International investment law and the [human right to] land

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By law, trade agreements are supposed to respect the obligations in the field of human rights and other peremptory norms. However, the reality is different.

HIC-HLRN | March 2015

Habitat International Coalition-Housing and Land Rights Network has just published the English-language version of its compilation of papers and presentations of the MENA Land Forum (2009–13).

International investment law and the [human right to] land

Kinda Mohamedia

Social movements and civil society concerned with on the rights to land, sovereignty, water and housing face a priority and challenge to monitor the effects of international trade and investment that are rapidly evolving through agreements concluded on the bilateral, regional and multilateral levels. In many cases, these investment agreements have the purpose and/or effect of hijacking the international human rights system. Trade and investment agreements often erode human rights implementation in direct and indirect ways, because they:

- Are developed within a framework that protects the investor under contract, at the expense of the rights of groups and stakeholders at the local and national level;
- Often lead to reduction in the public space available to reconsider and debate national policy, including land policy and land rights;
- Tend to undermine efforts to support and enhance the role and well-being of farmers;
- Often link many areas within a single policy, depending on the situation at the time of their adoption, and reduce the possibility for sitting or successive governments to change practices afterward in favor of more-enlightened policies implementing human rights;
- Generally lack investor responsibility, especially where local conditionalities are ineffective, unenforced (e.g., symbolic, faulty or otherwise-inadequate environmental-impact assessments);
- Evade existing human rights obligations of the state, despite their enshrinement in Public International Law, customary and peremptory norms on international law.

In the legal theory on the hierarchy of laws, [1] human rights treaties take precedence over trade agreements. By law, trade agreements are supposed to respect the obligations in the field of human rights and other peremptory norms. [2] However, the reality is different.

Basic Features of Investment Agreements

In the review and monitoring of trade and investment agreements, it is important to note the various forms and types of agreements with states in our region. These affect national laws and jurisprudence related to the protection of investment and foreign investors that evolve through bilateral agreements or chapters within the free trade agreements. These investment-protecting agreements reserve special privileges and extend disproportionate advantages to foreign investors. While bilateral investment agreements may vary from case to case, most usually provide the following rights to the investor:

- They apply broad concepts to identify anyone who is an investor;
- They extend to investor specific rights to:
> Full restoration of profits and other funds expended in the investment;
> Reciprocity with local investors or investors from other countries (equal or most-favored nation treatment);
- Compensation in the event of nationalization or expropriation;
- "Fair and equitable treatment" and/or “full protection and security” (nonspecific concepts subject to interpretation in the context of arbitration between parties).

Multiplicity of Arab States’ Bilateral Investment Agreements
Egypt 91
Kuwait 40
Lebanon 48
Morocco 40
Sudan 13
Tunisia 54
U.A.E. 21
Yemen 20

Source: UNCTAD.

These trade and investment agreements also give the investor the right to sue the state in international arbitration forums. Therefore, they provide legal protection to foreigners and contracts with investors for investors, raising their standing within and vis-à-vis states. This raises the legal value and status of these contracts as “international agreements,” so that investor contracts may even evade the application of national laws. However, in the case of a bilateral agreement between the investor and the host country, the investor benefits from the protections contained in the investment agreements. Bypassing local law, these agreements also allow the investor to take her/his case to an international dispute settlement mechanism, outside the jurisdiction of the territorial state.

While investment agreements impose certain restrictions on the treatment of governments and foreign investors or companies owned by foreign entities, these agreements do not put sufficient or explicit conditions or obligations on the investor. [3] The United Nations review in 2001 for many of the investment agreements and found few examples of obligations imposed on investors. [4]

Some analysts point to the possibility of reading a number of basic and responsibilities imposed on the investor in the framework of the concepts and obligations included in the investment-protection agreements. Professor Peter Muchlinski refers to the “fair and equitable treatment” concept, which guarantees the investment agreements, can be read to mean that the foreign investors also must to refrain from illegal practices such as: lack of transparency in the conduct of business in the host country; or use of (taking or paying) bribes, or corruption. [5] The legal concept of "pre-incorporation" (pre-establishment) refers terms of the organization, capitalization and management of a future corporation for investments and investors from any party (member state or other party to a trade or investment agreement) entering the territory of another party. Pre-incorporation allows investors of each party to agree to make investments in the other’s territory on terms no less favorable than those applicable to any domestic investors (the principle of national treatment), or any investors from other countries (most-favored nation [MFN] principle). A "preincorporation" investment agreement bans states from imposing certain performance requirements on investors as a condition for the establishment of investment. The concept of "pre-incorporation" is rarely applied, because every country has sensitive sectors, where foreign investment is not allowed, or only under certain conditions. Usually countries try to include a list of measures (for example, laws and regulations) or entire sectors excepted from the application of the principle "pre-incorporation."

