Integrating Sustainable Development into International Investment Agreements

Tony VanDuzer is a professor and former Vice Dean of Research with the Faculty of Law (Common Law Section) at the University of Ottawa, as well as an Adjunct Research Professor at the Norman Paterson School of International Affairs at Carleton University in Ottawa. He has written widely on investment and trade in services issues and completed several major studies for the government of Canada, including an analysis of the impact of the WTO General Agreement on Trade in Services to health, education and social services in Canada (2004) and a study of Canadian foreign investment policy (2005). He has participated in technical assistance projects related to trade and investment issues in more than 25 transition and developing economies over more than 20 years. He was a Member of the Academic Advisory Council to Canada’s Deputy Minister for International Trade from 2002 to 2006. Penelope Simons is an associate professor at the Faculty of Law (Common Law Section), University of Ottawa, Canada. She has been engaged in research on corporate human rights accountability since December 1999 when she participated in the Canadian Assessment Mission to Sudan (Harker Mission), appointed by Canada’s Minister of Foreign Affairs and International Trade, to investigate allegations of slavery as well as links between oil development in Sudan and violations of human rights. Her research focuses on the human rights impacts of domestic and extraterritorial activity of extractive corporations, state responsibility for corporate complicity in human rights violations and the human rights implications of transnational corporate activity facilitated by international economic law. She is the co-author with Audrey Macklin of The Governance Gap: Extractive Industries, Human Rights, and the Home State Advantage (Routledge, forthcoming 2013) which examines the human rights implications of corporate activity in zones of weak governance and argues for home state regulation.Graham Mayeda is an associate professor at the Faculty of Law (Common Law Section), University of Ottawa, Canada. His recent work has focused on the impact of international trade and investment law on developing countries. He is also interested in foundational issues in international law such as the role of global justice in structuring international legal regimes. In particular, he is interested in issues of justice raised by developing countries and methods for interpreting international law that can be more responsive to these claims. While on sabbatical at New York University Law School in 2011, he conducted research on the influence of Canadian, American and UK anti-terrorism policy on poverty alleviation and development work conducted by these countries. More recently, he has studied how international and domestic administrative law regimes can be used to promote and protect the interests of developing countries in international legal regimes. Outside of international law, his research has branched into legal theory, theories of judgment, social rights and public protest, and environmental law. He has a background in philosophy and specialises in East Asian and contemporary European ethics.

'The Guide is an important contribution to the ongoing debate over sustainable development, democracy and foreign investment. It gives governments aspiring to achieve sustainable development their voice in a positive and productive manner.'

• ForewordAbout the authorsAcknowledgementsList of casesList of treatiesAbbreviations and acronymsPART I. BACKGROUND1. Introduction1.1 The rationale for a guide to international investment agreement provisions for developing countries based on sustainable development1.1.1 Exploring how international investment agreements can do a better job of promoting foreign investment and accommodating appropriate host state regulation1.1.2 Identifying emerging best practices1.1.3 Identifying new kinds of provisions1.1.4 Supporting developing country negotiators1.1.5 Enhancing policy coherence1.2 What is in the Guide?1.3 What is not in the Guide?2. The Context for International Investment Agreement Negotiations2.1 Existing IIA practice2.1.1 Why states sign IIAs2.1.2 Why investors want IIA protection2.2 Links between signing IIAs and attracting increased foreign investment2.2.1 Empirical evidence2.2.2 Problems with empirical models2.2.3 Problems with data2.2.4 IIAs with different strengths2.2.5 Alternative evidence2.2.6 Conclusion2.2.7 Guide features promoting investment2.3 Links between foreign investment and sustainable development2.3.1 Defining sustainable development and the right to development2.3.2 Current IIAs do not link development and foreign investment2.3.3 The costs and benefits of foreign investment for sustainable development2.4 Making choices: sustainable development in the sample provisions in the Guide2.4.1 A comprehensive and centrist approach to sustainable development2.4.2 Alternative approaches to sustainable development2.4.3 Supporting developing countries through co-operation and their integration into international decision-making2.4.4 Elements of sustainable development employed in the Guide’s