Betül Durmuş is a PhD candidate at Koç University Public Law programme
The practice of the investment tribunals confirms the close relationship between these two regimes. The tribunals face human rights claims brought by the investors, the host states, or the third parties (see Petersmann & Kube, 2016), and are asked to choose whether to keep IIL regime isolated from IHRL or to treat them together. Although the tribunals mostly refrained from responding to the human rights claims, the recent case-law shows that they can indeed welcome and apply human rights standards (see Yilmaz-Vastardis, 2017).
The general tendency of the tribunals to disregard human rights issues does not mean that IIL is completely isolated from IHRL. Even in cases where none of the parties invoke human rights, tribunals can turn to IHRL for interpretative purposes. By doing so, they accept the guidance of IHRL and fill in the gaps in IIL standards. To that end, investment tribunals have made references to the case-law of the European Court of Human Rights (ECtHR), the United Nations human rights treaties, and the work of the United Nations quasi-judicial bodies.
In this blog post, I first discuss whether human rights-based arguments can survive in investment law. Second, I turn to the role of the IHRL as the interpretive guide for the self-development of IIL.
Can human rights-based arguments survive in IIL?
Investment tribunals are not consistent in treating explicit human rights-based arguments. Until the recent Urbaser v. Argentina case, they were reluctant to take into account human rights claims openly. They did not provide clear criteria to determine when and how human rights law based arguments can be examined in an investment law dispute.
In the well-known case of Suez, Sociedad and Vivideni v. Argentina (see p. 17-18 of the Reader), Argentina raised human rights claims as a defense of necessity. In response to the arguments of the investors that the failure to adjust tariff calculations breached IIL standards, Argentina argued that it had to secure the right to water for its population. The Tribunal did not go into the details of the right to water argument in detail. Rather, it confirmed that IIL and IHRL can co-exist and neither of them has supremacy over the other.
In Spyridon Roussalis v. Romania, the ICSID rejected the investor’s claim that his rights under the European Convention on Human Rights (ECHR) had been violated (see p. 18 of the Reader). The Tribunal preferred to apply only IIL “given the higher and more specific level of protection offered by the BIT to the investors”. Differently from the first case where the Tribunal granted equal status to both regimes, this case demonstrated that IIL is treated as lex specialis compared to IHRL.
The reluctance to examine human rights claims later continued with Hesham Talaat M. Al-Warraq v. Republic of Indonesia (see p. 18 of the Reader). In this case, the investors asked the Tribunal to interpret the term “basic rights” in Article 10 (1) of the OIC Investment Agreement to include the right to fair trial. This was rejected by the Tribunal which considered that this term may only refer to “basic property rights” and cannot be extended to civil and political rights.
This trend to disregard human rights claims seems to be reversed in Urbaser v. Argentina (see p. 5-9 of the Reader). This time Argentina raised the human right to water argument as a counter-claim. The Tribunal unlike the previous cases ruled that human rights claims, if they relate to the investment, may fall into its jurisdiction. This is the first time when an investment tribunal developed a criterion to examine a human rights claim. Moreover, the Tribunal explicitly referred to corporate social responsibility. Although the counter-claim of Argentina was ultimately rejected on the ground that the investor does not have the obligation to perform water services, the Tribunal addressed the “no-harm” obligation imposed upon the investor:
“The situation would be different in case an obligation to abstain, like a prohibition to commit acts violating human rights would be at stake. Such an obligation can be of immediate application, not only upon States, but equally to individuals and other private parties. This is not a matter for concern in the instant case.”
IHRL as the Guide for Self-Development of IIL
Although investment tribunals mostly refrain from integrating human rights claims into the IIL regime, in some cases they treat IHRL as a guide for the development of IIL standards. The interpretative effects of IHRL in these cases can be categorized into three groups: i) IHRL clarifies the scope or meaning of substantive and autonomous IIL standards or rules ii) IHRL helps the tribunals to establish the legal standing of the investors iii) Investment tribunals borrow the principle of proportionality from IHRL and use it when balancing competing interests at stake.
First, IHRL helps the tribunals to develop standards and rules such as minimum standard of treatment, protection from expropriation and the nationality requirement. For instance, in Mondev v. United States of America (see p. 9-11 of the Reader), the Tribunal encountered the question of whether statutory immunity given to a governmental agency breached the minimum standard of treatment clause of the NAFTA. The Tribunal for the first time accepted that IHRL provides a “guidance by analogy” and turned to the ECtHR case-law to seek such guidance. By following the exact reasoning of the ECtHR, the Tribunal decided that minimum standard of treatment cannot cover a substantive civil right to sue that agency.
The role of IHRL in shaping the IIL standards continued with Saipem SpA v. Bangladesh where the Tribunal turned again to the ECtHR (see p. 13 of the Reader). This time the Tribunal gained support from the ECtHR case-law to determine that the protection against expropriation includes immaterial rights as well. Later in loan Micula et al. v. Romania where the nationality of the investors was in dispute, the Tribunal referred to the right to nationality under Article 15 of the Universal Declaration of Human Rights (see p. 14 of the Reader). Lastly, IHRL established an absolute baseline for the application of IIL in the Phoenix Action v. The Czech Republic case (see p. 15-16 of the Reader). The Tribunal stated that the “investments made in violation of the most fundamental rules of protection of human rights” are excluded from the ICSID protection.
Second, IHRL has been used to clarify the legal standing of investors. For instance, in Grand River Enterprises Six Nations, Ltd., et al. v. United States of America (see p. 17-18 of the Reader), the investors argued that their right to be consulted as indigenous people had been breached. The Tribunal concluded that Article 19 of the UN Declaration on the Rights of Indigenous Peoples does not impose an obligation to consult to individual investors unless they represent an indigenous community. In the present case, it rejected the argument of the investors by relying on the collective nature of the right to be consulted.
Third, IIL regime has exported the principle of proportionality from IHRL to balance the police powers of the host state and investors’ rights. The pioneer case, Téicas Medioambientales Tecmed, S.A. v. Mexico is a notable example (see p. 11-13 of the Reader). The investor argued that the closure of a landfill constituted unlawful expropriation, while the host state claimed that it took measures for environmental protection and public health. The Tribunal balanced the regulatory powers of the state with the investor’s rights by applying the principle of proportionality borrowed from the ECtHR case law. It concluded that the impugned measures which had led to the closure to the landfill was not proportional since the landfill did not pose “present or imminent risk to ecological balance or to people’s health.”
To conclude, IIL does not exist in isolation from IHRL. The trend not to integrate substantive human rights claims into the IIL regime appears to be changing. At least, the Tribunal in the Urbaser case opened a door to apply the “no harm” obligation in investment disputes. Besides, IHRL has long been a guide for the investment tribunals in shaping the content and application of IIL. Given the important developments in moving away from ad hoc arbitration to self-standing court systems in international investment law (see the recent developments on CETA here), we may expect more interactions between these two branches in the near future.