ESIL-International Human Rights Law Symposium: IHRL and Investment Law – What Could A Human Rights Based Approach Look Like?

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Scholars have increasingly focused (see here, here, here and here) on the relationship between international human rights law (“IHRL”) and international investment law (“IIL”). While some argue (see here, here and here) that IHRL and IIL are mutually re-enforcing, several cases highlight significant tensions between the fields.

When conflicts arise, IHRL rarely fares well. IIL provides a more powerful remedy than IHRL, often allowing for recourse to international remedies without the exhaustion of domestic ones. IIL decisions are also usually binding on the state without review or appeal, and can be enforced against a state’s assets overseas. This can incentivize states to comply with their IIL obligations at the expense of IHRL commitments. If IIL is not simply to “trump” IHRL without consideration for the merits of competing rights, a standard is needed that accommodates both fields. It appears to me that IHRL already provides the necessary tools for reconciling conflicting obligations without unduly burdening (or ignoring) either field.

The threat posed by conflicts between IHRL and IIL is perhaps best illustrated by one of the more disappointing judgments in international law, Suez, Sociedad General de Aguas de Barcelona S.A. and Vivideni S.A. v Argentina. This case arose from the economic crisis of 2001 when Argentina ordered a tariff freeze on water services. The IHRL right to water includes a core obligation that states ensure each individual can access a minimum daily allowance of water. “Accessibility” includes a financial aspect, requiring states ensure the minimum amount is affordable for all individuals, “including the most vulnerable or marginalized sections of the population” (para 12). To meet this obligation, states must not only respect the right but also protect it against corporate actions that would make water financially inaccessible.

Foreign investors with monopolies over water services challenged Argentina’s tariff freeze. They argued, and the tribunal agreed, that the action violated IIL’s “fair and equitable treatment” standard by disrupting investors’ “reasonable expectations” to regulatory stability. In other words, the Government could not take actions to stop corporations from making water prohibitively expensive for poor people because the corporations could not be expected to anticipate government action aimed at protecting access to water. While the state and amicus curiae submissions addressed the IHRL issues, the tribunal concluded there was no conflict between the expectations of IHRL and IIL in this matter. Even if a conflict did exist, the tribunal determined that IHRL has no effect on the state’s IIL obligations. Instead, the state was simply required to “respect both” sets of obligations “equally,” without giving weight to one set of obligations over the other. The panel provided no guidance as to how the state could have done this (para. 262).

The Suez and Vivendi decision, and others like it, create a de facto hierarchy in which IIL is prioritized over IHRL. By disregarding the conflict between the two fields, the tribunal creates a legal paradox for states: they are required to simultaneously abide by standards that are seemingly mutually exclusive. If the Vienna Convention on the Law of Treaties’ Article 31(3)(c) is to have meaning, the answer to conflicts between IHRL and IIL cannot simply be for one regime to ignore the other. As discussed in the ILC’s fragmentation report, a unified application requires interpreting rules and binding obligations in light of other applicable standards. When the fields are as diverse as IIL and IHRL, it is important to develop a framework for analysis that ensures the adequate protection of both fields, without allowing either to displace the other.

The inclusion of IHRL specific clauses in investment agreements, and the use of amicus curiae on IHRL issues have each been touted as potential solutions to the legal conflict. However, neither provides a systematic means of addressing the complex issues of how to resolve direct conflicts in the law. A more systematic treatment may be found in IHRL itself, which, as Edward Guntrip acknowledged, varies in the standards of protections afforded different rights.

The variation in IHRL stems from a recognition that individual rights can conflict, and that the rights of an individual may affect the community at large. This sits in contrast to the foundation of IIL, which anticipates a binary relationship affecting only the state and the investor. The investor makes claims against the state, and the state owes IIL duties only to the investor. The investor and the state become the only relevant parties, with others acting only as interested observers. In IHRL, the state (and consequently the tribunal) is obliged to consider not just the protection owed to an individual claimant, but how that claimant’s rights intersect with or interfere with the rights of third parties or the interests of the state as a whole. Consequently, IHRL includes mechanisms such as derogation clauses, limitations clauses, and minimum core obligations, which regulate a state’s response to competing demands by multiple rights holders.

