisches öffentliches Recht und Völkerrecht 3.

176 These enforcement avenues, of course, raise a host of legal issues, which cannot be explored here. See, e.g., Van Alstine, Michael, ‘The Role of Domestic Courts in Treaty Enforcement: Summary and Conclusions’ in Sloss, David (ed.), The Role of Domestic Courts in Treaty Enforcement: A Comparative Study (Cambridge: Cambridge University Press, 2009)CrossRefGoogle Scholar.

177 In international law (just as in domestic law), the existence of an obligation and the question of the obligation’s enforcement are conceptually distinct, and any potential enforcement issues thus have no bearing on the legal validity of the obligation and the automatic attachment of international responsibility to a breach of such an obligation. See, e.g., Shaw, Malcolm, International Law (Cambridge: Cambridge University Press, 2014) 9Google Scholar; Rüdiger Wolfrum, ‘International Law’, Max Planck Encyclopedia of Public International Law (on-line version, 2006), para 20; Clapham (2006), note 29, 31.

178 See Ioana Cismas and Sarah Macrory, ‘The Business and Human Rights Regime under International Law: Remedy without Law?’ in Summers and Gough (2018), note 143.

179 See note 102 and the accompanying text. The contemporary investment treaty universe, however, mostly consists of first- and second-generation treaties: the occurrence of investor obligations should rather be assessed with reference to third-generation treaties.

180 On the normative character of practice in international law, see Van der Ploeg, Klara Polackova, ‘International Law Through Time: On Change and Facticity of International Law’ in Van der Ploeg, Klara Polackova, Pasquet, Luca and Castellanos-Jankiewicz, León (eds.), International Law and Time: Narratives and Techniques (Cham: Springer International Publishing, 2022) 318–320CrossRefGoogle Scholar.

181 See notes 97100 and the accompanying text.

182 See notes 139150 and the accompanying text.

183 See notes 118122 and the accompanying text.

184 See note 106.

185 Studies by Erol (2022), note 92, and Bueno et al (2023), note 70, both reveal notable omissions when compared with the treaties referred in Section IV.A.

186 See notes 9394 and the accompanying text.

187 For an overview of these efforts, see Deva (2021), note 2, 1737–1741.

188 Clapham (2006), note 29; Deva (2021), note 2, 1737–1741; Sarah Joseph and Joanna Kyriakakis, ‘From Soft Law to Hard Law in Business and Human Rights and the Challenge of Corporate Power’ (2023) 36:2 Leiden Journal of International Law 1, 4-7; Perrone (2022), note 81, 375–96, 378–95. At this point, the ongoing negotiations of the BHR treaty are also highly unlikely to produce direct human rights obligations on businesses. Third Revised Draft (2021), note 5.

189 See, e.g., Rodley (2014), note 16, 526–527.

190 Karavias, Markos, Corporate Obligations Under International Law (Oxford: Oxford University Press, 2013).CrossRefGoogle Scholar

191 See Section II.

192 Anecdotally, arguments of the legal impossibility of investor obligations on account of the nature of international law as a legal order have been used by states opposing such obligations for policy reasons. However, concerns about international legal subjectivity of corporations, the debate on the nature of human rights and other similar issues have not stunned legal practice, which has largely taken place isolate from the international human rights law debates on corporate human rights obligations.

193 See Section IV.A.

194 See, e.g., Miles, Kate, The Origins of International Investment Law: Empire, Environment and the Safeguarding of Capital (Cambridge: Cambridge University Press, 2013)CrossRefGoogle Scholar; Mohammad Hamdy, ‘Redesign as Reform: A Critique of the Design of Bilateral Investment Treaties’ (2019) 51 Georgetown Journal of International Law 255, 281–284.

195 See note 174 and the accompanying text.

196 WG Report, note 4, e.g., summary at 2 and paras 7, 8 and 49.

197 See Section III.

198 See, e.g., WG Report, note 4 (summary); Choudhury 2017, note 2.

199 See, e.g., Gaukrodger (2021), note 8, 9.

200 See Choudhury (2017), note 2; Choudhury (2020), note 13.

201 See note 71.

202 For example, the literature on soft law versus hard law (which does not need to be recounted here) focuses—in addition to the normative form (‘obligation’)—on substantive content (‘precision’) and the availability and nature of any enforcement mechanism (‘delegation’). Kenneth Abbott and Duncan Snidal, ‘Hard and Soft Law in International Governance’ (2000) 54 International Organization 421.

