Conceptualizing the Right to Dev. within the Intl. Investment Law Framework – Challenges & Solutions
The complete title of the article is "Conceptualizing the Right to Development within the International Investment Law Framework – Challenges and Solutions"
The concept of development encompasses economic, social, cultural, and political elements. This concept, when translated into a right, is an inalienable human right for individuals and groups alike. States rave about the inflow of foreign investment for promoting development. Development cannot be achieved without adequate investment and investment cannot be made in a place where no prospects of development are seen. Often debated on whether they are friends or foes, development and foreign investment have had a love-hate relationship post the World Wars. Academia and industry have tried to find if there is a gap between development and foreign investment, and if there does exist a gap, how there may be constructed a bridge. This essay seeks to conceptualize the right to development within the current international investment law framework, while also predicting the possible challenges and providing the feasible solutions.
The importance of development in all its dimensions – social, economic, cultural, and political – and the right of the people to participate in, contribute to, and enjoy development has been emphasized through multiple international instruments such as the 1945 UN Charter (Art. 55), the 1948 UDHR (Art. 28), the 1966 ICESCR (Art.1) and the emphatic 1986 UN Declaration on the Right to Development. It was also later crystallized in the Millennium Development Goals Agenda, 2015 and the Sustainable Development Goals Agenda, 2030.
The third-generation human right concept of the Right to Development (‘R2D’), though suffering from the claim of non-justiciability and diffused collective interest, when viewed through the lens of 17 Sustainable Development Goals (‘SDG’) make undeniable reference to foreign investment. In simple terms, R2D does not have a single right-holder and an accountable duty-bearer. The R2D belongs to individuals and groups and the duty to ensure the R2D of the said right-holders vests with the State. This implies that it may be hard to effectuate the R2D through State machineries. However, the SDG which form a major chunk in investment treaty negotiations does emphasize the need for international partnerships to achieve the goals, as may be observed in Goal 17.
Yet, international investment law (‘IIL’), at all stages of its scope and operation, dilly-dallies and does not seem to extend an embracing arm to the idea of fructifying R2D. Hitherto, completely, or partially, R2D has been conceptualized within the IIL framework, at different stages of the investment process, in the following manner –
Negotiation and Documentation Stage
The preliminary stages of the investment process such as BIT or trade agreement negotiation and reducing the terms of trade on pen and paper have seen incidental references to development. Certain Trade Agreements such as the Cartagena Agreement, Free Trade Agreement between EU & Central America, EU-Columbia-Peru-Ecuador etc. recognize developmental concerns. The modern Bilateral Investment Treaties (hereinafter BITs) such as Brazil-India BIT (2020), and Iran-Slovakia BIT (2016), etc. include SDG within the preambular and operational portions. The presence of the SDG provisions, though not directly recognizing the R2D of the people of the host country, acts as a guiding beacon in terms of the realization of the R2D. The inclusion of SDG provisions in the BITs can benefit both the Investor and the host State. While the Investor is blessed with the tag of being a responsible business while being prudent in potential risk management, the host State can also ensure that the collective interests of its people are furthered. The introduction of SDG provisions in the operational provisions becomes the deal-maker or the deal-breaker for several investment-related disputes. In the preambular provisions, SDG serves a more subtle, yet significant role of being a guiding beacon for interpretation. The inclusion of clauses that are intricately related to R2D and SDG such as human rights impact assessment, social impact assessment, respect and furtherance of those rights and principles enshrined in the UDHR, ILO’s 1998 Declaration on Fundamental Principles and Rights at Work and it’s 2022 follow up and OECD Voluntary Guidelines for Multi National Enterprises etc. strengthen ties between development and foreign investment to some extent.
Interpretation and Dispute Resolution Stage
International investment law, suffering from a legitimacy crisis, also bears problems in interpretation during its implementation and dispute resolution stages, whenever elements of public health, safety, developmental concerns etc. of the host state arise. Such issues are mostly sought to be addressed through the supra-national international investment arbitration framework. Be it the Calvo Doctrine versus International Minimum Standards debate, or the Fair and Equitable Treatment Standard interpretation, the role of the investment arbitral tribunal in shaping the jurisprudence of IIL is overarching. In the context of dissecting R2D within the IIL framework, the arbitral tribunals have faced the following issues:
Investment arbitration tribunals have faced criticism for their conflicting and contradicting decisions and interpretation trends, which can even be seen in the conceptualization of development within the IIL framework. For instance, the ICSID Tribunal in Salini v. Morocco included the need for the economic development of the host country as a precursor for a particular investment to qualify as an ‘investment’ within the IIL framework. However, in Biwater Gauff v. Tanzania and MHS v. Malaysia, ICSID has shown divergence from the idea of including economic development of the host country as criteria for investment. Interestingly, in Saba Fakes v. Turkey, ICSID relied on Salini without including the economic development criteria; thus raising a clarion call for consistency in treaty interpretation vis-à-vis the recognition to development. The idea of in dubio pro investment discussed in SGS v. Philippines requires a restatement to in dubio pro development i.e., when in doubt, adopt that version which supports development by the arbitral tribunals for the successful conceptualization of R2D within IIL framework. Similarly, the principle of systemic integration envisaged under Art. 31(3) of the Vienna Convention on Law of Treaties may be adopted by arbitral tribunals to conceptualize the linkage of R2D with IIL. The principle of systemic integration is the tool using which the international courts and tribunals can harmoniously interpret two conflicting or seemingly conflicting treaty provisions in line with the general body of international law. The usage of this principle will ensure more consistency and coherence in the thought process of investment tribunals when it comes to integrating investment and development.
