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This article appeared on the Business and Human Rights Resource Centre’s Blog on a Binding Treaty for Business and Human Rights at: https://business-humanrights.org/en/regulating-investor-responsibility-not-just-investor’s-‘rights’

By Ludovic Courtès [CC BY-SA 3.0], via Wikimedia Commons

Recent political events like ‘Brexit’ and Donald Trump’s election have been in part fuelled by a backlash against a system of neoliberal international trade and investment. Its inherent inequality, injustice and environmental degradation have become clear. The status quo leaves too many behind to be sustainable.

It is clear that the international community’s priority is on promoting investment rather than regulating it.

Governments must confront the dominance of corporate interests over human rights and the environment. One way to address it is to ensure that international business – so well protected through investment and trade agreements and offshore tax havens – will also be regulated to protect and promote human rights.

THE REGULATORY GAP 

It is clear that the international community’s priority is on promoting investment rather than regulating it. Investment laws do not mention human rights. They require investors to follow national law. The problem is that many states do not have adequate human rights and environmental protections in place. In other cases, states are unwilling or unable to enforce existing laws. Transnational businesses are able to select a venue that makes its operations cheaper even if it undermines human rights or harms the environment.

A BINDING TREATY’S CONTENTS

A binding treaty must address this regulatory shortfall. Like the Convention on the Elimination of all Forms of Discrimination Against Women (CEDAW), the Convention on the Rights of the Child (CRC) or the Migrant Workers Convention, which elaborate on existing standards to address a particular need identified by the international community, a binding treaty on business and human rights should codify and develop the responsibility of states to protect human rights.

A business and human rights treaty needs to develop standards for preventative measures and build national capacity. States must be bound to adopt regulations and enforcement measures to ensure business enterprises fulfill their responsibilities, including adopting an approved policy or code of conduct and human rights due diligence processes. Many states are developing these policies in absence of an international framework. Civil society is calling out for binding standards by which to measure new laws.

The treaty should help states adopt effective legislative and administrative measures for criminal and civil liability of corporations for human rights abuses. Crimes for which international law requires the imposition of criminal sanctions should be incorporated into national corporate criminal law, expanding the jurisdiction of national tribunals and law enforcement bodies to deal with transnational corporate crime.

The regulatory process for approval of licenses and permits for some investments should include an obligation to obtain social license through fully informed community consent. It should also provide standards of public policy protection to be included in investment protection agreements.

The possibility for victims to initiate judicial complaints against companies directly in their domicile (whether it is in a host State or the home State) will further help to redress the inequality in rights and obligations that exist between companies on one side, and people on the other.

Access to justice, including the right to an effective remedy, is essential for business accountability for human rights abuses. The treaty should codify and develop provisions for access to an effective remedy for wrongful conduct against both states and business enterprises. For states, the remedy would be in relation to situations of complicity or participation in business abuses or for failing to discharge their duty to protect against the wrongful conduct of business enterprises.

The possibility for victims to initiate judicial complaints against companies directly in their domicile (whether it is in a host State or the home State) will further help to redress the inequality in rights and obligations that exist between companies on one side, and people on the other. It is clear that the international community’s priority is on promoting investment rather than regulating it.It is clear that the international community’s priority is on promoting investment rather than regulating it. The doctrine of forum non conveniens rings hollow as companies argue for human rights cases to be heard in host jurisdictions while their interests must be upheld in international arbitration.

REGULATION AND SOVEREIGNTY 

Some states claim that a binding treaty on business and human rights would interfere with domestic sovereignty, either through extraterritorial application of law, or by forcing developing states to adopt high standards that they cannot afford. Yet these same states are willing to sign binding investment treaties that apply international standards, sometimes overruling domestic regulatory sovereignty. This hypocritical stance helps fuel protest and opposition to economic globalisation.

International investment law faces little opposition from states and is promoted as encouraging legal certainty. But locking in bad law or discouraging new standards by allowing foreign investors to challenge changes is extremely unpopular. While states are reluctant to regulate their companies extraterritorially, they are happy to negotiate protections for them, even at the expense of human rights.

