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  • Bhargavi G. Iyer & Disha Kini

Juggling RtD & Investor Interests: The Balancing Act from the Perspective of Intl. Investment Law

The complete title of the article is "Juggling the Right to Development and Investor Interests: Examining the Balancing Act from the Perspective of International Investment Law".


“The right to development is the measure of the respect of all other human rights. That should be our aim: a situation in which all individuals are enabled to maximize their potential, and to contribute to the evolution of society as a whole.”

- Kofi Annan

The right to development (“RtD”) is considered to be an inalienable human right. The abovementioned quote is illustrative of the fact that the RtD is not limited to the human rights domain, but also holds good in the realm of international investment law, as it essentially subsumes within it the several economic rights afforded to individuals and sovereign nations.

It is pertinent to note that while investment law's purpose is to facilitate economic development in the nation that hosts such foreign investment, it has not necessarily been found to be true in all instances. Thus, it is important to consider the implications of the RtD in light of international investment law.

This article examines the perspectives on integrating investment laws with the RtD, in two parts. Firstly, the article looks at the RtD through the economic lens and seeks to point out the issues in the extant investment laws. Secondly, the article highlights the role of sustainable development and provides an environment-centric perspective to approach the issues in investment law concerning the RtD.

Issues pertaining to Economic Development and Investment Law

The RtD has been conventionally recognised in several important international legal instruments including within Article 55 of the United Nations Charter, Article 1 of the International Covenant on Economic, Social and Cultural Rights, within the Declaration on the Right to Development, in Article 22 of the African Charter on Human and Peoples' Rights, Article 37 of the Arab Charter on Human Rights and a range of multilateral human rights declarations. Despite the acknowledgement of RtD, it has yet to gather international consensus about its scope and content.

There are several aspects of the issues involved that are worth examining, including, firstly, the issues relating to expropriation and the RtD, secondly, the effect of the prevalent investment-dispute settlement mechanisms, thirdly, the interplay of SDGs and economic development, and fourthly, the indirect and direct impact of economic sanctions on the RtD.

Expropriation and the Right to Development: Regulatory Tussles

Considering the relation between expropriation and the RtD, it is often observed that a State is entitled to take the property of a foreign investor, if required for purposes encompassing public utility. The determination of the legality of such expropriation, as well as the amount of compensation, involves issues about the RtD of people of the expropriating state. In this regard, it is necessary to consider the link to international institutions such as the World Bank and United Nations Conference on Trade and Development (“UNCTAD”), and the reliance on international arbitration. Domestic investment legislation acts as another tool to protect Foreign Direct Investment (“FDI”) while promoting the RtD, in addition to the provisions contained within international investment agreements (“IIAs”). However, several IIAs as well as decisions by domestic courts and international arbitration tribunals, have a negative impact on FDI in host countries and tip the balance in favour of investors. For instance, inconsistencies in decisions by domestic courts lead to uncertainty in the interpretation and application of international investment law, thus discouraging investors and leading to a dip in FDI; while provisions in IIAs tend to lead to significant financial liability on the host country, to the benefit of the investors, defeat the very purpose of policies formulated to promote foreign investment, in view of RtD.

This potential impact has been particularly emphasised by the tribunal in Saluka v. Czech Republic while examining an unlawful expropriation claim in a dispute involving the violation of a BIT between the Czech and the Netherlands. It is interesting to note that here, it was acknowledged by the tribunal that in identifying expropriation, it is difficult to draw the line between permissible and impermissible regulations and to delineate the boundaries of acceptable exercise of the regulatory power of states, which would render an expropriation non-compensable. Such a difficulty effectively limits a state’s ability to take measures towards its economic development, effecting a “regulatory chill”, and thereby hindering its RtD. This regulatory chill has also been pointed out in other instances, such as in the case of Vattenfall v. Germany (I), wherein it can be seen that the provincial government of Hamburg was led to provide a favourable permit for a coal-fired power plant, compromising the RtD domestically. This is also discernible in the issues raised with regard to the Comprehensive Economic and Trade Agreement between the European Union and Canada, such as the proposal to limit the regulatory burden for companies in both jurisdictions, which effectively restricts the ability of regulators to consider specific economic and environmental conditions locally while granting permissions for operations and taking precautionary or remedial regulatory measures.

The Indian Perspective: Revisiting Provisions in BITs

In the Indian context, several Bilateral Investment Treaties (“BITs”) have been terminated by India recently to promote the RtD. This has been illustrated particularly in the Protocol to the India-Latvia BIT (2010), which is not sufficiently clear on non-compensable expropriation, leaving room for ambiguity; and the India-Republic of Korea CEPA (2009), which is significantly uncertain concerning allowing expropriation for a public purpose. On the other hand, several of India’s BITs are well-framed to balance investors’ interests and the interests of the state about expropriation.

It is necessary to acknowledge that India, being a developing nation, must ensure that IIAs do not serve as “unequal treaties”, putting the nation in a disadvantaged position regarding the negotiation of the provisions of the IIA, as well as concerning dispute settlement mechanisms under it. In line with such objectives, India has terminated and renegotiated several of its BITs, including its BIT with the UK, to institute a new investment, in light of the issue of striking a balance between promoting investment and protecting domestic welfare and development highlighted in the aftermath of the Cairn Energy v. India case. It is particularly interesting to note that while India was found in breach of the direct and indirect expropriation clauses of the IIA in this case, in the course of its analysis, the tribunal acknowledged the disproportionate burden of such procedures on a developing nation, which therefore impacts the RtD. This underscores the need for India to tread cautiously in the arena of international investment.