The ICJ’s advisory opinions in Nuclear Weapons and Palestinian Wall make clear that lex specialis can redefine the contours of a state’s obligations to take into account obligations that arise from other regimes. In such cases, the applicable law is the one more specific to the facts of the case. The right to life – a non-derogable IHRL obligation – is reinterpreted in armed conflict to take account of the rules provided for in international humanitarian law. However, where IHRL provides a more specific rule, such as in the right to education, it remains the dominant standard despite the presence of other rules or obligations. In applying this to the interaction between IIL and IHRL, the factual complexity involved in a conflict between the different rights-holders (individuals or communities with IHRL claims and foreign investors with IIL claims) requires a legal approach that can account for these varying relationships. IIL’s binary nature and IHRL multifaceted approach suggests IHRL will often provide the applicable lex specialis. The focus in IIL on only one relationship – the investor and the state – means the field has developed few internal rules for addressing conflicts with the rights or obligations of other parties. IHRL, on the other hand, provides a series of rules specifically intended to allow the state to simultaneously meet other obligations. It is not the field as a whole, but rather these individual IHRL rules, which allow for prioritizing or limiting rights where necessary to address other rights and obligations, that provide clearer guidance for addressing the facts at IHRL-IIL conflicts. These rules are likely to be the best existing recourse for resolving conflicts between IHRL and IIL.

So what would an IHRL-based approach look like? It would involve asking a series of questions about the rights at issue, and the answers would inform the balance of claims.

The first question is whether a right claimed is jus cogens. It would be unusual for an IIL treaty to require a state to violate a jus cogens norm; if that were to occur, the Vienna Convention on the Law of Treaties makes it clear the IIL treaty would be void (arts. 53 and 64).

What is more likely is an IIL treaty creating obstacles to a state’s obligation to provide remedies for a violation of jus cogens. Take, for example, Colombia’s current land restitution process, which is aimed at restoring property to some of the 5 million people forcibly displaced during the country’s decades-long armed conflict. As the International Criminal Court’s Office of the Prosecutor found in a 2012 interim report, at least some of the relevant displacements met the standard for crimes against humanity (paras 60-67), the prohibition of which may be a jus cogens norm (see M. Cherif Bassiouni’s assessment starting at page 68). Some of that land was subsequently sold to foreign investors. While a complete assessment of this case requires more than a blog post, an IIL treaty’s prohibition on the taking of property without compensation could interfere with the state’s ability to remedy jus cogens violation and restore displaced individuals to their property (i.e., to return them to the state they would have enjoyed but for the violation).

Jus cogens norms supersede any conflicting rights. Violations of jus cogens norms create an automatic right to a remedy for victims. Even when a victim cannot pursue a claim procedurally (see Lorna McGregor’s analysis), the offending state retains an obligation to provide a remedy (Italy v. Germany, para 94). The obligation to remedy is a fundamental aspect of a state’s obligation to abide by the jus cogens norm. No IIL rules are asserted as jus cogens, so remedies for violations of jus cogens human rights standards should supersede competing IIL claims. (Sornarajah has made a similar assertion (p. 228)).

The second question is whether one of the rights can (or should be) limited. IIL scholars who recognize the need to integrate IHRL and IIL have often argued that human rights can be addressed through the “fair and equitable treatment” standard, a provision common in investment treaties that is believed to be part of customary international law. Scholars have argued that this standard allows tribunals to account for the state’s other international obligations as well as for the conduct of the investor. This is hypothetically true, but to date IIL tribunals have not demonstrated this when considering conflicts between IIL and IHRL.

In IHRL, some rights – those most likely to come into direct conflict with others – can be limited in one of three ways. Several civil and political rights have explicit clauses allowing the state to limit the right in the interest of third parties or the state itself (see, e.g., arts. 18-19). For economic, social and cultural rights, the concepts of “minimum core obligations,” “maximum available resources” and “progressive realisation” allow a state to take into account the totality of its obligations and interests when meeting its obligations. The state is expected to give preference to “minimum core obligations” over competing claims. Finally, in a state of emergency, many rights can be derogated from, excusing the state’s obligations for a limited period of time. These means of limiting a human right can be used to prioritise the protections owed both investors and others affected by an investor’s actions.

To prevent against the abuse of limitation clauses, minimum core standards have been recognized for both civil and political rights as well as economic, social and cultural rights. Even where the state may limit an obligation, it cannot eviscerate that obligation. A state’s use of limitation provisions are judged by their reasonableness (or a “margin of appreciation” standard) in light of counter-veiling interests.