An international treaty that guarantees an enhanced remedy system for harm caused by companies including extraterritorially would serve as a corrective instrument in this respect.

The EU, the United States and the United Kingdom should support a binding business and human rights treaty to go along with their global investment agenda. It is advantageous for them to support the highest standards possible. Companies from Western states are increasingly held responsible by active civil societies and cannot compete in places where the rule of law does not exist. Other countries do not face such restrictions and their companies do not have the discerning glare of civil society back home upon them. It is in the developed home state’s interest to level the playing field. Ideological opposition to the regulation of markets no longer makes sense.

Try telling a local farmer or a worker that a foreign business enterprise will have access to justice and its interests protected by treaty while they will not. An international treaty that guarantees an enhanced remedy system for harm caused by companies including extraterritorially would serve as a corrective instrument in this respect. It might also convince people that globalisation is more than investment and includes the protection of human rights and the environment.

For more information see the ICJ’s Proposals for Elements of a Legally Binding Instrument on Transnational Corporations and Other Business Enterprises at: http://www.icj.org/wp-content/uploads/2016/10/Universal-OEWG-session-2-ICJ-submission-Advocacy-Analysis-brief-2016-ENG.pdf

This article was published in the Myanmar Times on 30 August 2013 at: http://www.mmtimes.com/index.php/opinion/22221-reconciling-investment-protection-and-human-rights.html 

This month the newly elected Myanmar government released its economic policy and announced that it will seek to attract even more foreign investment than under previous administrations. But the new policy did not outline how it will ensure that foreign investment will contribute to the protection of human rights and sustainable development.

Myanmar’s previous military government was committed to investment protection treaties. Will the new government follow suit? These treaties between states enable foreign investors to challenge new laws and policies by the host government – potentially including those protecting human rights and the environment – through international arbitration if they believe these may adversely affect their profits.

Foreign governments want their investors to benefit from the opening up of Myanmar’s economy. Myanmar has already entered into investment protection treaties with Japan, South Korea, the Philippines, China, Laos, Vietnam, Thailand, Israel and India and is party to the ASEAN Comprehensive Investment Agreement. Myanmar is negotiating a new treaty with the European Union and exploring options with Singapore, among others.

These investment treaties grant investors equal standing with Myanmar’s government in disputes over national laws and policy in international arbitration. Their broad provisions fail to reconcile investment protection with the host state’s right and duty to regulate for the benefit of human rights and sustainable development. Myanmar must ensure that provisions on the treatment of foreign investors limit their rights to challenge legitimate, non-discriminatory, public purpose legislation.

Seeking to attract investment by giving foreign businesses more economic security should not compromise government’s ability to regulate in favour of the rights of its people. Protection of investments must not be given priority over protection of human rights and the environment. The UN Guiding Principles on Business and Human Rights urge governments to maintain adequate domestic policy space to meet their human rights obligations when pursuing investment treaties.

Before agreeing to further investment treaties, Myanmar should commit to adopting and enforcing new laws in line with international human rights and environmental standards. It should evaluate whether these investment treaties are necessary to attract foreign investment to Myanmar. It should follow the regional trend and revisit old treaties that empower foreign investors at the expense of local rights holders.

The National League for Democracy-led government came to power promising change, to establish the rule of law and to protect human rights. In order to do so, the government will need to create new laws and policies in line with international laws and standards in the public’s interest. For example, Myanmar has recently signed the International Covenant on Economic Social and Cultural Rights, signalling its willingness to put in place policies to progressively achieve universal healthcare, education and social security. These rights are also protected in Myanmar’s constitution.

But new policies designed to fulfil these rights may give rise to disputes under investment treaties. For instance, it is possible that foreign investors will claim that a new policy on public health (for instance by requiring plain packaging for cigarettes) or minority rights (calling for affirmative action for minorities) or strict environmental protection standards (improved environmental impact assessment regulations) would harm their expected profits or other rights that are broadly defined in the investment protection agreement.