sample provisions2.4.5 Summary: the principles of sustainable development reflected in the Guide2.4.6 Overview of mechanisms for promoting sustainable development discussed in the Guide3. Using the Guide3.1 Introduction3.1.1 General purpose of the Guide3.1.2 Using the Guide in IIA negotiations3.1.3 Using the Guide to better understand the relationship between IIA obligations and domestic law and other international obligations3.1.4 Using the Guide to better understand existing IIA obligations3.2 IIAs and domestic investment policy3.2.1 General considerations3.2.2 Specific examples of the interaction between IIA commitments and domestic investment policy3.3 IIAs and other international obligationsPART II. SURVEY OF IIA PROVISIONS AND COMMENTARY4. Provisions Defining the Scope of IIA Application and Other Preliminary Matters4.1 Introduction4.2 IIA preambles4.2.1 The role of preambles in IIAs4.2.2 Use and interpretation of preambles in IIA practice4.2.3 Discussion of options4.2.4 Discussion of sample provision4.2.5 Sample provision: preamble4.3 Definitions4.3.1 Definition of investment4.3.2 Definition of investor4.3.3 Sample provision: definitions4.3.4 Sample provision: denial of benefits4.4 Statement of objectives4.4.1 IIA practice4.4.2 Discussion of options4.4.3 Discussion of sample provision4.4.4 Sample provision: objective4.5 Scope of application4.5.1 IIA practice4.5.2 Discussion of options4.5.3 Discussion of sample provision4.5.4 Sample provision: scope of application5. Substantive Obligations of Host States Regarding Investor Protection5.1 Introduction5.2 Right of establishment5.2.1 IIA practice5.2.2 Investor obligations and the right of establishment5.2.3 Discussion of options5.3 National treatment5.3.1 National treatment is a relative standard5.3.2 IIA practice5.3.3 The basis of comparison and ‘in like circumstances’5.3.4 Limiting national treatment to specific matters, including pre- and post-establishment activities5.3.5 Excluding particular sectors or measures from national treatment5.3.6 The scope of the national treatment obligation as it applies to sub-national governments5.3.7 Interaction between national treatment and MFN5.3.8 Discussion of options5.3.9 Discussion of sample provision5.3.10 Sample provision: national treatment5.4 Most favoured nation (MFN)5.4.1 MFN is a relative standard5.4.2 IIA practice5.4.3 Limiting MFN to specific matters, including pre- and post-establishment activities5.4.4 Importation of standards from other treaties5.4.5 Discussion of options5.4.6 Discussion of sample provision5.4.7 Sample provision: most favoured nation treatment5.5 Fair and equitable treatment and the minimum standard of treatment5.5.1 Introduction5.5.2 IIA practice5.5.3 Minimum standard of treatment required by customary international law versus an autonomous treaty standard5.5.4 Evolution of the customary international law minimum standard5.5.5 What the FET standard requires5.5.6 Discussion of options5.5.7 Discussion of sample provision5.5.8 Sample provision: minimum standard of treatment5.6 Limitations on expropriation and nationalisation5.6.1 IIA practice5.6.2 Understanding what constitutes an expropriation5.6.3 Understanding what compensation is required to be paid5.6.4 Discussion of options5.6.5 Discussion of sample provision5.6.6 Sample provision: expropriation and compensation5.7 Compensation for losses5.7.1 IIA practice5.7.2 Discussion of options5.7.3 Discussion of sample provision5.7.4 Sample provision: compensation for losses owing to armed conflict or civil strife5.8 Free transfer of funds5.8.1 IIA practice5.8.2 Discussion of options5.8.3 Discussion of sample provision5.8.4 Sample provision: free transfer of funds5.9 Performance requirements5.9.1 Some performance requirements are prohibited by the WTO Agreement on Trade-related Investment Measures (TRIMs)5.9.2 Some performance requirements are prohibited by the WTO General Agreement on Trade in Services (GATS )5.9.3 IIA practice5.9.4 Discussion of options5.9.5 Summary5.10 Transparency5.10.1 IIA practice5.10.2 Transparency obligations deriving from FET5.10.3 Discussion of options5.10.4 Discussion of sample provision5.10.5 Sample provision: transparency5.11 Entry and sojourn of foreign nationals and restrictions on nationality requirements for senior management5.11.1 IIA practice5.11.2 Discussion of options5.11.3 Summary5.12 Reservations and exceptions5.12.1 IIA practice regarding exceptions5.12.2 IIA practice regarding the right to regulate5.12.3 IIA practice regarding reservations5.12.4 Discussion of options5.12.5 Discussion of sample provisions5.12.6 Sample provision: reservations for non-conforming measures5.12.7 Sample provision: general exceptions6. New Provisions Addressing Sustainable Development 6.1 Making the link between investment and sustainable development 2526.2 The challenges of regulating foreign investors and holding transnational corporations accountable6.2.1 Weaknesses in international law6.2.2 Weaknesses in domestic law in host states and investors’ home states6.2.3 Investor–state tribunals do not give priority to considerations other than investment protection6.3 Different approaches to integrating foreign investment and sustainable development6.3.1 Using