Geneva, 16 September 2015
Ladies and gentlemen,
Pursuant to Human Rights Council resolutions 18/6, 21/9, 25/15 and 27/9, I have identified in my prior reports challenges to the realization of a democratic and equitable international order, including lack of transparency and accountability, absence of democratic participation in domestic and global decision-making, asymmetric economic, financial and trade practices, military expenditures and denial of self-determination.
In this report, I address the challenge to the international order posed by certain activities of investors and transnational corporations that entail much more than interference in the regulatory space of States but actually constitute an attack on the very essence of sovereignty and self-determination, which are founding principles of the United Nations.
The paradox must be confronted and resolved that whereas States have ratified human rights treaties with immediate application such as the International Covenant on Civil and Political Rights and agreed on the progressive implementation of economic and social rights, they have also entered into trade and investment agreements that hinder, delay or render impossible the fulfillment of their human rights treaty obligations, thus violating the rule pacta sunt servanda.
A solution to this paradox lies in the application of article 103 of the UN Charter that stipulates that in case of conflict between the provisions of the UN Charter and any other treaty, the Charter prevails. This recognition should be strengthened and its implications further elaborated in an advisory opinion of the International Court of Justice stating that the international human rights regime prevails over other treaties and requires that all courts and arbitration tribunals interpret other agreements in the light of the erga omnes obligations ensuing from human rights treaties. An advisory opinion by the World Court should make explicit that the rule pacta sunt servanda requires that human rights treaties be fulfilled and that the principle of good faith entails an obligation on States and tribunals to interpret other treaties, including free trade and investment agreements, in a manner consistent with human rights obligations. The ICJ should further clarify which provisions of trade and investment agreements must be considered contra bonos mores and therefore invalid pursuant to article 53 of the Vienna Convention on the Law of Treaties, and removable pursuant to the doctrine of severability. The Opinion should reaffirm the principle that national and international tribunals must not give effect to judgments or arbitral awards that violate international ordre public and entail violations of human rights. The present report examines the adverse human rights impacts of free trade and investment agreements and the urgent need to reform the international investment regime, as recognized in UNCTADs Trade and Development Report and World Investment Reports for 2014 and 2015.
My forthcoming report to the General Assembly addresses the impacts of investor–State dispute settlement arbitrations. I have relied on the advice of economists and given attention to the reports of other Special Procedures mandate holders including the Working Group on the issue of human rights and transnational corporations and other business enterprises. I strongly endorse the 2011 Guiding Principles on Business and Human Rights and the United Nations “Protect, Respect and Remedy” Framework. I also rely on pertinent general comments and concluding observations of treaty bodies including the Human Rights Committee, and the Committee on Economic, Social and Cultural Rights.
My report proposes a sensible compromise that promotes business and foreign direct investment while ensuring the protection of human rights , bearing in mind two ontologies – first that by nature the function of the State is to legislate in the public interest, to advance the welfare of the persons living under its jurisdiction. Every State under the rule of law must fulfil this responsibility and cannot divest itself of human rights obligations by outsourcing or privatizing activities that are fundamentally State functions. Moreover, before and after entering into trade and investment agreements, States should conduct human rights, health and environmental impact assessments .
The second ontology is that of business and investment activities – which by nature entail risk-taking. It is this risk-taking that justifies the opportunity of earning profits. Of course, risk means that sometimes the investor wins, sometimes he loses. Enterprises cannot demand a guarantee of profits from governments, nor can they usurp State functions. Private risk insurance exists, which should logically be seen as a routine business expenditure.
The investor–State dispute settlement mechanism established under most bilateral and multilateral investment agreements has proven to be a Trojan horse and mutated into a privatized system of dispute settlement, outside and contrary to article 14, paragraph 1, of the International Covenant on Civil and Political Rights, which requires that all suits at law be decided by independent tribunals which must respect the principles of transparency and accountability. Experience shows that many of the 608 arbitration awards that have become known, have overridden national law and hindered States in the sovereign determination of fiscal and budgetary policy, labour, health and environmental regulation, and have had adverse human rights impacts, also on third parties, including a “chilling effect” with regard to the exercise of democratic governance.
An advisory opinion by the International Court of Justice should state that Investor–State dispute settlement tribunals do not operate in a separate legal context, but are bound by the erga omnes obligations imposed by the international human rights regime , which permeates all areas of human activity and binds all actors, State and non-State actors alike. For centuries humanity has been constructing the rule of law. Allowing three private arbitrators to disregard international and national law as well as the judgments of the highest State Tribunals is tantamount to a revolution against law, it is retrogression in terms of legality and predictability, a no-man’s land of arbitrary arbitrations.
