Volume 17 / Number 2 / 2013

BUSINESS LAW FORUM

BALANCING INVESTOR PROTECTIONS, THE ENVIRONMENT, AND HUMAN RIGHTS

 

INVESTORS, STATES, AND STAKEHOLDERS: POWER ASYMMETRIES IN INTERNATIONAL INVESTMENT AND THE STABILIZING POTENTIAL OF INVESTMENT TREATIES

George K. Foster

17 Lewis & Clark L. Rev. 361 (2013)

Critics of investment treaties contend that these treaties give investors excessive rights vis-à-vis host states, and undermine the latter’s ability to regulate to prevent corporate human rights abuses. Some even assert that investors are often now more powerful than host states, in part be-cause of investment treaties. Consequently, calls for reform of international investment law often focus on modifying treaties to diminish investor rights or expand host state regulatory authority. This Article argues that, contrary to common perception, investors have a genuine need for treaty protections, and these do not unduly hinder host state regulatory prerogatives. Investment-related human rights abuses occur not because investment treaties deter host states from regulating, but because host states are sometimes disinclined to regulate—and may even commit abuses in their own right—as a result of financial considerations and other factors unrelated to treaty protections. Indeed, host states sometimes enter into an effective alliance with investors, resulting in a power asymmetry to the detriment of local stakeholders far greater than any that may exist between investors and states. This Article ex-plains how investment treaties could and should be modified to buttress the position of local stakeholders—just as they presently do that of investors—empowering them to protect their own human rights, with-out the need to rely on their governments to do so on their behalf.

THE PLACE OF HUMAN RIGHTS IN INVESTOR-STATE ARBITRATION

Susan L. Karamanian

17 Lewis & Clark L. Rev. 423 (2013)

Human rights arguments are appearing with increased frequency in investor–state arbitration. States and amici curiae may raise them as d-fenses to the challenged state action. Occasionally, investors rely on human rights principles, such as due process and non-discrimination, to support their claims against states. Arbitral tribunals, while not uniformly ignoring human rights arguments, have not fully embraced them either. This development, in turn, has led to heightened criticism of investor–state arbitration. A process, which is largely grounded in international law, is considered by some to be devoid of a critical aspect of that law, namely treaty and customary human rights norms. This Essay analyzes an approach for tribunals to give effect to human rights yet do so in a structured and legally sound manner. It recognizes that tribunals should respect jus cogens norms and other human rights based arguments that have priority under international law, such as those emanating from the UN Security Council, yet largely do so when they are raised as defenses. As discussed, deference to Security Council action is more complex as arbitral tribunals, unlike the European Court of Human Rights and the European Court of Justice, lack a broader human rights-based mandate. The Essay also sets out two interpretive means for tribunals to use the language of international investment agreements to give effect to legitimate human rights concerns.

REBALANCING THROUGH EXCEPTIONS

Kenneth J. Vandevelde

17 Lewis & Clark L. Rev. 449 (2013)

One commonly proposed method of rebalancing investor and host state interests in bilateral investment treaties (BITs) is through treaty exceptions. To this end, BITs increasingly utilize “self-judging” language in their exceptions, i.e., language that may render a party’s invocation of an exception nonjusticiable, although the precise effect of the language remains unresolved. BITs also include increasing numbers of exceptions. While exceptions can subvert treaty norms that protect investors, if carefully crafted and if drafted without self-judging language, they can serve to promote treaty norms while permitting re-balancing where necessary. Properly understood as measures to promote the rule of law, most BIT provisions allow host states to protect their interests without the need for numerous exceptions, although those BIT provisions that liberalize capital movements raise different concerns that may call for judicious exceptions.

THE ROLE OF COUNTERCLAIMS IN REBALANCING INVESTMENT LAW

Andrea K. Bjorklund

17 Lewis & Clark L. Rev. 461 (2013)

Examining investment treaty arbitration in isolation suggests an imbalance in both substance and procedure. Though international investment treaties are aimed at correcting the asymmetry that exists if states can exercise unchecked sovereign authority over investors, once a dispute starts, a new imbalance arises. Procedurally, most international in-vestment agreements (IIAs) permit investors to commence claims against host states but do not contain a reciprocal right for the state to commence a claim against an investor. Substantively, most agreements impose obligations on states without imposing any obligations on investors. While states are obligated to abide by the terms of the agreement, and investors are implicitly (or sometimes explicitly) required to comply with host-state law, it is at best unclear whether states can submit counterclaims against investors when the substance of the investor-commenced dispute is a violation of an IIA. The core of an arbitral body’s jurisdiction is the parties’ consent to grant it authority over them. Thus, whether or not a counterclaim is possible depends on the breadth of an investor’s consent at the commencement of the claim. Certain treaties might have broad enough dispute resolution clauses to encompass counterclaims, but most do not. While the arbitral rules most likely to govern investment treaty disputes envision counterclaims, reference to them is a slim reed on which to base an investor’s consent. Moreover, counterclaims are intertwined with the law applicable to them, so that a state’s ability to submit counterclaims must be accompanied by agreement about the tribunal’s authority to apply that law. This Essay suggests that drafting treaties to permit closely related counterclaims would help to rebalance investment law by enabling both par-ties to bring all claims related to a dispute within a single tribunal’s authority.

INTERNATIONAL INVESTMENT LAW AS A GLOBAL PUBLIC GOOD

Barnali Choudhury

17 Lewis & Clark L. Rev. 481 (2013)

The key characteristic of a public good is that it serves the well-being of the public. Today, however, individual well-being is often conditioned not only on the receipt of state public goods, but also on the receipt of global public goods. In part, this is because the rise of globalization has resulted in complex interconnections between states. For this reason, global public goods can bestow benefits on much of the world’s population.