203 Many academic commentators are much more comfortable with relativizing legal normativity than practicing lawyers, and the binary distinction between binding and non-binding continues to be essential to legal practice.

204 See, e.g., Sarah Joseph and Joanna Kyriakakis (2023), note 187, 7–8.

205 See, Richard McAdams, ‘Focal Point Theory of Expressive Law’ (2000) 86 Virginia Law Review 1649; Richard McAdams and Janice Nadler, ‘Testing the Focal Point Theory of Legal Compliance: Expressive Influence in an Experimental Hawk/Dove Game’ (2005) 2 Journal of Empirical Legal Studies 87; David Carter, Rachel Wellhausen and Paul Huth, ‘International Law, Territorial Disputes, and Foreign Direct Investment’ (2019) 63 International Studies Quarterly 58; Kish Parella, ‘International Law in the Boardroom’ (2023) 108 Cornell Law Review 839. For application to international investment law, see Lauge Skovgaard Poulsen, ‘Beyond Credible Commitments: (Investment) Treaties as Focal Points Research Note’ (2020) 64 International Studies Quarterly 26. The empirical observations made in this body of literature parallel the conceptual distinction between the existence of an obligation and its enforcement, and the key point of modern analytic jurisprudence that legal quality is independent of the existence of a (threat of) sanction. See Scott Shapiro, Legality (Cambridge: Harvard University Press, 2011), Chapter 2.

206 See Simma, Bruno and Müller, Andreas, ‘Exercise and Limits of Jurisdiction’ in Crawford, James and Koskenniemi, Martti (eds.), The Cambridge Companion to International Law (Cambridge: Cambridge University Press, 2012) for the law on jurisdiction of statesGoogle Scholar.

207 See note 79 and the accompanying text. In recent investment treaties, such provisions would include legality clauses that cover not only the establishment but also the operation of an investment (e.g., 2015 India Model BIT art 1.4; 2016 Nigeria-Morocco BIT art 1.3), exclusion from protection clauses (e.g., 2018 Singapore-EU Investment Protection Agreement art 2.1) and exclusion from access to investor-state dispute settlement clauses (2016 Canada-EU Comprehensive Economic and Trade Agreement (CETA) art 8.18.3; 2015 India Model BIT art 13.4).

208 See Newcombe, Andrew, ‘Investor Misconduct: Jurisdiction, Admissibility or Merits?’ in Brown, Chester and Miles, Kate (eds.), Evolution in Investment Treaty Law and Arbitration (Cambridge: Cambridge University Press, 2011)Google Scholar.

209 See notes 156159 and the accompanying text.

210 See notes 199200 and the accompanying text.

211 See Section IV.B.

212 See Section II.

213 See note 138 and the accompanying text.

214 The OECD Report has set an ill-advised trajectory in this respect. See Gaukrodger (2021), note 8.

215 UNCTAD (2015), note 68, 19, 30, 77–78.

216 UNCTAD (2018), note 68, 15, 65.

217 Ibid, 65.

218 Ibid, 65–67.

219 See, e.g., OECD (2021), note 7, 101 (Güven and Coleman).

220 UNCTAD, World Investment Report 2023: International Investment Trends (Geneva: UNCTAD, 2023) 7 and 17Google Scholar.

221 See, e.g., Bonnitcha et al (2017), note 9, 202–204, 226–231.

222 For example, the EAC Model BIT specifically spells out this rationale, stating that the objective of its investor obligations provisions is, inter alia, to ‘enhance contribution of Investments to inclusive growth and sustainable development of the Host State.’ 2016 EAC Model BIT, commentary on arts 10 and 11.

223 See, e.g., Anthea Roberts, ‘Investment Treaties: The Reform Matrix’ (2018) 112 AJIL Unbound 191.

224 Anil Yilmaz Vastardis, ‘Corporate Investors’ Nationality and Reforming Investment Treaties: Can Older-Generation Treaties Undermine Substantive Reforms?’, IISD Investment Treaty News (19 December 2020), https://www.iisd.org/itn/en/2020/12/19/corporate-investors-nationality-and-reforming-investment-treaties-can-older-generation-treaties-undermine-substantive-reforms-anil-yilmaz-vastardis/ (accessed 25 May 2023).

225 See Section II.

226 See Section IV and V.

227 See notes 97101.

228 UNGPs, note 12, commentary to Principle 3; Gaukrodger (2021), note 8, 9.