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  • Rosmy Joan & Abhay Raj

Investment Agreements, Transnational Corporations, and Developmental Concerns Under the UN WG Report


Regulating corporations, principally those operating at a transnational level or those operating under international investment agreements (‘IIAs’), to minimise the adverse impact on the society caused due to their activities, has been a prime task under the expansive field of business and human rights (‘BHR’).[i] Different regulatory reports and reforms have been tried at all national,[ii] international, and local levels for years, and some are still underway. However, corporations, primarily those operating at a transnational level, have proved to be arduous regulatory targets and, reaching a regime that is both efficient and systematic has been an elusive target as far. Recently, the United Nations, in its seventy-sixth session, remarked its working group report on the issue of promoting and protecting human rights, sustainable developments for ‘transnational corporations and other business enterprises’ through the IIAs. This has been accompanied by various recommendations to the States for maintaining their domestic policy space while negotiating and reforming their IIAs.

This article considers various limitations in the United Nations report, primarily Principle 9 and whether bringing the proposed recommendations to reality is challenging or not. Principle 9 of the guiding principles on BHR plays a cardinal role in defining how States “should maintain adequate domestic policy space to meet their human rights obligations when pursuing business-related policy objectives […] through investment treaties or contracts”. The blog post specifically focuses on the sustainable development and human rights aspects that have been ascertained in the report, the consequence of the deficient nature of sustainable development, and the narrow scope of applicability of such reports in IIAs.

The article is divided into three parts. Section 1 briefly provides the context of sustainable development and human rights in investment arbitration. Section 2 mentions the lacunae of the nature of the report and its usage. Section 3 addresses the conclusion for the overall development of the investment arbitration paradigm, predominantly sustainable development, and human rights.

Section I: Sustainable Development and Investment Arbitration: The Context

According to Ukaga, Maser, & Reichenbach, Sustainable Development (‘SD’) has become a ubiquitous concept – as jargon for international agencies, as a topic of research for academicians, and as a slogan for many environmental and development activities.[iii] It is an ambitious idea that aims towards public interest at large and the well-being of future generations.[iv] With time, the meaning of ‘SD’ has changed, with the current regime focused on mitigating the negative externalities by business conduct.[v]

IIAs concluded before the year 2010, have been embodied with three characteristics as highlighted in the report: firstly, imbalance – IIAs provided for legally enforceable rights upon the investors, however, do not usually provide for any human rights or SD obligations, in particular; secondly, inconsistency – in regards to the legal system followed, during Investor-State Dispute Settlement (ISDS), the investors distrust the host States’ legal system and opt for arbitration, however, when communities affected pursue claims against the investors, these very investors plead for host States’ legal system; and lastly, irresponsibility – the unbalanced protection provided to the investors and general lack of transparency in the ISDS, provides incentives to the investors to be inadequately attentive to the human rights and SD. 

SD and IIAs have since 2010, proved to be integrating, even if this remain embryonic. For instance, the recent Final Dutch Model BIT, 2019, clears the intention for promoting SD. Pursuant to Article 3(4), the parties must indulge in promoting and sustaining investments that contribute towards the SD, and as provided under Article 3(1), “encourage the creation of favourable conditions for responsible investment in its territory that contribute to sustainable economic development” (emphasis supplied). SD, concurrently, as an idea and as an aim, has also been used as a criterion for defining investment in IIAs. For instance, the bilateral investment treaty (BIT) between Morocco and the Democratic Republic of Congo clearly articulated an investment where a company, amongst others, focuses on the SD of the host State.[vi] Under such support by both the host States and investors, even if the IIAs do not bound the investors (which is observed in a majority of the BITs) by SD, they do remain with policy functioning to adhere to the SD of the host State.

Despite such attempt through treaties and even after years of research, there is an underlying legal vacuum in between the accountability of businesses and their duties in IIAs.[vii] The best practices in relation to transparency through better definition of the scope of SD and human rights are only incorporated in a limited number of IIAs.

