Summary by Matthew Chappelle
In today’s globalized world, corporations wield increasing amounts of power, which can be used for laudable goals or result in harmful consequences. This idea was explored further in the Conference’s second panel by looking at the interplay between international investment law, and in particular, Investor-State Dispute Settlement (ISDS), and efforts to shift toward a more sustainable economy.
International Investment Law and Human Rights
The first speaker of this panel was Markus Krajewski, a professor at the University of Erlangen-Nürnberg in Nuremberg, Germany, where he serves as the Chair of Public Law and International Law. Krajewski began his talk by looking at the ways we conceptualize international investment law and human rights. In particular, he noted how international investment law is a barrier to the promotion of human rights for several reasons. To make this point, Krajewski detailed both the substantive and procedural law challenges that exist.
Substantively, corporations allege that when states seek to promote human rights, there are subsequent violations of their guarantees against expropriation and their rights to fair and equitable treatment. As a result of these perceived violations, corporations can seek ISDS as a remedy under both bilateral and multilateral international investment treaties. However, Krajewski sees ISDS as a one-sided system. Speaking to the procedural barriers to promoting human rights, Krajewski noted that unlike corporations which can seek a remedy from the state, local stakeholders, such as residents, cannot. As a result, if human rights violations do occur at the hands of the state, there is no mechanism in place to protect locals for example. Another problem is that ISDS adjudicators often lack specialized knowledge about human rights, therefore making them less capable of factoring in human rights considerations.
While international investment law reforms have been proposed, Krajewski said he believes they are fundamentally flawed because they don’t address the one-sided nature that is pervasive. Instead, he argued that mandatory human rights laws within international investment law could be a solution.
International Investment Law and Climate Change
The next speaker on the panel was Anil Yilmaz Vastardis, Senior Lecturer, at the University of Essex. Her talk began by discussing the relationship between international investment law and climate action.
To demonstrate this point, she spoke of Article 2.1(c) of the Paris Agreement which tries to reconcile both financial and environmental considerations. In particular, 2.1(c) “aims to strengthen the global response to the threat of climate change, in the context of sustainable development and efforts to eradicate poverty, including by: […] [m]aking finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development.” However, she argued that international investment law protects fossil fuel companies, which poses an inevitable threat to climate action and serves as a barrier to creating a greener economy.
In shifting away from fossil fuels and toward a more green economy, Yilmaz Vastardis noted that a problem emerges. This is because oil and mining companies are exceptionally litigious. With vast financial resources to engage in litigation, this allows them to fight states when they feel unfairly targeted by policies aimed at mitigating climate change. Moreover, if damages are subsequently awarded, a further problem is that these awards are typically excessive and do not reflect the true, fair-market economic damages incurred.
However, because there is little convincing evidence international investment law actually promotes investment—thus, just serving as a tool when investment is harmed—international investment law appears to have more risks than benefits. She concluded that streamlining the goals of a greener economy with international investment law will be challenging.
International Investment Law and Local Communities
Closing out the panel on international investment law was Nicolás M. Perrone professor of Economic Law at the Universidad de Valparaíso in Chile. Perrone began by discussing the need to bridge the gap between international investment law and human rights. To do so, we have to think of international investment law and ISDS in a broader sense.
Perrone spoke about how presently, investors engage with governments with a primary interest in making profit and shaping the rules to create a friendly investment climate. At the same time, governments themselves are focused on creating benefits for constituents such as job creation and innovation.
What is left out of this current international investment law system is third-party interests. This echoes the criticism of international investment law’s one-sidedness made earlier in the panel by Markus Krajewski. As a result, investments can run the risk of lacking a social licence and buy-in from the communities they directly impact. For Perrone this results in “ISDS put[ting] the political economy of extractives on steroids.”
Perrone questioned whether investor obligations could help fix international investment law. According to Perrone, history tells us that foreign investors are more worried about the relations with governments than the treaties themselves. He noted that to address these concerns about the current state of international investment law, we ought to incorporate obligations into investment treaties while leaving out human rights obligations.
In concluding his talk, Perrone said the effect of this would be to promote buy-in from investors through “reverse engineering” the international investment law system.
A lively question and answer period followed the discussions of each of the three panellists, closing out the second session of the Conference.
Having recapped the panellist’s discussions, it seems clear that international investment law may be hampering state efforts at sustainable development and that much more must be done.