In his EJIL article, Martins Paparinskis outlines how the rules of State responsibility, developed in the interstate context, apply in claims between individuals and States in the field of investment law (p 619). He proposes three alternative views one might take of the nature of the ‘rights’ accorded to investors under investment treaties: that they are ‘direct rights’, similar to those found in the regime of human rights (p 622-623); ‘third party rights’, akin to those accorded by treaty parties to third states under Article 36 of the Vienna Convention on the Law of Treaties (p 624); or ‘delegated rights’, where the individual is an agent exercising rights that belong to their home State (p 625).
Paparinskis details the implications of each approach to investors’ rights for various aspects of State responsibility, including for the purposes of reparation, the application of circumstances precluding wrongfulness and the implementation of responsibility (p 619-620), elucidating the practical effects that flow from adopting a particular perspective on investors’ rights. He expressly does not seek to reach a definite conclusion on which of these is the correct approach to take (p 626). He does, however, offer some thoughts on the appropriateness of relying on the human rights paradigm in the investment context.
While noting the functional similarity between many of the rights in the investment and human rights fields, Paparinskis argues (and affirms in this EJIL: Talk! post and a forthcoming chapter available here) that human rights and investment law differ in the key respect that investors choose to become investors, with investment law protections designed to entice an investor to invest in a particular State (p 623). Conversely, one falls under the protection of a given human rights regime not as a matter of choice but simply by virtue of being human. This leads the author to suggest that rights in investment law might be ‘better captured’ by viewing them through the lens of third party rights, rather than from a human rights perspective (p 624).
The purpose of this post is to query the extent to which the choice of the investor provides a useful way of thinking about which of the three models of investors’ rights is most appropriate. Although Paparinskis’ argument makes intuitive sense, it is interesting to delve a bit further into the models that he proposes, including some of their implications for State responsibility issues, in order to elucidate the relevance of this choice distinction.
First, one of the key consequences of adopting a human rights perspective to State responsibility is, according to Paparinskis, that the consent of the individual is relevant as a circumstance precluding wrongfulness only to the extent that the primary rules allow (p 630). In this respect, he notes case law suggesting that an individual can consent to the violation of some human rights, but not others (p 630), and that, in respect of waiver, any settlement of claims must be based ‘on respect for human rights’ (p 644 (fn 151), citing Broniowski v Poland). On the other hand, Paparinskis suggests that if one adopts the third party rights perspective, the individual is free to consent to acts that would otherwise amount to violations of the rights accorded (p 630, 646) and may cease to benefit from the rights it has been granted if it so chooses (p 644). The outcome is therefore that individuals have a lesser capacity to consent to or waive violations of obligations under a ‘direct’ human rights model than on a ‘third party rights’ approach. One question to be asked is whether this reduced capacity to consent under human rights regimes is a result of such rights not being chosen in the first place by the individual.
An alternative explanation for the difference in approach to consent under the two regimes is based in a distinction that Paparinskis mentions more broadly, namely that human rights regimes have a different teleology to investment law (p 623, also p 644). More particularly, there may be a ‘public interest’ underlying the scheme of human rights that limits the role of individuals’ consent in respect of violations of at least certain rights (see, eg, J. G. Merrills, The Development of International Law by the European Court of Human Rights (Manchester University Press 1988), 161). This ‘public interest’ rationale may be a more convincing explanation for limitations on the ability of individuals to consent to certain human rights violations than an explanation based on the individuals’ lack of choice of those rights. Indeed, as Paparinskis notes in the chapter mentioned above, a foreign investor may, as a matter of fact, choose to rely on human rights protections available in a country in deciding whether to invest there (p 9 (fn 31)). Assuming that any public interest considerations limiting the role of consent apply equally to investors as to other individuals, this suggests that the distinction between human rights and investment law may be less about the question of choice and more about the nature of the regimes at issue.
Second, Paparinskis argues that under the ‘direct’ human rights model, a State would not be able to waive the rights of its investors, because a person cannot waive rights belonging to another (p 645). Conversely, he suggests that the ‘third party rights’ model, drawing on the rules relating to rights conferred on third States contained in the Vienna Convention on the Law of Treaties, would probably lead to the conclusion that there is a presumption, albeit rebuttable, that the investor’s rights could be modified without its consent (p 645). Paparinskis’ focus on the ‘conscious choice’ of investors ‘to become holders of particularly formulated rights’ (p 625) suggests a concern with ensuring investors have a degree of control over those rights. The premise seems to be that the inducement of investors to rely on investment protections, and their subsequent choice to do so, should lead to greater constraints on the power of treaty parties to modify their rights (see Anthea Roberts (2013) 107 AJIL 45, 60, in the context of reinterpretation of treaty obligations). The situation may be different in respect of modification of rights jointly by the treaty parties (see in this respect Paparinskis’ chapter, noted above, p 26-28). However, concerning waiver by one treaty party, it is not entirely clear why the investor’s choice to rely on particular rights should lead one to adopt the third party rights model when, as has been noted, that model might give the State more control over the rights of its investors than the direct human rights model.
Finally, one might suggest that the customary international law rules on the protection of aliens, enforced by way of diplomatic protection, also play a role in encouraging investment (see, for example, Marc Jacob, ‘Investments, Bilateral Treaties’ (2011) in MPEPIL (online), particularly para 3; cf Paparinskis’ views in the chapter, noted above, p 9 (fn 31)). Importantly, these customary rules are also engaged as a result of the ‘choice’ of a given alien to enter a foreign State. The institution of diplomatic protection forms the background to the third approach that Paparinskis suggests might be taken to investors’ rights, namely of considering them ‘delegated rights’, in which the individual enforces rights which belong to the State (p 625). It follows that on the one hand, the fact of an investor’s choice to invest in a given State is said to lead to the view that the rights of the individual are akin to third party rights. On the other hand, the choice of the individual also seems relevant within the framework of diplomatic protection, and by extension to the ‘delegated rights’ model, in which the individual is only enforcing the State’s rights. It is not entirely clear, therefore, exactly what role the choice of the individual ought to play in distinguishing between the alternative approaches that Paparinskis suggests.
None of this is to say that the ‘third party rights’ model is not a useful framework for elucidating the nature of investors’ rights. There may well be reasons why the ‘direct’ human rights and ‘delegated rights’ models are inappropriate. It merely queries the extent to which choice provides a way to distinguish between the models of investors’ rights that the author very helpfully develops.