How investment treaties undermine the voices of local communities
Erasmus Magazine | 19 June 2024
How investment treaties undermine the voices of local communities
by Manon Dillen
Dispute settlements in international investment law protect the rights of companies. However, they suppress the voice of local communities, as Stephanie Triefus found in her PhD research.
What is your research about?
“In my research, I investigated how international investment law suppresses the perspectives of local communities. Many investment treaties have a dispute settlement mechanism. For instance, the Energy Charter Treaty contains such a clause.”
“Under these treaties, foreign investors can sue states directly. These disputes often involve the rights and interests of the people who are affected by a project such as a mine. However they are not a party in the dispute, that is between the state and the investor. So local communities don’t really get a voice.”
Do you have an example of that?
“Yes. I conducted a case study on Roșia Montană, a mountainous area in Romania with gold and silver deposits. A Canadian company, Gabriel Resources, invested in the site in the late nineties. Developing this land into an open-cut mine would displace over two thousand people, pollute the area with cyanide, and destroy more than two thousand years of cultural heritage. The project received a lot of backlash, starting with the local community, and protests spread throughout the country and even got international support.”
“The government decided to put the issue to a vote in parliament, and the project did not go ahead. Gabriel Resources then sued Romania, claiming their permit was refused for political reasons. The company demanded four billion euros. The arbitration lasted for nine years.”
You interviewed witnesses that were involved in the arbitration. What did you learn?
“The state used witnesses from the local community in their defence. However, up until the the dispute, the state was as much a problem for the local community as the company was. So these people didn’t want to defend the state. Still, the witnesses felt they needed to participate in the arbitration, in order for their community’s voices to be heard.”
“At first glance, the involvement of these witnesses seems a way to account for the interest of the local community. But the local community members are only heard through the lens of state versus investor. So the tribunal doesn’t consider these perspectives in an influential way; they merely form the background story.”
It sounds like there is no real win for the state in these arbitrations.
“Indeed, the best outcome for a state is not to lose. The system gives enormous power to foreign companies. Foreign investors often challenge decisions that states make in response to democratic movements. Regulations or laws that, for instance, protect the environment, or the health of citizens, could potentially limit future profits of foreign investors, providing grounds for legal action under these treaties. So there can be tension between the state’s obligation to uphold human rights, and its obligation to foreign investors under these treaties.”
How do you see this power asymmetry played out in practice?
“Claims are based on the cost of what the company has already invested and the loss of future profits, so the amounts can be enormous. A claim of four billion euros is significant for any country to face. For Romania, it’s more than one percent of their GDP.”
“Faced with such a large claim, states change their behaviour. They might mitigate or revoke laws and regulations that favour the public interest. For instance, when the government thought Romania had lost the arbitration, there was significant discussion about restarting the mine project in Roșia Montană.”
Why is this system of international law in place at all, if it doesn’t serve the public interest?
“Scholars have traced the colonial origins of these systems. During colonial times, the Global North had a free run at resources in the South. After decolonisation, the Global North wanted to ensure that the relationship of extraction continued. So the narrative was created that companies don’t have adequate protection under the domestic court systems in countries in the Global South. Companies would only invest in the Global South if the host state guaranteed a certain level of security and protection through private arbitration.”
“That is how this system of international investment law came into place. It is now so embedded in the international economic system that it is not realistic to call for complete abolition. As scholars, we can try to work towards a fairer system by pointing out these inequalities.”
Has there been a decision in the Roșia Montană case?
“Yes, Romania won the case. Two out of three arbitrators voted for Romania. They found that this type of decision-making is inevitably partly political, and that it is acceptable as long as it is not arbitrary or prejudicial. It’s good news for the local community, though they are still in limbo as to what will happen, because the land is still owned by Gabriel Resources.”
Were there any challenging moments during your PhD?
“I was six months into the PhD when the pandemic hit. I was far away from my family, I had just moved to Rotterdam, and I didn’t know anyone. I felt like I was missing out on the typical experiences of academic life, such as conferences, meeting people, and building a network. But on the other hand we built our own community online, that has brought me a lot as well.”
And any highlights?
“Being able to travel to Romania, Italy and Australia was definitely a highlight. I met so many great and interesting people. I learnt qualitative empirical research skills, that are not typically part of research when studying international law, but which are so valuable.”
“Also, I got married three days after my defence. So it’s been quite the rollercoaster, but a wonderful experience.”
