Note from the author: This post is based on a Keynote delivered in Rio de Janeiro, Brazil, on 28 August 2017 at the Expert Workshop “Transformative Constitutionalism in Latin America and International Economic Law: Avoiding Conflict and Fostering Dialogue”, jointly organised by the Fundacao Getulio Vargas (FGV) Direito Rio de Janeiro Brazil and the Max Planck Institute of Comparative Public Law and International Law, Heidelberg, Germany.
On 10 August 2017, the Committee on Economic, Social and Cultural Rights (hereafter, the “Committee”) released its General Comment No. 24 (2017) on State obligations under the ICESCR in the context of business activities. General Comment No. 24 is arguably the most impactful document yet released by the CESCR, since it elaborates on the role of the ICESCR as a legal constraint on State regulation of business activities, especially in the area of investment treaty-making. As I have argued elsewhere in more detail (Public Policy in International Economic Law: The ICESCR in Trade, Finance and Investment, OUP 2015), the implementation of the ICESCR (and related human rights) in international economic law cannot be relegated to the back end of issues of treaty interpretation and treaty application in world trade law disputes or investor-State arbitrations, but rather, should operate as an inbuilt constraint for States when bargaining the terms of their international economic agreements in the first instance. When negotiating these international economic agreements, I argued that States have to take into account: 1) the impact of treaty commitments on States’ social protection baselines under the ICESCR (“minimum core obligations”); 2) how the new treaty will affect the future ability of the State to progressively realise ICESCR rights, given the State’s continuing non-retrogression obligations under the ICESCR; 3) the model of development chosen by the State and how it will impact the State’s legal and/or constitutional duties to its citizens to respect, protect, and facilitate ICESCR rights; and 4) whether the design of the dispute resolution mechanism in the international economic agreement preserves the State’s present and future capacity and authority to respect, protect, and facilitate ICESCR rights – including questions of whether there are sufficient ‘exit’ and ‘voice’ mechanisms for local communities impacted by trade and investment operations; meaningful and not mere token participation in monitoring and oversight by all impacted constituencies; and sufficient broadening of the sources of information that either affect the investor’s risk and return calculus with respect to the host State of investment, or that which would affect the exporting firm’s regulatory expectations about the importing country.
Current trends in reforming international economic agreements thus far reveal a kind of “policy of accommodation” for the ICESCR or other human rights obligations that depend more on dispute resolution for application and interpretation. To this end, more agreements seek to include provisions maintaining compliance with labor and environmental agreements (see for example Articles 12 and 13 of the 2012 US Model BIT), without being altogether clear about the legal consequences (e.g. no breach, excused breach, or mitigated liability, among others) for a host State that purposely breaches an investment protection standard in order to maintain compliance with such labor and environmental agreements. The Canada-European Union Trade Agreement/CETA Investment Chapter Article 8.9 arguably does a better job at clarifying what these precise legal consequences are when a State commits otherwise investor-injurious acts pursuant to its right to regulate, but even this treaty is pending challenge at the European Court of Justice, due to France’s concerns over environmental and health impacts, as well as Belgium’s objections over the supposed impact of CETA’s investor-State arbitration process on States’ rights to regulate.
It may be inherently futile to rely on such a strategy of ex post interpretation by international economic tribunals to implement international human rights law into international economic agreements. This cannot be better illustrated than in the apparent stasis of investor-State arbitration, which still dichotomises treaty obligations (presumably binding only States) and contract obligations (supposedly the only mode of binding investors). While recent arbitral awards such as Urbaser v. Argentina (ICSID Award of 8 December 2016) have significantly recognised broad sources of international human rights law from the Universal Declaration of Human Rights to customary norms as (somehow) possible relevant rules for investment treaty interpretation under Article 31(3)(c) of the Vienna Convention on the Law of Treaties, thus far it appears that arbitral tribunals are reluctant to conclude that investors are directly bound by ICESCR or other human rights obligations in a manner that should affect how they perform their contract obligations. As the Urbaser v. Argentina tribunal stressed:
“…..While it is thus correct to state that the State’s obligation is based on its obligation to enforce the human right to water of all individuals under its jurisdiction, this is not the case for the investors who pursue, it is true, the same goal, but on the basis of the Concession and not under an obligation derived from the human right to water. Indeed, the enforcement of the human right to water represents an obligation to perform. Such obligation is imposed upon States. It cannot be imposed on any company knowledgeable in the field of provision of water and sanitation services. In order to have such an obligation to perform applicable to a particular investor, a contract or similar legal relationship of civil and commercial law is required. In such a case, the investor’s obligation to perform has as its source domestic law; it does not find its legal ground in general international law…” (Urbaser v. Argentina Award of 8 December 2016, para. 1210. Emphasis added.).
This view – where international human rights law appears detached from having any direct applicability to investors – echoes similar reasoning from that of the 2010 Decision on Liability in Suez v. Argentina:
“…Argentina and the amicus curiae submissions received by the Tribunal suggest that Argentina’s human rights obligations to assure its population the right to water somehow trumps its obligations under the (bilateral investment treaties or BITs) and that the existence of the human right to water also implicitly gives Argentina the authority to take actions in disregard of its BIT obligations. The Tribunal does not find a basis for such a conclusion either in the BITs or international law. Argentina is subject to both international obligations, i.e. human rights and treats obligation, and must respect both of them equally. Under the circumstances of these cases, Argentina’s human rights obligations and its investment treaty obligations are not inconsistent, contradictory, or mutually exclusive. Thus, as discussed above, Argentina could have respected both types of obligations…” (Suez v. Argentina Decision on Liability of 30 July 2010, para. 262. Emphasis added.)
The unique genius and foresight behind the Committee’s General Comment No. 24 lies with how it achieves comprehensive internalisation of the ICESCR – by embedding the ICESCR in every step of States’ regulation of the conduct of business activities, trade, and investment, and in a manner more markedly direct than those sought through voluntary corporate social responsibility instruments (such as the UN Global Compact, Equator Principles, UN Principles on Responsible Investment, among others). General Comment No. 24 provides for modes of attribution of direct State responsibility for the action or inaction of business entities (whether State-owned or privately owned enterprises). It already anticipates that there will be direct treaty conflicts between the ICESCR and IEL, such that States should, accordingly as a matter of routine practice, conduct human rights impact assessments long before concluding trade and investment treaties, and States should also require business entities to conduct extensive human rights due diligence in order to identify, prevent, and mitigate risks of ICESCR violations. Because the ICESCR is a long-standing treaty binding 165 States Parties and with 5 further signatory States pending ratification of the ICESCR (and thus bound – pursuant to Article 18 of the Vienna Convention on the Law of Treaties – not to defeat the object and purpose of the ICESCR), the ICESCR constitutes binding international law to hold States to account when they regulate business, trade, and investment activities in ways that are inconsistent with ensuring respect, protection, and facilitation of ICESCR rights. The Committee’s General Comment No. 24 bears significance as an authoritative interpretation of the ICESCR – one that gives States practical guidance on the implementation of the ICESCR in the context of regulating business, trade, and investment activities. In this sense, perhaps more successfully than the aspirations thus far to arrive at a global treaty on business and human rights based on the Ruggie framework (see Guiding Principles on Business and Human Rights), General Comment No. 24 consolidates much of the previous works of the Committee on these matters into a single authoritative interpretive document. It is precisely this rich blueprint that States and non-State actors can now use to invoke legal constraints inbuilt and guaranteed by treaty under the ICESCR, as States design and plan for the regulation of business, trade, and investment activities.