The United Nations Working Group on ‘Human Rights, International Corporations (TNCs) and Other Businesses’ has published a new report on human rights-compatible international investment agreements. It urges states to ensure that their Bilateral Investment Treaties (BITs) are in line with international human rights obligations. It emphasizes investor obligations at the international level i.e. accountability of TNCs in international law. Given the immense power of TNC, questions have been raised about their accountability frequently. There are many examples where TNC’s misconduct has come to light such as the corruption scandal involving Siemens in Germany.
previous attempts
Former US Secretary of State Henry Kissinger told the United Nations General Assembly in 1975 that the international community should clarify standards of conduct for TNCs. Subsequently, an audacious attempt was made at the United Nations to develop a multilateral code of conduct on the TNC. However, it was abandoned in 1992 due to differences between developed and developing countries.
An integral feature of the neoliberal project was the use of international law to institutionalize the forces of economic globalization, which led to the spread of BIT. These treaties promised protection to foreign investors by granting them rights under international law and imposing obligations on states. This structural asymmetry in the BIT, which provides rights but no obligations to foreign investors, has led to the demand for investor accountability.
However, the issue of holding the TNC accountable again gained momentum following a 2011 report by John Raggi, the UN Special Envoy on Trade and Human Rights. In 2014, the United Nations Human Rights Council established an open-ended working group to elaborate on TNC and other human rights-related professions an internationally legally binding instrument. Since then, efforts have been made to develop a treaty and find ways to hold foreign corporations accountable. The latest UN report is a step in this direction.
The BIT can be used to hold the TNC accountable under international law. The issue of fixing accountability of foreign investors came in a case of international law. Arbasar vs Argentina (2016). This included a concessionaire looking after the supply of water and sewerage services in Argentina, of which Urbasar, a Spanish environmental management company, was a shareholder. Argentina adopted emergency measures in 2001 to address a financial crisis that caused losses to the concessionaire, which eventually led to its bankruptcy. Arbaser filed a claim against Argentina, alleging infringement of its rights guaranteed under the Argentina-Spain BIT. Argentina filed a counterclaim accusing the investors of ensuring the required level of investment in the services provided and thus violating international human rights to water. The Tribunal held that corporations may be subject to international law and have a duty not to engage in activities that harm or destroy human rights. However, with regard to the question of whether the foreign investor was under an international law obligation to provide drinking water and sanitation, the Tribunal held that only states have a positive obligation to fulfill the human right to water; Corporations only have a negative obligation in this regard unless specific human rights obligations are imposed on the foreign investor as part of the BIT.
The case played an important role in bringing to the fore the human rights norms in the BIT disputes. It also opened up the possibility of using BITs to hold TNCs accountable, provided the treaty imposes positive obligations on foreign investors. Over the past few years, states have begun to recalculate their BITs by including provisions on investor accountability. However, these use soft law language and are horrifying. They do not impose positive and binding obligations on foreign investors. They fail to create a framework to hold the TNC accountable under international law.
lesson for india
A recent UN report has important findings for India’s ongoing reforms in BIT. India’s new model BIT of 2016 includes provisions on investor obligations. However, these exist in the form of best effort sections. They do not impose binding obligations on TNC. India must impose positive and binding obligations on foreign investors not only to protect human rights but also to urgent issues such as promotion of public health. The Nigeria-Moroccan BIT, which imposes binding obligations on foreign investors such as mandatory for them to conduct an environmental impact assessment of their investments, is a good example. These reforms will help create a binding international legal framework for using BITs to ensure accountability of foreign investors and to account for TNCs.
Prabhas Ranjan, Professor and Vice Dean, Jindal Global Law School, OP Jindal Global University. thoughts are personal
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