These are not outlandish examples. There are a number of cases where new laws and regulations passed by democratically elected governments have been challenged by foreign investors before arbitral tribunals. In Canada, a foreign investor successfully challenged an environmental impact assessment board’s decision to deny it a permit and asked for more than US$100 million in damages. Affirmative action policies in South Africa and environmental protection standards in Germany have been challenged. Just the threat of arbitration can lead to a “regulatory chill”, forcing back public interest legislation and preventing environmental protection measures.

These are costly disputes – some arbitral awards run into the billions of dollars against host governments. Recent challenges by tobacco giant Phillip Morris against Australian and Uruguay plain packaging cigarette laws, designed to protect public health, were unsuccessful but cost millions in lawyer’s fees. Australia reportedly paid $50 million to defend its law. Myanmar cannot defend repeated challenges by deep-pocketed investors. In Myanmar, this money could be better spent improving the dire state of health and education.

Around the world, people are demanding that negotiation and adoption of investment treaties be transparent; increasingly, people are opposing treaties that grossly favour the interests of investors over the interests of the public. Investment treaties are often negotiated behind closed doors with little public or parliamentary oversight. These are important decisions that impact on the rights of people in Myanmar. Myanmar’s civil society has not yet had the opportunity to participate in genuine and informed consultation.

Many states have turned against international dispute resolution in investment treaties. South Africa, Bolivia, Ecuador, Venezuela and Indonesia have started to cancel or phase out existing treaties. Others, including India, are reviewing current treaties and rethinking future negotiations. Brazil, Russia, India and China are considering an alternative system that considers issues relevant to emerging economies.

The Indian government intends to replace existing investment treaties with new ones designed to balance investor’s interests, regulatory space and investor responsibilities. It seeks to limit protections for foreign investors, drop controversial aspects of treaties and narrow the scope of others to reduce disputes. While it allows access to international dispute settlement, foreign investors will have to pass through the domestic courts first. The new investment treaties will also include an exhaustive list of economic, environmental and social measures to be exempt from challenge by foreign investors.

Myanmar would do well to follow this approach. Improving its human rights situation and maintaining sustainable development require sweeping legal reform. The threat of costly legal challenges by foreign investors could dissuade policy makers from making necessary changes, discouraging them from fulfilling human rights and environmental obligations in order to promote investment.

Dr. Daniel Aguirre, Panel VI: Lessons learned and challenges to access to remedy (selected cases from different sectors and regions).

Prosecuting Companies in Myanmar: Challenges and Opportunities

Thank you again, Madam Chair, Ecuador and the OHCHR for supporting this important week of fruitful discussion. I will begin where I left off on Tuesday, discussing some of the practical challenges and opportunities that a binding treaty on business and human rights could possibly address.

Let me state that I am not here to pick on Myanmar. Myanmar is undergoing tremendous political, economic and social change. The situation in Myanmar is much better than it was 5 years ago and almost unrecognisable from the darkest days of the military regime. The Economy has changed rapidly and politics progressively; yet reform of the legal system and the judiciary lag far behind and will likely not be resolved in a generation. Yet into this accountability void billions of dollars of new investment flows.

Failure to provide for effective remedies and redress, even where provided for in domestic law, has a range of causes, legal and political. Among the most common are: weakness in the rule of law (including the independence of the judiciary and the legal profession); inability or unwillingness of officials to counter resistance by powerful corporate interests against regulation; public officials who lack knowledge or capacity; corruption; limited resources; and other procedural hurdles that create a system of disincentives to litigation against companies.

So Myanmar is not alone in this regard. I present it as a case study because a Binding Treaty on BHR must address investment in weak governance zones and transitional countries emerging from dictatorship or conflict where the rule of law is weak. The situation in Myanmar provides useful examples to keep in mind during the process of developing this important treaty.

