Raising Concerns Over the International Investment Regime

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International investment law doesn’t usually get much attention–in comparison to human rights law or international environmental law (or even international trade law), it tends to be fairly dry stuff.  But in recent years multinational corporations have started to use investment law to challenge environmental and human rights regulation and liability.  Treaties such as the North American Free Trade Agreement (NAFTA), the Central American Free Trade Agreement (CAFTA), and various bilateral investment treaties (BITs) give multinational corporations from one member countries various privileges when they invest in another country.  Most significantly, these corporations can take the foreign government to binding international arbitration, where a panel of arbitrators decides whether the government has violated the treaty by expropriating the corporation’s property or denying it equal treatment.

Several recent cases have shown that corporations are getting more creative in their use of investment law.  In Glamis Gold Ltd. v. United States, the Canadian mining company Glamis claimed that the U.S. had violated NAFTA by imposing various environmental restrictions on its planned open-pit gold mine in California.  Glamis sought $50 million from the U.S. government, but the arbitrators rejected its claim in a decision issued last June.  In Piero Foresti v. Republic of South Africa, various European investors claimed that South Africa had violated its obligations under two BITs by passing post-Apartheid “legislation designed to ameliorate social conditions experienced by historically marginalized South Africans,” laws which changed private ownership of mineral resources into a public licensing system that required companies to meet black empowerment objectives.  That case was dismissed in August after the investors dropped their claims and came to an accommodation in with South Africa.  Other cases remain ongoing.  In Pac Rim Cayman LLC v. El Salvador, Canadian mining company Pacific Rim is claiming that El Salvador violated CAFTA by refusing to approve its Environmental Impact Assessment.  And perhaps most disturbingly, in Chevron Corp. v. Republic of Ecuador, the oil giant is arguing that Ecuador’s efforts to hold Chevon liable for its legacy of pollution in the Amazon violate its rights–part of a long series of maneuvers by Chevron to avoid justice.

A number of academics and scholars are taking notice of this trend.  On August 31, over three dozen professors issued a Public Statement on the International Investment Regime, raising serious concerns over the uses of BITs and other treaties by corporations.  They note that “Foreign investment may have harmful as well as beneficial impacts on society,” and that “States have a fundamental right to regulate on behalf of the public welfare and this right must not be subordinated to the interests of investors where the right to regulate is exercised in good faith and for a legitimate purpose.”  After observing that arbitrators “have prioritized the protection of the property and economic interests of transnational corporations over the right to regulate of states and the right to self-determination of peoples,” they recommend that “States should review their investment treaties with a view to withdrawing from or renegotiating them in light of the concerns expressed above; should take steps to replace or curtail the use of investment treaty arbitration; and should strengthen their domestic justice system for the benefit of all citizens and communities, including investors.”

It’s too soon to tell whether these opinions will gain traction in the investment treaty world–for the moment, the momentum still appears to be in favor of continuing to push new BITs and other agreements.  But there may be a growing realization that corporate rights under these agreements have gone too far, and that some re-prioritization in favor of the public interest is necessary.

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