The Impact of Direct and Indirect Sanction on the Right to Development

Another important issue to consider in the economic context is that with the rising trend of countries imposing sanctions as soft power, there is an adverse impact on the RtD. These sanctions make it difficult for the population to transport goods, waste natural resources and are a hindrance to achieving the targets under SDGs. Over-compliance with these sanctions has been considered a threat to international law and human rights, as the sanctions impact not just the targeted entities, but also the rest of the population, thereby causing distress to the economy and prohibiting access to essential commodities. The primary sanctions when extended to secondary sanctions, discourage third parties and commercial units from investing and trading with countries against whom sanctions have been issued.

Conventionally, sanctions are used by countries as a middle ground in the international sphere, between diplomatic communication and the use of force. As has been analysed by UN Experts, sanctions tend to hold back the country’s RtD due to their “coercive” nature. They are often perceived as a necessary evil as an exercise of the sovereign power of the nation to safeguard its interest in the international sphere. But with the above-mentioned reasons, and given human rights and international law, they cannot be unlimited. The trade sanctions imposed on countries like Cuba, Venezuela, and Syria have pushed the population into poverty due to a lack of investment and the inaccessibility of basic services like food, shelter, and clothing. Therefore, it is necessary to consider the indirect impact of sanctions that hamper the RtD and take measures to prevent or suitably remedy the harm to development.

The Interplay of Sustainable Development and Investment Law

Considering the interplay of SDGs and development, it has been highlighted over time that the nexus between foreign investment and SDGs is not straightforward, and is compound in nature. On one front, foreign investment contributes to the fulfilment of SDGs through external financing towards improvement in local infrastructure, amenities, and renewable energy initiatives; on the other hand, it has been observed to have adverse environmental effects in certain areas. For instance, a study analysing developing nations, particularly in Africa, found the relationship between FDI and the probability of achieving SDGs to be negative. However, the UNCTAD has been advocating for more foreign investment in initiatives that fuel the SDGs, seeing foreign investment as a means to further SDGs.

It is interesting to note that in this regard, the 2012 World Investment Report had included a separate chapter on “investment policy framework for sustainable development”, while the UNCTAD elaborated upon the framework based on its 10 Core Principles in 2015, highlighting this interlinkage. The most recent 2023 World Investment Report also analyses the link between foreign investment and SDGs, optimistically underscoring an increase in international private investment projects in SDGs.

While it is yet to gain formal recognition by countries, it is in the interests of balancing RtD with the investment that the criteria and standards established internationally lay emphasis on the responsibility of foreign investors and their home nations to contribute to meeting SDGs in the host countries. The role of the BITs is particularly instrumental here, as they promote accountability amongst nations, and therefore, including provisions promoting sustainable development within investment treaties has been lauded as a step towards harmonising RtD with investment. Such provisions under BITs pave the way for implementation of Goal 17 of the SDGs, by enhancing the possibilities of global partnership towards achieving SDGs overall. Incorporation of such provisions can be seen within the BIT that India has with Brazil, as well as in the Dutch Model BIT, wherein there are express references to sustainable development and investment.

However, it is necessary to note certain lacunae concerning the provision for and implementation of SDGs in the arena of international investment law. Firstly, there is a lack of clarity concerning laying down SDG-related objectives within the substantive provisions of IIAs. For instance, while it is relatively simpler to define SDG-related terms, it is difficult to incorporate SDG-related rights in specific provisions, such as within fair and equitable treatment (“FET”) clauses. Secondly, there is insufficient jurisprudential backing to promote SDGs in harmony with investment law. This has particularly been observed in the swarm of Investor-State Dispute Settlements ("ISDS") under the Energy Charter Treaty, which is now prompting states to opt out of the Treaty to support projects in line with furthering SDGs.

Road Ahead

Recently, the issues concerning RtD and international investment law were highlighted by the United Nations Human Rights Council's Expert Mechanism on the Right to Development in its Fifth session held between 9–11 March 2022, followed by its Seventh session which took place between 3-5 April 2023, wherein a suitable way forward was envisioned. The Expert Mechanism’s Recommendations included various measures such as renegotiation of IIAs by states, express employment of the concept of RtD, and inclusion of provisions to ensure meaningful obligations on the part of the investors towards the RtD. One of the most notable suggestions with regards to bolstering RtD was the legal innovation of the Social License to Operate (“SLO”), which forms an agreement between an investor and local stakeholders, thereby enabling direct participation of affected communities in matters about the investment and thereby guaranteeing their RtD.

It must be acknowledged, however, that the inclusion of SLOs within IIAs may make the investment onerous for the investor, and the implementation and overseeing mechanisms for such a measure may prove to be complex. Therefore, it would be necessary to ensure investor-state coordination, as well as international cooperation, to make the application of these recommendations fruitful.

International Investment Law is bound to play a key role in achieving the RtD and SDGs for low-income and developing countries. India can seek to reform its investment policies and legislation to strengthen the international investment law regime. Thus, decisions on these aspects will help in adopting a progressive approach towards the RtD and SDGs.


The international community, including India, has implemented a range of policies aimed at promoting domestic industry and protecting local communities, which have sometimes been at odds with the interests of foreign investors. While investment law should seek to balance the interests of investors and states in a manner that encourages FDI and economic growth, it must also be inclusive of the RtD and be framed keeping in mind environmental concerns.


This article has been co-authored by Bhargavi G. Iyer and Disha Kini, students of law at Narsee Monjee Institute of Management Studies. 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.


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