Prosecuting corporations in Myanmar is difficult as the very notion of legal accountability is in its nascent stages. The judicial system was undermined by the military regime over 50 years, destroying a system once regarded as among the finest in the region. While inherited colonial law recognises both criminal and civil liability for corporations as well as the possibility of class action suits, these provisions are not yet used to ensure corporate accountability.

The public does not trust the judiciary, which is under resourced, lacking in capacity and assumed to be corrupt. The only time a person goes to court in Myanmar is as a defendant. Disputes are resolved in any other means possible, with the courts avoided at all costs. This lack of the rule of law undermines the State duty to protect and provide remedy in the context of business and human rights.

 Access to Remedy

On Tuesday, in Panel 2, I outlined the challenges Myanmar faces in adopting regulation to protect human rights, in the context of business activity. Indeed, the international community overwhelmingly supports deregulation, which is reflected in Myanmar’s’ national investment law and investment treaties.

Myanmar, like other transitional states, does not provide adequate access to remedy for victims of business related human rights abuses. Myanmar is unable to take appropriate steps to ensure, through judicial, administrative, legislative or other appropriate means, that when such abuses occur within their territory those affected have access to effective remedy. The judiciary is not yet independent from the undue influence of other branches of government and the military, who themselves are connected to crony businessmen. This creates a public perception of injustice and undermines the rule of law.

Judges lack resources and capacity and are subject to pressure from the executive through the Attorney General’s Office and by direct intervention for the military in sensitive cases (ie Human Rights). Many Judges, including 4 of the 7 members of the Supreme Court, are military appointed officers. The courts are under resourced and require further support from the international community.

Lawyers do not have an independent bar association. The current legal body is headed by the Attorney General and has punished its members for taking on contentious cases.

Current land law creates administrative bodies to handle land disputes. These committees make vital decisions affecting human rights at the local level. Their decisions are perceived as final and have had not been subject to adequate judicial oversight despite the availability of constitutional writs as rights of citizens.

Yet there are positive signs. As you all know, there is a new government in Myanmar. There is an unprecedented opportunity to engage and cooperate. The Attorney General’s Office, the Supreme Court and the new government have all signaled their commitment to reform in line with the rule of law and human rights. There is a new Attorney General, appointed by the new government, who can take the lead on judicial reform. Lawyers are emboldened and increasingly willing to take on tough cases with less fear for their careers. The ICJ builds the capacity of and supports all of the above in the protection of human rights.

Under the current regulatory regime, it is unlikely criminal or civil litigation will hold powerful economic actors like corporations accountable. This is a generational change that will require reform of legal education, increased capacity building and support from the international community.

In the meantime, the state duty to protect and provide access to remedy cannot be fulfilled, bringing into question the utility of the corporate responsibility to respect human rights put forward by the UN Guidelines. Let’s face it, it is easy to respect rules and regulations that do not exist or are not enforced.

Access to justice, including the right to an effective remedy, is essential for business accountability for human rights abuses. The prospective treaty must require measures to ensure access to effective remedies and redress for persons and groups of persons that suffer abuse arising from the conduct of business enterprises.

The treaty should codify and develop provisions for access to an effective remedy for wrongful conduct against both States and business enterprises. For States, the remedy would be in respect of situations of complicity or participation in business activity or for failing to discharge their duty to protect against the conduct of business enterprises.

The possibility for victims to initiate judicial complaints against companies directly in their domicile (whether it is in a host State or the home State) will further help to redress the inequality in rights and obligations that exist as between companies on one side and people on the other side.

The growing web of bilateral or multilateral agreements on investments and free trade often grant business enterprises and investors in general the right to a very extensive set of protections including the right to sue governments before international arbitral tribunals, a right that individuals and communities do not have in relation to companies that abuse their human rights.

Try telling a farmer that a foreign company will have access to justice to protect its land while they have none. An international treaty that guarantees an enhanced remedy system for harm caused by companies including extraterritorially would serve as a corrective instrument in this respect.

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