Dispute Resolution Mechanisms

Bilateral investment agreements investor granted asylum to a number of mechanisms and dispute arbitration of international disputes, including United Nations Commission on International Trade Law (UNCITRAL) [6] and the International Chambers of Commerce (ICC)/World Chambers Federation, [7] and the International Centre for Dispute Resolution (ICDR). [8] Disputes in the states parties to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (CSID) [9] may resort to the International Centre for Settlement of Investment Disputes (ICSID), [10] part of the World Bank Group. The majority of Arab countries are members of the Convention and, thus, it is possible for investors protected by bilateral investment agreements to raise the cases against those states before ICSID. [11] (Several such cases have been brought against Arab countries, including ten against Egypt [12]). The 263 percentage of cases registered in 2013 involving a State Party from MENA considerably exceeds the overall percentage of such cases in ICSID’s history (20% in 2013, compared to 11% overall). Those cases involved Egypt (six arbitrations against Egypt, one each against Jordan and Tunisia). [13] ICSID had registered a total of 437 cases (2014) and 497 (2015) under the CSID Convention and Additional Facility Rules. 19% (2014) and 18.3% (2015) investment contracts with host state; 63% (2014) and 61.8% (2015) were BITs. Out of eight regions of the world, MENA had 11% (2014) and 10% (2015) of cases in FY 2014.

In the case of optional arbitration, three parties carry out the arbitration (one chosen by the investor, another by the respondent state and the third is determined by the arbitrators who are selected). Of arbitrators, conciliators and ad hoc committee members appointed in cases, 4% (2014 and 2015) came from MENA, while Europe and North America held 68% (2014) and 69% (2015). [14] All of MENA, SubSaharan Africa, Eastern Europe and Central Asia have been under-represented in appointments by both parties in the overall historical ICSID picture.

Transparency is lacking. Decisions and legal analysis in these cases are not disclosed without the consent of the parties in the case (i.e., the investor and the state). Lack of transparency in these forums makes it extremely difficult to track down the legal issues and concepts that form the basis of international law system in the field of investment and the approach of the arbitrators. Therefore, the parties often do not announce the issues and, in many cases, the cases remain unknown to the public.

Land-reform measures affecting the right to the land currently are being influenced by foreign investors in some countries, and violations treaty obligations (e.g., via dispossession and forced eviction) under the bilateral investment agreements. Several other cases were heard, but not announced, and remain unknown.

Some Well-known Cases:

1. British investors filed a lawsuit against the Venezuelan government in 2005 after the government-authorized redistribution of investor-claimed land to landless citizens.

2. The Government of Namibia has faced German investors’ BIT land claims to end land-redistribution program. [15]

3. A confidential arbitration commenced in 2001 by a Swiss businessman under the terms of the Switzerland-South Africa bilateral investment treaty continued until July 2003. The tribunal found South Africa to have failed to offer sufficient police protection and security to the Swiss owner of a proposed conference center and game farm located in the northeast of the country. [16]

4. The 1992 case of Egypt and the company Southern Pacific Properties (SPP) involved the Hong Kongbased company, company against Egypt through the International Centre for Dispute Resolution (ICSID). The jury approved of the importance of taking into consideration Egypt’s obligations UNESCO World Heritage Protection treaties. But this approach does not justify the cancellation of Egypt’s investment contract, as it was concluded in advance that SPP was a tourist operation, rather than an enterprise in the cultural heritage field. [17] First, SPP and SPP (ME) commenced an ICC arbitration, and obtained an award of US$ 12.5 million in damages. However, French courts later annulled that award on jurisdictional grounds. In a subsequent ICSID arbitration, the Tribunal awarded US$ 27.6 million to the claimants. [18]

In this situation:

- The private sector has the ability to lure states to costly stakes that may affect the state budget.
- The private investor has the right to sue the host country the circumvent legislation or regulations for economic, social or cultural reasons such that shrink the democratic process and the role of the state.
- Some of what are being traded are the prospects of democratic policy making and implementing human rights obligations at the national level.

Human rights organizations must be aware that the international arbitration agreements on investment are the main international channel through which to challenge the reform processes in developing countries (and certain developed ones). They open the way for foreign investors to challenge land reform and other redistributive initiatives, including those designed to support the indigenous peoples and local communities. This process prevails outside the framework of the legal system and the system of national and constitutional courts of the affected states. Consequently, the BITs have the ability dramatically to reduce the political space available to governments and their ability to take measures to fulfill its international human rights obligations.