Section II: Lacunae in the Recommendations of the Report

This part of the post highlights the lacunae in the report in a threefold manner: firstly, the lacunae in relation to the ‘recommendatory nature’ of the SD and human rights obligations to be met by the business enterprises; secondly, difficulty in managing transnational organisations; and lastly, the non-consideration of the report towards COVID-19 crisis.

Recommendatory Nature of SD and Human Rights

The report suffers from a unique limitation: the recommendatory nature of SD and human rights. In general, the provisions entailing SD and human rights are formulated as mere recommendations. Such that, they posit the majority of issues in the enforcement of SD and human rights as a legally binding principle. While there has been a recent trend of SD and human rights in some of the IIAs, the same has by far majorly remained restricted to only the preamble of the IIAs. As such, the sustainable and human rights duties have been followed in a top-down approach, first addressed to the States, and subsequently recommended to the investors.[viii]

For instance, a perusal of the Brazil-India, 2020 BIT shows how the preamble mentions the recognition of mutual benefit between the investor and host State, including SD, implying the BIT’s focus on environmental concerns and that the parties must recognise such concerns. However, there lies a conundrum regarding the BIT’s exclusion of the concerns over human rights and SD explicitly. The preamble of the Brazil-India BIT does not specifically deal with the concerns of human rights (at all) and SD (in detail). However, in another statement of the preamble, it is mentioned, “the parties aim to reaffirm the right of parties to regulate the investment in their territories in accordance with their domestic laws and policy objectives”. This, indeed, signals towards the interpretation of the human rights and environmental concerns under the scope of “domestic laws and policy objectives”. It is prudent to note that the ‘definitions clause’ has no definitions related to what falls under human rights or SD, which may cause confusion between the parties. Observation, when made through considering the SD and human rights obligations, depict them to be only recommendatory and not, in particular, mandatory; and the same has been observed in other BITs.[ix] This hints that the investors must put their best effort in complying with the provisions, and as such, one can note it to be a duty towards maintaining due diligence.[x]

Soft SD and human rights duties in investment agreements definitely signal to the investors and the transnational business corporation regarding the social behaviour expected of them. In turn, it implies that these IIAs primarily cover those investors who adhere to the specified norms and adapt to the host States culture accordingly.[xi] Even if they are not legally obligatory, the provisions entailing (SD and human rights) establish certain standards that can be utilised for corporate’s self-regulation in the future.

As such, the author believes that the report is no doubt essential within the international investment law ambit, in which it addresses the recommendations to investors and States; however, because of the voluntary character, these recommendations are subject to intrinsic limitations.[xii]

Difficulty in Managing Transnational Corporations

Transnational organisations and their regulation by States, that may have dimensions like being adjudicative, prescriptive, or enforced, have remained controversial.[xiii] Several challenges, as also observed by various academicians,[xiv] in regulating the transnational business posit a triggering effect to the usage of SD, in compliance with the human rights model. These challenges include, for instance, the complex structures of businesses, long chain of supply, lack of the will (politically) from the host States’ side, an attempt to just promote foreign investment, reactive and slow nature of legal norms, corporations’ power, and lack of the rule of law.[xv] With that, several other continuing challenges include the race to the bottom in environmental and labour standards (much evident after the impact of COVID-19),[xvi] the gig economy emergence, the shrinking civic space, and the asymmetry between the transnational essence of business operations and the territorial essence of State regulations.

As previously mentioned in the introduction, the transnational corporations have in(advertently) weakened the role of regulatory powers of the States. In the present article, it is not possible to interact with the alternative regulatory methods and related literature in the disciples of BHR and SD due to space constraints. Thus, as such, the article does not focus on alternative regulatory approaches. These approaches include the usage of public procurement to encourage responsible business conduct, the usage of polycentric governance to fill the regulatory deficits, the traditional command and control method.[xvii]

Principle 9 of the BHR guiding principles lay down its focus on three pillars of the Guiding Principles, which are, State’s duty in protecting human rights, the corporate’s duty in respecting human rights, and the access to remedy. However, the report does not cater in particular to the difficulties arising in applying Principle 9 in relation to arduous management of transnational corporations; and the establishment of the three pillars is possible only when an attempt is made to cater to the above-mentioned limitation.