domestic laws, regulations and institutions to promote investor compliance with sustainable development policies6.3.2 Integrating sustainable development into an IIA6.3.3 The elements of sustainable development addressed in the sample provisions6.4 Overview of Guide sample provisions promoting sustainable development6.4.1 Summary of the provisions6.5 Assessing the costs and benefits of the sample provisions in the Guide6.6 Sustainability assessments6.6.1 Sustainability assessment in practice6.6.2 Policy discussion6.6.3 Discussion of options6.6.4 Discussion of the sample SA provisions6.6.5 Sample provision: standards for sustainability assessment of investments6.6.6 Sample provision: pre-establishment sustainability assessment process6.6.7 Technical assistance6.7 Investor obligation to comply with the laws of the host state6.7.1 IIA practice6.7.2 Discussion of options6.7.3 Discussion of sample provision6.7.4 Sample provision: obligation to comply with the laws of the host state6.8 Investor obligation to respect internationally recognised human rights and undertake human rights due diligence6.8.1 The impacts of foreign investment6.8.2 The UN Guiding Principles on Business and Human Rights6.8.3 IIA practice6.8.4 Discussion of options6.8.5 Discussion of sample provision6.8.6 Sample provision: obligation to respect internationally recognised human rights and undertake human rights due diligence6.9 Investor obligation to refrain from the commission of, or complicity in, grave violations of human rights6.9.1 Discussion of options6.9.2 Discussion of sample provision6.9.3 Sample provision: obligation not to commit, be complicit in or benefit from grave violations of human rights6.10 Investor obligation to comply with core labour standards6.10.1 IIA practice6.10.2 Discussion of options6.10.3 Discussion of sample provision6.10.4 Sample provision: obligation to comply with core labour standards6.11 Investor obligation to refrain from acts, or complicity in acts, of bribery and corruption6.11.1 IIA practice6.11.2 Discussion of options6.11.3 Discussion of sample provision6.11.4 Sample provision: obligation to refrain from acts, or complicity in acts, of bribery and corruption6.12 Other rights and obligations of party states6.12.1 IIA practice6.12.2 Discussion of options6.12.3 Summary6.13 Enforcement of investor obligations6.14 Criminal sanctions6.14.1 IIA practice6.14.2 Discussion of options6.14.3 Discussion of sample provision6.14.4 Sample provision: obligation to provide criminal offences, enforcement and sanctions for grave violations of human rights and corruption6.15 Grievance procedure and other measures to enforce the management plan produced in the sustainability assessment6.15.1 Discussion of options6.15.2 Discussion of sample provisions6.15.3 Sample provision: obligation to establish a grievance procedure6.15.4 Sample provision: compliance with management plan6.16 Civil liability of investors6.16.1 Enterprise liability6.16.2 Liability insurance6.16.3 Posting a bond or guarantee6.16.4 IIA practice6.16.5 Discussion of options6.16.6 Discussion of sample provision6.16.7 Sample provision: obligation to provide for civil liability of investors6.17 Counterclaims by states in investor–state arbitration6.17.1 IIA practice6.17.2 Discussion of options6.17.3 Discussion of sample provision7. Dispute Settlement7.1 Investor–state dispute settlement7.1.1 Costs and benefits of investor–state arbitration7.1.2 Statistics show increasing use of investor–state arbitration7.1.3 Dissatisfaction with investor–state arbitration7.1.4 Features of investor–state dispute settlement procedures7.1.5 Discussion of options7.1.6 Discussion of sample provisions7.1.7 Sample provisions: investor–state dispute settlement7.2 State-to-state dispute settlement7.2.1 IIA practice7.2.2 Discussion of options7.2.3 Discussion of sample provision7.2.4 Sample provisions: state-to-state dispute settlement procedure8. Investment Promotion and Technical Assistance8.1 Investment promotion8.1.1 IIA practice8.1.2 Possible costs and benefits of investment promotion commitments8.1.3 Other issues in the design of investment promotion commitments8.1.4 A role for investors’ home state in investment promotion8.1.5 Relationship between investment promotion and other IIA provisions8.1.6 Discussion of options8.1.7 Discussion of sample provision8.1.8 Sample provision: assistance and facilitation of foreign investment8.2 Technical assistance8.2.1 IIA practice8.2.2 Challenges in drafting a technical assistance provision8.2.3 Discussion of options8.2.4 Discussion of sample provision8.2.5 Sample provision: technical assistance9. Final Provisions: Commission, Entry into Force and Termination9.1 Introduction9.2 Commission9.2.1 IIA practice and options for institutional arrangements9.2.2 Discussion of sample provision9.2.3 Sample provision: commission9.3 Termination of IIAs9.3.1 IIA practice9.3.2 Discussion of options9.3.3 Discussion of sample provision9.3.4 Sample provision: application and entry into force and terminationAppendix 1. Review of Evidence Regarding Whether IIAs Encourage Investment Inflows to Signatory CountriesAppendix 2. Overview of the General Agreement on Trade in ServicesGlossaryBibliographyIndex