Human Rights in Arbitration Cases

In cases that held international arbitration between the foreign investor and the host state issues, the key question is whether those who are not party to the arbitration rights (such as communities or individuals living under the jurisdiction of the state) may be relevant in resolving such disputes and, thus, arbiters must take into account the rights of the arbitration process.

Overall, the arbitrators in disputes relating to investment agreements are not assigned to consider violations related to human rights compliance. Specializes arbitration cases are held to address any violation of investment-protection agreements.

However, this does not mean that the legal system of human rights cannot form part of the necessary background, including compliance with commitments contained in the investment agreements.

Recommendations:

- Clarify the right of the parties to invest to take further steps in the field of public policy and legislation reform in the interest of human rights obligations of CSID, and through the legal protection of this right from within the conventions.
- Clarify the meaning of investors’ "legitimate aspiration" (legitimate expectation) for parties to ICSID and to determine the rights of both parties to take measures to uphold binding human rights obligations.
- Although most of the bilateral investment agreements do not have sufficient content relating to the responsibility of the investor, several proposals call for introducing treaty obligations and commitments to ILO standards and UN human rights treaties.
- In 2008, the Government of Norway has a model BIT that authorizes arbitrators to interpret investor responsibility, including material related to social responsibility, transparency, accountability and legitimacy, not to engage in corruption. It also enables the arbitrators to take into account both the investor’s interests and the state’s demand for public interest regulation. Convention encourages compliance with the principles of the OECD Guidelines for Multinational Enterprises. [19] The Norwegian Model BIT uses generic language, but makes clear that the standard of treatment owed is that already imposed by customary international law. [20]
- Numerous proposals in academic literature on investment agreements give groups of citizens the right to establish a "counter-claims" against foreign investors over human rights violations. The Special Rapporteur on Business and Human Rights reported to the Human Rights Council in 2008 that the rights and protections of the transnationals (multinational) has expanded dramatically, especially through investment agreements bilateral, while the legal framework governing the performance and responsibilities of these companies did not evolve in a similar way. [21]

These legal interpretations take an approach that harmonizes with other prevailing legal regimes. As human rights law is paramount, human rights obligations (e.g., prohibiting forced eviction, protecting livelihoods and effecting reparations for violations) are self-executing and always applicable in trade and investment agreements.

Related References:

- 3D Human Rights Trade, The Global Land Grab: A Human Rights Approach (2009), at: http://www.3dthree.org/pdf_3D/globallandgrab_seminar2009_programme.pdf.
- Cotula, Lorenzo, Sonja Vermeulen, Rebeca Leonard and James Keeley. Land Grab or Development Opportunity? Agricultural investment and international land deals in Africa (Rome: FAO, IIED and IFAD, 2009), at: http://www.fao.org/3/a-ak241e.pdf.
- De Schutter, Olivier. “The Green Rush: The Global Race for Farmland and the Rights of Land Users,” Harvard International Law Journal, Vol. 52 (summer 2011), at: http://www.harvardilj.org/wpcontent/uploads/2011/07/HILJ_52-2_De-Schutter1.pdf.
- Lipton, Michael. Why poor people stay poor: a study of urban bias in world development (London: Temple Smith, 1977).
- Peterson, Luke Eric and Ross Garland. “Bilateral Investment Treaties and Land Reform in Southern Africa” (Montréal: Rights & Democracy, 2010), at: https://www.international-arbitration-attorney.com/wpcontent/uploads/bilateral-investment-treaties-and-land-reform-in-southern-africaluke-eric-peterson-and-rossgarlan.pdf.

Footnotes:

[1Ian Seiderman, Hierarchy in International Law: the Human Rights Dimension, School of Human Rights Research Vol. 9 (April 2001), at: http://www.intersentia.co.uk/searchDetail.aspx?bookid=4400.

[2Tom Moerenhout, “The Obligation to Withhold from Trading in Order Not to Recognize and Assist Settlements and their Economic Activity in Occupied Territories,” Journal of International Humanitarian Legal Studies Volume 3, Issue 2, 2012 (2014), 344–88, at: http://booksandjournals.brillonline.com/content/journals/18781527/3/2.

[3Luke Eric Peterson, “Human Rights and Bilateral Investment Treaties: Mapping the role of human rights law within investor-state arbitration” (Montréal: Rights & Democracy, 2009), at: http://publications.gc.ca/collections/collection_2012/dd-rd/E84-36-2009-eng.pdf; Luke Eric Peterson, “Human Rights and Bilateral Investment Treaties” (Montréal: Rights & Democracy, 2009), at: http://publications.gc.ca/collections/collection_2012/dd-rd/E84-36-2009-eng.pdf.