Non-Consideration of the COVID-19 Crisis

The report suffers from another major limitation, that is, the non-consideration of the COVID-19 crisis. While the report does talk about the crisis, no concrete emphasis has been laid down as such. The COVID-19 crisis acts as a catalyst in not including human rights and SD obligations in IIAs. The severe Asian financial crisis of 1997-98 crucially observed the decline and consequent demise of the developmental state architecture and constituted a lacuna in the promotion of SD and human rights. The neoliberal reforms discerned during the crisis was one, which coincided with the growth of neoliberal ideology, in an attempt to promote the State’s domestic and international regulation (in terms of finance). That is, the Asian crisis led to States needing urgent financial assistance from the international community, leaving them to the realms of the International Monetary Forum, World Bank, and the like.

The COVID-19 crisis observed a similar economic crisis, bringing the economic activity to a standstill. This, in turn, leads to the State’s focus on maximising the retreat of the State’s domestic regulation and expanding the neo-liberal policies.[xviii] In simpler words, the States are in desperate need of economic growth to overcome the brutal economic consequences of the crisis. Different studies have depicted that human rights and SD obligations have been restricted to only preambles of the IIAs, and do not per se impose obligations over the investors in an attempt to promote investment in the host State.[xix] While the human rights and SD obligations have been increased with time, the earlier BITs did not include such obligations (as is now needed because of the crisis) so as to enhance liberalisation, export-oriented growth, deregulation, and the promotion (economically), which are the parcel of all actors for overcoming economic difficulties.

Section III: Conclusion

Over the years, there has indeed been a growing trend towards the intersection of the field of business and human rights with investment arbitration. International regulatory regimes in the field of business and human rights have, however, remained fragmented, soft, non-existent, and ineffective till yet. Since no investment activity exists in a vacuum, academicians, studies, and reports have attempted to account for the prevalent milieu in which the investors and host States operate. The goal of bringing these two seemingly disparate domains of law (investment arbitration and SD, human rights) together is to stimulate investment and establish a balanced investment climate. A strong and functional human rights framework would boost investors’ confidence, raise awareness of the host State’s duties, and inform the transnational corporations about their lawful investment arbitration interests. As a result, a greater manifestation of human rights in investment arbitration is required to increase stakeholder engagement while still safeguarding the interests of individuals involved in the dispute.

The analysis made above shows the following:

  1. In an attempt to promote business and human rights responsibilities amongst the investors and host States, the report has attempted to provide suggestions for the investment arbitration regime. However, the success of such argumentation is now largely dependent upon the nature of the recommendations envisaged in the IIAs. These very SD and human rights recommendations are, in themselves, merely recommendatory and thus, limit themselves because of their voluntary nature.

  2. There is an underlying difficulty in managing transnational corporations, and the report, per se, does not cater to this limitation. The difficulty can be attributed to the prevalence of inherent circumstances of the corporations and host States’ will.

  3. At the same time, the report does not cater to the COVID-19 crisis and problems arising through it; and thus, the same has remained unexplored by far in the report. Independent of the report, the parties are recommended to follow the international law principles; however, the COVID-19 crisis and its implications for a wider period are to be definitely taken into consideration.


[i] 1 Nadia Bernaz, Business and Human Rights: History, Law and Policy- Bridging the Accountability Gap (Routledge UK: Taylor & Francis Group, 2016).

[ii] Surya Deva, Regulating Corporate Human Rights Violations: Humanizing Business,  Abingdon (UK: Routledge 2012) (hereinafter Deva 2012).

[iii] Ukaga, Okechukwu, Chris Maser, and Mike Reichenbach, Sustainable Development: Principles, Frameworks, and Case Studies, 12(2) Int’l. J. of Sustainability in Higher Education, Emerald Group Publishing Limited (2011), doi:10.1108/ijshe.2011.24912bae.005.