An international order of sovereign and equal States under the Charter of the United Nations, committed to the rule of law, transparency and accountability must not be undermined by private attempts to replace it with an international order ruled by investors, speculators and transnational enterprises lacking democratic legitimacy.
In this context we must recall that pursuant to article 28 of the Universal Declaration of Human Rights, States shall ensure “a social and international order in which the rights and freedoms set forth in this declaration can be fully realized”. This is reinforced in article 2 of the International Covenant on Civil and Political Rights and article 2 of the International Covenant on Economic, Social and Cultural Rights. The adoption of 10 core international human rights treaties and countless resolutions and declarations of the General Assembly, the Economic and Social Council and the Human Rights Council, pertinent ILO and WHO Conventions, the emergence of a system of regional human rights courts capable of adopting binding judgments, the 1993 Vienna Declaration and Programme of Action, the Millennium Development Goals – all these instruments over a period of many decades prove that a customary international law of human rights has emerged, manifesting opinio juris and international consensus on the primacy of human rights. Accordingly, globalization and targeted investment ought to foster an environment where human rights are fully realized through the State’s regulatory functions. Alas, international investment agreements are usurping State functions as if the only rights were the rights to trade and to invest. By the same token, States cannot invoke IIAs as a pretext to delay fulfilment of their human rights treaty obligations.
Globalization cannot be allowed to become the grand global casino where investors rig the system to guarantee that they always win. A democratic and equitable international order is not possible if this “Hotel Brave New World” is allowed to ensnare States, letting them check in but never leave. Since the siren call of foreign direct investment has proven deceptive, Governments must move away from easy mythologies and demand empirical evidence of job creation through foreign direct investment and reject a “race to the bottom” in human rights terms.
Modification or termination of international investment agreements may be a complex task, but much less problematic than, for example, dealing with armed conflict. The world economy has had to adjust time and again to advance the cause of human dignity.
So it was with the prohibition of the lucrative slave trade, the abolition of slavery and decolonization, which were replaced by other economic models. For centuries slavery was the de facto economic model with implicit legality; colonialism was de facto the international order. Today these practices are seen as crimes against humanity. For decades, investor–State dispute settlement arbitrations have de facto upset the international order, but they cannot trump the Charter of the United Nations. Just as other economic paradigms were abandoned, eventually investor–State dispute settlement will be recognized as an experiment gone wrong, an attempt to hijack constitutionality, resulting in the retrogression of human rights. The consequences of not modifying or terminating bilateral investment treaties and free trade agreements are more serious than soberly accepting the necessity of revising them.
I am convinced that there are ample opportunities for corporations and investors to make legitimate profits and enter into genuine “partnerships” with States and not into asymmetrical relationships. The rule of thumb should be to: (a) give to corporations what belongs to them – an environment in which to compete fairly; (b) give back to States what is fundamentally and inalienably theirs – sovereignty and policy space; (c) give parliaments what belongs to them – the faculty to consider all aspects of treaties without undemocratic secrecy and fast-tracking; and (d) give to the people what is theirs: the rights to public participation, due process and democracy.
Seventy years after the entry into force of the Charter of the United Nations, it is appropriate to reaffirm its Purposes and Principles which, pursuant to Article 103, prevail over other treaties. Bearing in mind that a democratic and equitable international order can only be achieved gradually through the concerted action of States, national human rights institutions, intergovernmental organizations and civil society, I submit a preliminary plan of action with preventive and corrective recommendations. Allow me to summarize:
States must ensure that all trade and investment agreements — existing and future — represent the democratic will of the populations concerned. Negotiations on current drafts must not be secret or “fast-tracked”, but, on the contrary, should be accompanied by pro-active consultation and broad public participation on the basis of independent human rights, health and environmental impact assessments.
States should ensure that parliaments, national human rights institutions and ombudspersons are involved in the process of elaboration, negotiation, adoption and application of trade and investment agreements.
States must ensure that all trade and investment agreements recognize the primacy of human rights and specify that, in case of conflict, human rights obligations prevail. States must uphold their erga omnes obligation to implement human rights treaties and observe the human rights commitments laid down in pertinent ILO, WHO and WIPO Conventions.