Applying this framework in a manner that does not create absurd results requires translating IIL into the language of IHRL. Some standards in IIL clearly carry more weight than others. The prohibitions on direct expropriation of property and on discriminatory treatment are undisputed, while the prohibition on indirect expropriations and modern interpretations of the fair and equitable treatment standard as protecting an investor’s “legitimate interests” are hotly debated and resisted by states. By transferring these preferences and weighting into IHRL terminology, IIL tribunals may find themselves more readily prepared for addressing complex cases involving clashes between IIL and IHRL.

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Sergey Usoskin says

February 11, 2016

On the question of potential conflict between investment treaty obligations and jus cogens I wander whether there is actually a conflict. Looking at the example you provide there are at least two ways to avoid the conflict:
(1) hold that the obligation to remedy the consequences of a crime against humanity (assuming it is jus cogens) does not require restitution. Indeed, where restitution is legally impossible the usual approach is to pay compensation.
(2) proceed with expropriation of the property the state wants to return to the previous owners. Restitution to the victims of crimes against humanity surely qualifies as public purpose and the state may easily comply with procedural obligations. It must of course pay compensation to the investor, but this is only just. A foreign investor should not be forced to suffer losses due to the way in which the state had obtained the property it transferred to the investor.

Obviously, if the investor was complicit to the crimes or had reason to believe the state had obtained the property illegally, these factors may influence the analysis. However, even in these circumstances investment treaties usually provide appropriate solutions (e.g. the tribunal may decide not to treat illegally acquired property as a protected investment) without the need to rely on a conflict with jus cogens or human rights.

Tara Van Ho says

February 14, 2016

Hi Sergey,

Thanks for an important question that has a lot to it. It’s true that there could be interpretative methods that avoid finding a conflict between jus cogens and investment law, but I think implicitly those attempts underplay the significance of the conflict at issue.

On your first proposed interpretation: since at least the Factory at Chorzów decision, the international presumption on reparations has been, in favor of restitution as the primary form, and supplementary aspects of reparation (such as compensation) should be used to fill gaps only where restitution is legally impossible. This position was affirmed, of course, by the ILC Articles. The presumption is strong enough that, as the recent finding of the investment tribunal in Von Pezold v Zimbabwe (ICSDI Case No. ARB/10/15) explained, “material impossibility usually arises in a situation where the property is permanently destroyed or lost. The standard is high: … ‘restitution is not impossible merely on grounds of legal or practical difficulties, even though the responsible State may have to make special effort to overcome these.’” (para 725, quoting the Commentary to Article 35 of the ILC Articles on State Responsibility).

This raises the question of whether restitution is "legally impossible" in the Colombian example. Simply because title or other forms of ownership right have been transferred to another does not mean that restitution is necessarily legally impossible, particularly if the purchaser knew or should have known of the questionable nature of the title transfer. Again, the Von Pezold decision indicates that simply because someone knew is using the land – or that it is difficult to evict someone from property – that does not rise to the level of “legally impossible.”

To use this standard for “material impossibility” only for the protection of investors would, of course, be disingenuous. If this is the standard, it has to be equally applicable when it favors and when it harms investors. (I do recognize that the ad hoc nature of investment arbitration – and the pending annulment request in this case – means that a subsequent tribunal could find fault with the reasoning, but on this narrow issue, I do not.)

Your second proposed interpretative solution suggests that the obligation to provide compensation isn’t itself part of the conflict. The obligation to provide compensation is what causes a conflict between IIL and IHRL in the Colombian example, as the cost of compensation under investment law may render the realization of the IHRL response impossible.

More importantly, though, that interpretative solution is likely to reward those who acted with knowledge that they were entering a situation where closure of title was unlikely. Even if an investor was entering the state without being complicit in serious or grave violations of IHRL or humanitarian law, they would have, or should have, had knowledge of the ongoing situation of forced displacement from the time and therefore should not be entitled to a claim of a good faith investment.

I do, however, see a potential third interpretation that would resolve the conflict and I would be interested in your thoughts on this: that the arbitration tribunal finds that there is a presumption of illegality of the investment – and therefore the investment cannot be protected under relevant BITs – absent a showing of “enhanced” due diligence (language used by John Ruggie in the UN Guiding Principles on business and human rights) taking into account the widespread and systematic nature of the displacement and related IHRL / humanitarian law violations.