[4UNCTAD, Host Country Operational Measures, UNCTAD Series on issues in international investment agreements (New York and Geneva: UNCTAD, 2001), at: http://unctad.org/en/docs/psiteiitd26.en.pdf.

[5Peter Muchlinski, “Caveat Investor: The Relevance of the Conduct of the Investor under the Fair and Equitable Treatment Standard,” International and Comparative Law Quarterly, Vol. 55, No. 3 (2006), pp. 527–57.

[6See UNCITRAL website, at: http://www.uncitral.org/uncitral/en/index.html.

[8See ICDR website, at: https://www.icdr.org/icdr/faces/home;jsessionid=GVKHVDxNqvQVn14rLJjHTYFnyqLPd4nJ9D9WtHMR1vGwhbjCh h3t!- 218693490?_afrLoop=1354233282337926&_afrWindowMode=0&_afrWindowId=null#%40%3F_afrWindowId%3Dn ull%26_afrLoop%3D1354233282337926%26_afrWindowMode%3D0%26_adf.ctrl-state%3D16rfum4yhj_4.

[9ICSID Convention, Regulations and Rules (Washington: ICSID, 2006), at: 266 https://icsid.worldbank.org/ICSID/StaticFiles/basicdoc/CRR_English-final.pdf.

[11Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Morocco, Oman, Qatar, Saudi Arabia, Sudan, Syria, Tunisia, Yemen. “List of Contracting States and Other Signatories of the Convention (as of April 11, 2014),” at: https://icsid.worldbank.org/apps/ICSIDWEB/icsiddocs/Documents/List%20of%20Contracting%20States%20and%2 0Other%20Signatories%20of%20the%20Convention%20- %20Apr%202014.pdf?Mobile=1&Source=%2Fapps%2FICSIDWEB%2Ficsiddocs%2F%5Flayouts%2Fmobile%2Fdi spform%2Easpx%3FList%3De03afb6f%2Dab19%2D4448%2Dae95%2D90f2381bfb8f%26View%3D6d8f0662%2D 3bda%2D4253%2D83bc%2D256b746b5f75%26ID%3D2%26CurrentPage%3D1.

[12 “The ICSID Caseload – Statistics (Issue 2014-2),” at: http://wwwwds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2015/01/12/000442464_20150112143506/Rend ered/PDF/936220NWP0Box30ats020140200English0.pdf; “The ICSID Caseload – Statistics (Issue 2014-2),” at: https://icsid.worldbank.org/apps/ICSIDWEB/resources/Documents/ICSID%20Web%20Stats%202015- 1%20(English)%20(2)_Redacted.pdf.

[13Herbert Smith Freehills, Matthew Weiniger and Hannah Ambrose,”ICSID publishes latest caseload statistics,” (13 February 2014), at: http://www.lexology.com/library/detail.aspx?g=da68a333-2662-4bce-8663-719656c0dc45.

[14Ibid., p. 18.

[15Damon Vis-Dunbar and Luke Eric Peterson, “German nationals challenge Namibia’s land reform as discriminatory,” Investment Treaty News (12 July 2007), at: http://www.iisd.org/itn/wp-content/uploads/2010/10/itn_july12_2007.pdf.

[16Luke Eric Peterson, “Swiss investor prevailed in 2003 in confidential BIT arbitration over South Africa land dispute; award remains unpublished, but IAReporter investigation unearths significant details about arbitration outcome,” Investment Treaty News (22 October 2008).

[17International Centre for Settlement of Investment Disputes, Southern Pacific Properties (Middle East) Limited Arab Republic of Egypt Case No. ARB/84/3, at: https://icsid.worldbank.org/ICSID/FrontServlet?requestType=CasesRH&actionVal=showDoc&docId=DC671_En&ca seId=C135.

[18“Case summary: Southern Pacific Properties (Middle East) Ltd. V Arab Republic of Egypt,” prepared in the course of research for Sergey Ripinsky with Kevin Williams, Damages in International Investment Law (London: British Institute of International Law [BIICL], 2008), at: http://www.biicl.org/files/3934_1992_spp_v_egypt.pdf.

[19OECD Guidelines for Multinational Enterprises (Paris: OECD, 2011 edition, 2011), at: http://www.oecd.org/daf/inv/mne/48004323.pdf.

[20Article 5 of the Norwegian Model BIT.

[21“Report of the Special Representative of the Secretary-General on the issue of human rights and transnational corporations and other business enterprises, John Ruggie: Protect, Respect and Remedy: a Framework for Business and Human Rights,” A/HRC/8/5, 7 April 2008, at: http://daccess-ods.un.org/access.nsf/Get?Open&DS=A/HRC/8/5&Lang=E.

source: HIC-HLRN