A frequent criticism against the investment arbitration regime is that the arbitrators are concentrated to a particular geography, gender, race, and politico-economical ideology. Latin American countries, South Africa etc. have denounced the ICSID Convention citing their investor-centric progression in dispute resolution. Advocates and arbitrators fail to appreciate that as much as cross-border investment is transnational in nature, so is the concept of development and the people’s R2D. The ideological differences among the arbitrators in terms of valuing R2D is an issue that needs redressal through the de-politicization of the Arbitral Tribunals, sensitization of arbitrators on the R2D and hearing amicus curiae participation of those whose human rights are affected in the investment process.
The Indian Take on R2D and IIL
With the White Industries v. India issue in 2011, India’s approach of entering into BITs, left, right and center, had changed. Several investors began pulling India to international investment arbitrations and this made India revamp its investment policy by unilaterally terminating many BITs and introducing the India’s 2016 Model BIT for further BIT negotiations. An analysis of the 2016 Model BIT proves that the Preamble incorporates sustainable development of both the Parties as a specific treaty objective, non-derogable in nature. It has a host-state centric approach of retaining the power of India to regulate the investment in accordance with law and policy objectives, thus providing the necessary leverage for furthering R2D. It also has included Corporate Social Responsibility (‘CSR’) related provisions that foster the integration of SDG and R2D within the IIL framework. Taking lessons from prior experience, India has also retained certain general exceptions to give it the required policy space for furthering public health, safety, national security etc. While inclusion of sufficient policy space is definitely a step in the right direction, it is not enough if we stop here. The key now is to ensure that the 2016 Model BIT is negotiated with investors, and adequately inking the developmental commitments in the agreements for those investments from countries with whom there is no BIT.
Identifying the Linkages for Securing the R2D within the Patchy IIL Framework
The right to property of the investor gets compromised if an aggressive interpretation in favor of R2D is adopted. In order to avoid such conflict of interest, it is important for the host state to balance stakeholder interests by:
overcoming the ‘silo-thinking’ between investment and development. and sifting out investments as detrimental or beneficial based on its overall SDG impact,
reserving sufficient policy space to consider R2D as an agenda and adopt a rights-based governance process,
developing a legitimate and rather strict policy framework on R2D and its corresponding investor duty by the host state (such as legitimizing CSR),
disclosing the commitment of the host state to developmental ideologies in the pre-contractual stage (as it would create a legitimate expectation and a fair idea in the minds of the investor),
conducting thorough due diligence into the investor’s track record in promoting and respecting human rights,
creating political and economic transparency surrounding investments,
widening and ensuring public participation in the investment process inter alia through not-for-profit investment monitoring institutions, civil society organizations etc.,
including novel clauses such as cultural impact assessments, labor-related clauses, right to intervention of those persons whose human rights are affected in their investor agreements / BITs and
having continuous follow-up, calibration, and maintenance of the performance record of the investor’s commitment to development.
Acknowledging the jurisprudential difficulty in crystallizing the owner of the R2D due to its collective nature implies that the State, as parens patriae and the chief arbiter of all disputes, has paramount interest in ensuring that the R2D of its citizens is guaranteed and safeguarded. In terms of the 1986 UN Declaration on R2D, SDG Agenda 2030 etc., when read along with the ARSIWA also imposes State responsibility among the international community.
The 1986 UN Declaration on R2D, SDG Agenda 2030, the Responsibility of States for Internationally Wrongful Acts, 2001 (commonly known as ARSIWA), the modern BITs which include R2D provisions in the preambular and operational phase, the mandate of VCLT to use the principle of systemic integration etc., when read together cohesively, clearly point towards the role of the State in ensuring the R2D of its citizens during the investment process. This active participation of the State in facilitating development, along with responsible investment practices by the Investor, will ensure a win-win-win for the host State, the Investor and the people who have the R2D.
This article has been authored by VM Aishwarya, Advocate & a Company Secretary, with LL.M. in International Trade Law from National University of Advanced Legal Studies, Kochi. This blog is a part of RSRR’s Blog Series on 'Emerging Trends in Indian Approach to Trade & Investment: Treaties & Agreements', in collaboration with the Centre for Trade and Investment Law.