CYIL vol. 11 (2020)

CYIL 11 (2020) INVESTORS’ RESPONSIBILITIES BEYOND INVESTMENT TREATIES… may be dominant ones, but not exclusive. Similarly, the relationship between investment and broader societal concerns depends on many factors. Investors could positively contribute to the improvement of environmental and labour conditions as well as to human rights compliance by behaving “responsibly”. 2 In some cases, governments may relax human rights and environmental standards in a “race to the bottom” to attract foreign investment. The same applies to quality of investment. Irresponsible investment practices not only erode the quality of the investment and business environment; they result in economic loss, environmental degradation or poor labour conditions. Currently, a combination of diminishing productivity and rising income inequality in many developed economies puts additional pressure on policymakers to maximise the benefits of FDI and ensure a broad-based distribution of those gains. Responsible investment, that is investment that respects the standards and imperatives of responsible business conduct (RBC) and corporate social responsibility (CSR), is the type of investment Host states seek to attract. In parallel to this development, some states and other actors criticise investment treaties on grounds of being asymmetric, favouring foreign investors, and possibly restraining Host states while lacking accountability mechanisms for investors’ operation in those states. This criticism is contributing to the legitimacy crisis of the investment protection regime. 3 Moreover, the investor-state dispute mechanism (ISDS) provides foreign investors with access to effective adjudicative and enforcement mechanism. This contrasts with other areas of international law (e.g. human rights, environmental law), which provide only limited or no recourse to international dispute resolution. For instance, the OECD Secretary-General Angel Gurría wrote in this context in 2014 about “growing pains of investment treaties” 4 and the UN Independent Expert on the promotion of a democratic and equitable international order, Alfred de Zayas has called the system into question: “The investor-state dispute settlement puts companies’ rights ahead of human rights. Its effects are devastating … – we must abolish it.” 5 In response to the critique, some governments have recently decided to revise their investment policy. 6 In consequence, the promotion and implementation of RBC and CSR standards in their treaties have increased. 7 Their incorporation is arguably a gradually recognised way to create a level playing field between rights, obligations and responsibilities of host states and 2 ‘Responsibilities’ is used broadly here to refer to the full range of possible policy approaches, which can conceivably extend from investment treaty coverage notwithstanding violations of law on the one hand, to investment treaty obligations for business and investors on the other hand. 3 WEIBEL, M., KAUSHAL, A., CHUNG, K., BALCHIN, C. (eds.) The Backlash Against Investment Arbitration. Perceptions and Reality . New York: Wolters Kluwer. 2010; LIM, C. L. (ed.) Alternative Visions of the International Law on Foreign Investment. Essays in Honour of Muthucumaraswamy Sornarajah . Cambridge: CUP, 2016. 4 GURRÍA, A., The growing pains of investment treaties. OECD Insights , 13 October 2014. 5 DE ZAYAS, A., How can Philip Morris sue Uruguay over its tobacco laws? Guardian, 16 November 2015. 6 Since 2012 at least sixty countries have developed or are developing new model bilateral investment treaties. UNCTAD: Taking Stock of IIA Reform. IIA Issue Note , 2016, No. 1, p. 5. On the European Union’s reflection over its approach see e.g. SVOBODA, O. The Common Commercial Policy after Opinion 2/15: No simple way to make life easier for free trade agreements in the EU. Croatian Yearbook of European Law and Policy , 2019, Vol. 15; SVOBODA, O. EU Reform Agenda in Defence of the Judicialization of International Economic Law. European Foreign Affairs Review , 2020, Vol. 25, No. 2. 7 Since foreign investors, natural or legal persons, lack international legal personality according to the prevailing doctrine of public international law, they may be held responsible only under domestic legal system, or possibly violation of ius cogens norms.

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