[iv] N. Schrijver, The Evolution of Sustainable Development in International Law: Inception, Meaning and Status 23–24 (Hague: Pocketbooks of the Hague Academy of International Law 2008); P-M. Dupuy & J. Viñuales, International Environmental Law 80 (Cambridge: Cambridge University Press 2015); P. Sands & J. Peel, Principles of Int’l. Environmental Law 206 et seq. (Cambridge: Cambridge University Press 2012).

[v] United Nations Environmental Program, Corporate Social Responsibility and Regional Trade and Investment Agreements, UNEP 13 (2011).

[vi] Bilateral Investment Agreement between Morocco and the Democratic Republic of Congo (30 Apr. 2018), Art. 1.1. 

[vii] T. Ishikawa, Counterclaims in Investment Arbitration: Is the Host State the Right Claimant?, Investors’ International Law (J. Ho & M. Sattorova eds, Oxford: Hart 2021); M. Sattorova, The Foreign Investor as a Good Citizen: Investor Obligations to do Good, in Investors’ International Law 50 (J. Ho & M. Sattorova eds, Oxford: Hart 2021).

[viii] Nitish Monebhurrun, Mapping Companies’ Duties in International Investment Law, 14 Brazilian J. Int’l L., 15 (2017), (hereinafter Monebhurrun 2017).

[ix] Nitish Monebhurrun, The Corporate Duty to Contribute to Sustainable Development from the Perspective of Investment Arbitration, 17(2) Asian Int’l Arb. J. 79, 79-102 (2021) (hereinafter Monebhurrun 2021).

[x] Supra Monebhurrun 2021.

[xi] Ibid.

[xii] Supra Monebhurrun 2017.

[xiii] Nadia Bernaz, Enhancing Corporate Accountability for Human Rights Violations: Is Extraterritoriality the Magic Potion?, 117(3) J. of Business Ethics 493, 493-511 (2013).

[xiv] Supra Deva 2012.; A. Clapham, Human Rights Obligations of Non-State Actors, (Oxford, UK: Oxford Univ. Press).; D. Kinley, J. Tadaki, From Talk to Walk: The Emergence of Human Rights Responsibilities for Corporations at International Law, 44 Va. J. Int. Law 931, 931–1023 (2004).; P. Muchlinski, Implementing the new UN Corporate Human Rights Framework: Implications for Corporate Law, Governance, and Regulation, 22 J. Bus. Ethics, 145–177 (2012).

[xv] Surya Deva, Business and Human Rights: Alternative Approaches to Transnational Regulation, 17(1) Annual Review of Law and Social Science 139, 139-158 (2021), (hereinafter Deva 2021).

[xvi] Ibid.

[xvii] Martin-Ortega O, O’Brien CM, Public Procurement and Human Rights: Opportunities, Risks and Dilemmas for the State as Buyer, Cheltenham (UK: Edward Elgar 2019).; D. Ashman, Civil Society Collaboration with Business: Bringing Empowerment Back, 29 World Dev., 1097–113 (2001).; Palazzo G, Morhart F, Schremph-Stirling J., Shopping for a better world: how consumer decisions can help to promote sustainability and human rights, In Business and Human Rights: From Principles to Practice, 200-209  (ed. D Baumann-Pauly, J Nolan, Abingdon, UK: Routledge 2016).

[xviii] J.K.M. Ohnesorge, Developing Development Theory: Law and Development Orthodoxies and the Northeast Asian Experience, J. Int. Law 28, 219 (2007).

[xix] Krommendijk, Jasper, and John Morijn, ‘Proportional’ by What Measure(s)? Balancing Investor Interests and Human Rights by Way of Applying the Proportionality Principle in Investor-State Arbitration, Human Rights in Int’l Invst. L. and Arb., Oxford University Press, (2021) <>.

This article has been authored by Prof. (Dr.) Rosmy Joan, Assistant Professor, National Law University, Jodhpur and Abhay Raj, Student, Jindal Global Law School, Sonipat. This blog is a part of RSRR’s Excerpts from Experts Blog Series, initiated to bring forth discussion by experts on contemporary legal issues.


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