States must ensure that international investment agreements do not undermine their ability to implement the industrial and macroeconomic policies needed for development, which is an essential objective of United Nations “constitutional” law, and take steps to revise existing bilateral investment treaties and free trade agreements with negative effects on human rights. States should test existing bilateral investment treaties and free trade agreements for compliance with their human rights obligations and their respective Constitutions, and revise or terminate said agreements pursuant to the Vienna Convention on the Law of Treaties when they conflict with human rights obligations.
ISDS should be abolished. Investment disputes should be subject to national jurisdictions under article 14 ICCPR or settled through a special international investment court with permanent judges and appeal chambers, operating transparently under the rule of law and bound by a statute that prioritizes human rights, public interest and sovereignty, and disallows one-way jurisdiction, so that not only investors but also States have standing to sue.
States should monitor respect for the Guidelines on Business and Human Rights by all transnational enterprises operating in their territory and extraterritorially and make them legally binding in the domestic legal order.
States should deny effect to investor–State dispute settlement and ICSID awards that violate human rights. They should practice solidarity with States seeking to modify or terminate bilateral or multilateral investment treaties.
Parliaments must ensure that international investment agreements contain general provisions on their periodic review and amendment, as well as provisions for termination, withdrawal or suspension without unreasonable “survival clauses”.
Parliaments must ensure that investment treaties and free trade agreements advance food security, education, health, sanitation social and economic policies and ensure that they do not interfere with State competences on domestic budgetary and fiscal matters.
Parliamentarians should resist the siren call of lobbies for transnational enterprises that make over-optimistic projections of growth and development. Instead, they should demand independent economic studies and human rights impact assessments.
I further recommend that:
The Human Rights Council systematically use its universal periodic review to monitor the human rights impacts of free trade and investment agreements and give guidance to States how to modify them so that human rights obligations are fulfilled. Moreover, the new Forum on Human Rights, Democracy and the Rule of Law should devote a session to these issues.
UNCTAD should convene a conference to advance its “road map” for reform and explore how best to revise or terminate existing free trade and investment agreements.
All United Nations agencies and subsidiary organs should put international investment agreements on their agenda and offer advisory services and technical assistance to States considering such agreements to ensure the protection of all human rights, including the rights to food, health, minimum wage, improved labour standards, gender equality and the rights of the child. In relevant investor–State dispute settlement arbitrations, these entities should submit amicus curiae briefs. They should consider using their competence under Article 96 (2) of the UN Charter to request pertinent advisory opinions from the International Court of Justice.
A democratic and equitable international order can only be achieved by States in international solidarity. The challenge posed by the malfunctioning of the international investment regime must not be underestimated because it has negatively impacted on the enjoyment of human rights in an increasing number of States.
The Human Rights Council may consider requesting from the International Court of Justice an advisory opinion on relevant legal questions, or refer these questions to the General Assembly with a view to obtaining from the World Court a determination on the pre-eminence of human rights treaties and the invalidity of ISDS awards that are arbitrary and manifestly ill-founded. Those provisions of investment treaties that encroach on the ontological functions of States should be eliminated pursuant to the doctrine of severability as contra bonos mores and contrary to international public order.
I thank you.
UNCTAD, World Investment Report 2015, Trade and Development Report 2014
See Stephan W. Schill (ed.), International Investment Law and Comparative Public Law (Oxford University Press, 2010); Joseph François et al., “Reducing transatlantic barriers to trade and investment: an economic assessment”, IIDE Discussion Paper No. 20130401(Institute for International and Development Economics, 2013); V. S. Seshadri, “Trans-Atlantic trade and investment partnership”, RIS Discussion Paper No. 185 (New Delhi, Research and Information Systems for Developing Countries, 2013); Jeffrey J. Schott and Cathleen Cimino, “Crafting a transatlantic trade and investment partnership: what can be done”, Policy Brief No. PB13-8 (Washington, D.C., Peterson Institute for International Economics, 2013); and U.S. Business Coalition for TPP, “VOICES: Asia-Pacific Policy Experts Support TPP”, 28 April 2015, available from tppcoalition.org/voices-asia-pacific-policy-experts-support-tpp-and-tpa.
Bruno Simma and Theodore Kill, “Harmonizing investment protection and human rights: first steps towards a methodology”, in Christina Binder et al. (eds.), International Investment Law for the 21st Century: Essays in Honour of Christoph Schreuer (Oxford University Press, 2009).