International Human Rights Law in Investment Arbitration: Evidence of International Law’s Unity

02__FRY.DOC 5/27/2008 1:27:26 PM INTERNATIONAL HUMAN RIGHTS LAW IN INVESTMENT ARBITRATION: EVIDENCE OF INTERNATIONAL LAW’S UNITY JAMES D. FRY* Arbitration is justice blended with charity. – Nachman of Bratslav INTRODUCTION A. Responding to Cynicism The relationship between human rights and foreign investment 1 law is recognized as complex, yet commentators generally agree that international investment law and arbitration have an adverse impact on the promotion and protection of human rights. Ryan Suda summarizes his recent study by stating: [Bilateral investment] treaties, which grant strong protections to investors of either state party who are operating in the territory of the other party, may impinge upon human rights enforcement and realization in several ways. . . . The analysis brings home the need for the investment treaty regime to be reformed to take better account of the human rights regime, ameliorating situations in Copyright © 2007 by James D. Fry. * James D. Fry is a Fellow at the University of Geneva Faculty of Law and a Teaching Assistant at the Graduate Institute of International Studies, International Law Section, in Geneva. He received an LL.M. from Leiden University Faculty of Law, a J.D. from Georgetown University Law Center, an M.I.A. from Columbia University and a B.A. from Brigham Young University. He would like to thank Professor Gabrielle Kaufmann-Kohler and Thomas Schultz of the University of Geneva, as well as Andrew Clapham, Jonathan Curci, David Fry, and Bertrand Ramcharan for their comments on earlier drafts of this Article. This Article is part of a research project funded by the Swiss National Science Foundation. 1. See U.N. Economic and Social Council [ECOSOC], Sub-Comm. on the Promotion of Human Rights, Report of the High Commissioner for Human Rights, Human Rights, Trade and Investment, ¶¶ 5-19, 56, U.N. Doc. E/CN.4/Sub.2/2003/9 (July 2, 2003) [hereinafter High Commissioner Report] (noting, inter alia, how the relationship depends on such factors as the country in question and investors’ motives). 77 02__FRY.DOC 78 5/27/2008 1:27:26 PM DUKE JOURNAL OF COMPARATIVE & INTERNATIONAL LAW [Vol 18:77 which states face conflicting international legal obligations under 2 the two regimes. Remi Bachand and Stephanie Rousseau assert, “dispute settlement decisions that have a negative impact on policies related to rights protection,” among other things, fuel strong concerns over international trade and investment agreements undermining human 3 rights protections. Luke Peterson and Kevin Gray summarize their arguments, noting: The ability [of arbitral tribunals] to monitor the full human rights impacts of emerging investment treaty arbitration is hindered by various shortcomings of this process. Some reform of [the bilateral investment treaty regime], including greater transparency, is necessary at a minimum, as disputes are now implicating a broad range of public policy measures in host states. . . . [I]f investment tribunals will be expected to take account of a broader range of human rights and human security externalities related to investment, this might require further changes to the substantive 4 and procedural rules of existing (and future) investment treaties. Jose Alvarez ironically characterizes the NAFTA investment chapter (Chapter 11) as “a human rights treaty for a special-interest group”— 5 Indeed, as he asserts, the NAFTA namely, foreign investors. investment chapter is “the most bizarre human rights treaty ever conceived,” giving the bulk of the rights to the few and ignoring the rights of those who are otherwise affected by the investment, including individual economic rights, work-related rights as provided by Articles 22 to 24 of the Universal Declaration of Human Rights (UDHR), and other rights like the right to education under UDHR Article 26.6 All of these studies consistently set international 2. Ryan Suda, The Effect of Bilateral Investment Treaties on Human Rights Enforcement and Realization 2 (NYU Global Law Working Paper No. 01, 2005). 3. Rémi Bachand & Stéphanie Rousseau, International Investment and Human Rights: Political and Legal Issues 1 (Peter Feldstein trans., Rights & Democracy, Background Paper, 2003), http://www.ichrdd.ca/english/commdoc/publications/globalization/thinkTank2003/ bachandRousseauEng.pdf. See also Peter Barnacle, Promises and Paradoxes: Promoting Labour Rights in International Financial Institutions and Trade Regimes, 67 SASK. L. REV. 609, 634-35 (2004) (“Enforcement of investor rights [through investment arbitration] will potentially affect a wide range of human rights . . . .”). 4. Luke Eric Peterson & Kevin R. Gray, International Human Rights in Bilateral Investment Treaties and investment Treaty Arbitration 3 (The International Institute for Sustainable Development, Research Paper, 2003), http://www.iisd.org/pdf/2003/investment_int_ human_rights_bits.pdf. 5. Jose Alvarez, Critical Theory and the North American Free Trade Agreement’s Chapter Eleven, 28 U. MIAMI INTER-AM. L. REV. 303, 308 (1997). 6. Id. at 307-09. 02__FRY.DOC 2007] 5/27/2008 1:27:26 PM EVIDENCE OF INTERNATIONAL LAW’S UNITY 79 investment law and international arbitration against human rights 7 considerations. Surprisingly, these studies are light on tangible examples, instead 8 relying on hypothetical situations and weak counterfactual reasoning. In contrast, this Study looks at actual international investment arbitration cases to determine the relationship between international investment law and arbitration, on the one hand, and human rights law, on the other. This Article seeks to undermine the general consensus that investment arbitration negatively impacts human rights and to present examples where the law applied by international investment arbitral tribunals is compatible with, and even supports, human rights law by relying on human rights jurisprudence to make key determinations. This Article goes beyond mere theoretical debate by looking into the facts in order to provide a solid foundation upon which a theory might then be erected, particularly the unification of international law. In order to respond to the prior studies mentioned above, Part I of this Article takes a detailed look at actual tribunal decisions to determine the relationship between investment arbitration and human rights law.9 Part II expands on this critique by analysing the fundamental principles of international arbitration—namely, equality of parties and the opportunity to present one’s case, which derive from international arbitration’s wholehearted commitment to party 10 consent. Part III, then, puts the analysis contained in Part I into a 7. As noted infra Part I(B), “international arbitration” and “international investment law” are occasionally used interchangeably in this Article due to the fact that arbitrators essentially are interpreting relevant international investment law provisions in a particular context. That (...truncated)