Sergey Usoskin says

February 15, 2016

Tara, I agree these issue illustrate the possible conflicts between IHLR and IIL, but more generally conflicts between human rights of different persons (if one recognizes the right to property as a human right IHLR should protect).

1. On whether restitution may be materially impossible if the state vested the legal title on a foreign investor. The threshold for impossibility of restitution is indeed high, but legal impossibility of restitution remains a possible obstacle. Commentaries to the ARSIWA (para. 9 to Art. 35) recognize this providing Forest of Central Rhodopia, where part of the forest plot to be returned had been transferred to third parties, as an example. In von Petzold v Zimbambe the tribunal very carefully observes that the land in dispute largely remained under claimants' control and the third party occupants had no legal title (paras. 728-730). In essence, third party rights may serve to prevent restitution. To me the question is how the person had acquired the relevant property, but this is a different issue.
2. On expropriation and the obligation to pay compensation I do not see a conflict. If the state has no means to pay compensation it cannot be allowed to violate rights of one person to restore the rights of another. Again if the state can establish that the investor illegally acquired the property it may use this argument to defend against the investor's claim, but this should not be assumed to be the case in all circumstances.
3. The investor's involvement in or awareness of illegality (more specifically reaching the level of crimes against humanity) should in most cases result in the investor's inability invoke investment law protections. Investor's should exercise due diligence (e.g. Fraport v Phillipines) and where the illegality involved offends transnational public policy (e.g. corruption or I would say crimes against humanity) they cannot rely on estoppel or similar arguments saying 'the state told us it's ok' (World Duty Free v Kenya).

Tara Van Ho says

February 16, 2016

Hi Sergey,

I generally agree with you, including on the potential for legal impossibility but I think you generally need to be wary of invoking that when discussing crimes against humanity, war crimes, torture, etc. Restitution in these cases is often not just a legal imperative but has long-term social and communal impacts and can therefore give rise to long-term impacts that affect the security of the state. That doesn't mean legal impossibility isn't an option but rather that it should be viewed skeptically as a solution to this conflict.

There are two points on which I do think we have a disagreement.

1. Property is not an IHRL protection; it exists within the regional systems (including the Inter-American, which is partly why the Colombian law cannot be fully analysed in this short blog post), but it was not included in any of the international treaties other than to say that where the right is provided in law, it must be provided on a non-discriminatory basis. This makes it quite unique amongst the lists of rights initially recognized in the Universal Declaration of Human Rights. So, I generally would suggest that while this involves the rights of two parties; it does not necessarily involve the "human rights" of the two. This distinction often doesn't matter, but it does become important when you talk about a conflict of rights, bringing up the second point where I disagree with you.

2. There are many times in which to realize the rights of one party (A), the rights of another party (B) are limited. In a normal circumstance, this limitation of B's rights would often be a violation but because it is seen to be necessary for the furtherance of A's rights, the limitation is found to be legitimate. This is clearly reflected in the IHRL approach I outlined and perhaps becomes clearest when one thinks of free speech. Normally, a limitation on my free speech violates Art. 19 of the Int'l Covenant on Civil and Political Rights; but, where the state limits my right to free speech so as to prevent me from standing outside your house yelling at you at 3am, that is not a violation even though it is a limitation of my right and would be a violation in other circumstances.

Where an impact on the right to property is purely an IIL violation, the question is how does it balance against the other human rights. Can there be limitations to that right for the purpose of reconciliation between the two fields when there is a conflict of rights? Clearly, even where IHRL protects property, it is not a non-derogable right (see, the European Convention at article 15), so there are at least some times in which the right to property does give way to other rights. If we were to introduce international humanitarian law, the right to property becomes even tenuous when you see the standard in IIL sitting in juxtaposition of the understandings of property in IHRL and IHL.

So, for me, the question is not whether the right to property -- including the obligation to provide compensation -- can ever be abrogated in favor of other rights -- because that clearly occurs in IHRL. The question then is solely how do you resolve the conflict between IHRL and IIL as the latter currently does not recognize limitations to that right. And this is where, as I elude to in the final bit, where translations between the regimes would need to occur.

That discussion - and why I think the IIL right to property falls to the IHRL obligation for restitution - is more than can be covered in even the comments of this piece. I am, however, finalizing the longer paper version of this and would be happy to send it to you for comments if you email me your interest. My email is tvh -- at -- law[dot]au[dot]dk