The system of international investment law (IIL) is slowly arising as one type of a global public good. Principally, the system of IIL meets the two characteristics of public goods: non-rivalrous and non-excludable. First, it is non-rival in that use of IIL by one state or one foreign investor does not detract from the system’s utility for other users. Second, with the adoption of over 3,000 international investment agreements (IIA), the system of IIL is becoming less of a club good and more of a system of law whose benefits are non-excludable. The standardization of many of the agreements’ provisions has resulted in commonalties despite the lack of a multilateral agreement and some have even argued that aspects of IIL have reached the status of customary international law. As a result, many of the benefits of IIAs transcend the individual agreements to be available to more than just signatories and their nationals.

In this sense, the system of IIL—the actual standards of protection, the meaning of those standards and the behavioral expectations they en-tail—has resulted in a type of global public good that benefits the world at large. These benefits include first, the provision of an overarching legal framework that guides foreign direct investment (FDI) activity and enhances its predictability and, second, the creation of a system that ensures that FDI benefits both states and investors alike.

The system of ILL, however, is failing to bestow both of its benefits. First, the system is exhibiting failures in indicators of legitimacy—for example by producing incoherent jurisprudence and using indeterminate rules—thereby limiting the system’s ability to establish an overarching framework for FDI activity. Second, a failure by arbitral tribunals to recognize the role of FDI in promoting a state’s development is hindering its ability to ensure that FDI benefits both investors and states. Viewing the system of ILL through a global public good lens thus highlights the system’s shortcomings, allowing for correction of these issues, and allows the system of ILL to attain the status of global public good that it deserves.

RECONCEPTUALIZING INTERNATIONAL INVESTMENT LAW: ITS ROLE IN SUSTAINABLE DEVELOPMENT

Howard Mann

17 Lewis & Clark L. Rev. 521 (2013)

This Essay provides an overview of the evolution of international in-vestment treaties since their origins in 1959. It focusses on the purposes, goals and rationales put forward for their development, and in particular their uptake by developing countries. In the face of growing criticisms and concerns of these treaties, the Essay argues that the orig-inal purposes can no longer justify the overall regime and the risks it poses to sustainable development through its opaque processes and vague standards. Rather, the author argues that the purpose and ra-tionale of the treaties must be shifted to fully encompass the central and critical relationship between FDI and sustainable development, particularly but not exclusively for developing countries. If this is done, options for reform are available. But anything less than this type of par-adigm shift cannot address the fundamental problems the regime faces as part of a modern public international component for globalization.

THE OECD GUIDELINES FOR MULTINATIONAL ENTERPRISES AS MECHANISMS FOR SUSTAINABLE DEVELOPMENT OF NATURAL RESOURCES: REAL SOLUTION OR WINDOW DRESSING?

Evaristus Oshionebo

17 Lewis & Clark L. Rev. 545 (2013)

In response to international calls for fostering sustainable development, the Organisation for Economic Co-operation and Development prom-ulgated the OECD Guidelines for Multinational Enterprises, which set forth principles and standards for the responsible conduct of multinational corporations. Specifically, these guidelines provide guidance on human rights, employment, industrial relations, and environmental protection concerns. While the Guidelines have a mechanism for assuring compli-ance, they are discretionary in nature, and therefore lack in effective-ness. This Article discusses the Guidelines’ provisions for sustainable development and assesses their impact on the global exploitation and extraction of natural resources. Recognizing that the Guidelines lack a strong enforcement mechanism, it then articulates strategies for en-hancing their effectiveness.

 

COMMENT

 

PAPERS OR PLASTIC: THE DIFFICULTY IN PROTECTING NATIVE SPIRITUAL IDENTITY

Brian Sheets

17 Lewis & Clark L. Rev. 591 (2013)

Sellers of Native ceremonies offer the opportunity to non-Natives to participate in ceremonial traditions with roots in Native spiritual com-munities—for a price. These “plastic shamans” have appropriated some Native ceremonies, sometimes with fatal results. Commodifying these spiritual practices removes important communal identities from their sources and furthers the stereotype that Native communities and their cultural practices are relics of the past—a concept reinforced through divorcing cultural practices from vibrant, modern Native societies struggling to maintain an identity. In response to ceremonial appropriation by plastic shamans, some Native spiritual communities have sued operators of botched ceremonies, and have further advocated for legal protection of Native ceremonies in Western legal concepts. However, Western law misses the mark. While spiritual identity is offered protection through exemptions to generally applicable laws, the Western requirement of a bright-line object to represent spiritual identity does not allow for the protection of an intangible ceremony from appropriation. Furthermore, Western concepts of intellectual property are market based, and directly conflict with the intent to protect Native ceremonies from being commodified. These conflicting values demonstrate the tension in protecting spiritual identity. And when Native cultural composition, transformative ceremonial practice, and distributions of ceremonies between Native groups are taken into account, the difficulty becomes even more apparent.

This Comment explores the approach of current Western laws seeking to protect cultural heritage, and then applies one Native proposal through a First Amendment analysis to demonstrate the difficulty of protecting Native spiritual identity in Western law. Some of the current means of protecting and preserving Native spiritual identity make ap-propriation even easier through documentation requirements. While there is a compelling reason to protect Native ceremonies from appro-priation, Western courts are limited in their ability to favor one group’s religious practices over another. This Comment concludes that while difficult to protect in law, public awareness is the most likely cure to prevent shopping for spirituality—enlightenment and self-actualization cannot be bought off-the-shelf with the clerk asking at checkout “paper, or plastic?”