Hostname: page-component-586b7cd67f-gb8f7 Total loading time: 0 Render date: 2024-11-25T04:08:35.022Z Has data issue: false hasContentIssue false

Corporate Human Rights Obligations under Stabilization Clauses

Published online by Cambridge University Press:  06 March 2019

Abstract

Core share and HTML view are not available for this content. However, as you have access to this content, a full PDF is available via the ‘Save PDF’ action button.

Lawyers, economists and social scientists alike have for a number of years agreed that foreign investment has the potential to act as a catalyst for the enjoyment of an individual's fundamental human rights, particularly in developing countries. This article discusses and critically analyses corporate human rights obligations and the lack thereof under stabilization clauses in foreign investment contracts. The balance of this article is devoted to exploring three main issues relating to corporate human rights obligations and stabilization clauses. First, stabilization clauses in foreign investment agreements are examined in relation to corporate obligations and responsibility for fundamental human rights. In doing so the substantive and procedural dimension of stabilization clauses is analysed. Second, using the concrete examples of the Mineral Development Agreement between Mittal Steel and the Government of Liberia Mittal Steel Agreement and of the Baku-Tblisi-Ceyhan Pipeline Project as case studies, this article considers an application of stabilization clauses in foreign investment contracts in relation to the fundamental human rights obligation of states and of corporations. Third, a proposal for reform in the form of a fundamental human rights clause is introduced. To be clear, the argument here is that the fundamental human rights obligations of investors, particularly of corporations, must be included in foreign investment agreements.

Type
Articles
Copyright
Copyright © 2010 by German Law Journal GbR 

Footnotes

*

Dr. J. Letnar Černič is a Max Weber Postdoctoral Researcher at European University Institute. Email: [email protected]. The author would like to thank the members of the editorial board for their many helpful comments and suggestions. All remaining errors are, naturally, mine.

References

1 The World Investment Report 2007, Transnational Corporations, Extractive Industries and Development, iii.Google Scholar

2 U.N. Human Rights Council [HRC], Promotion and Protection of All Human Rights, Civil, Political, Economic, Social and Cultural Rights, Including the Right to Development: Protect, Respect and Remedy: A Framework for Business and Human Rights, U.N. Doc. A/HRC/8/5, para. 12, 7 April 2008 available at: http://www.reports-and-materials.org/Ruggie-report-7-Apr-2008.pdf.Google Scholar

3 International Law Association, First Report of the Committee on International Law on Foreign Investment, 2006, 440 available at: http://www.ila-hq.org/en/committees/index.cfm/cid/1015.Google Scholar

4 U.N. High Commissioner for Human Rights, Report on Human Rights, Trade, Investment, UN Doc. E/CN.4/Sub.2/2003/9, 2 July 2003, 68.Google Scholar

5 Howard Mann, International Investment Agreements, Business and Human Rights: Key Issues and Opportunities (2008) 39. See also generally International law Association, Committee on International Law on Foreign Investment, Final Report (2008) 15 available at: http://www.ila-hq.org/en/committees/index.cfm/cid/1015.Google Scholar

6 United Nations Human Rights Committee General Comment 31, Nature of the General Legal Obligation on States Parties to the Covenant, Human Rights Committee, U.N. Doc. CCPR/C/21/Rev.1/Add.13 (2004).Google Scholar

For a detailed analysis see: J. G. Ruggie, State Responsibilities to Regulate and Adjudicate Corporate Activities under the United Nations’ core Human Rights Treaties, Prepared for the mandate of the Special Representative of the United Nations Secretary-General (SRSG) on the issue of human rights and transnational corporations, A/HRC/4/35/Add.1, 13 February 2007 available at: http://daccessdds.un.org/doc/UNDOC/GEN/G07/108/52/PDF/G0710852.pdf?OpenElement.Google Scholar

See also: J. Ruggie, State Responsibilities to Regulate and Adjudicate Corporate Activities under the United Nations’ core Human Rights Treaties, Individual report on the International Covenant on Civil and Political Rights Report No. III, (2007) para. 33 available at: http://198.170.85.29/Ruggie-ICCPR-Jun-2007.pdf,. In relation to States’ duties regarding acts by natural or legal persons and private individuals or bodies, see United Nations Human Rights Committee General Comment 16, ‘Article 17 (Right to privacy)', 8 April 1988 (32nd Session) at paras. 1 and 10, in relation to acts by private persons or bodies see General Comment 18, ‘Non-discrimination', 10 November 1989 (37th Session) at para. 9, in relation to acts by private agencies in all fields, the private sector and private practices see HRC General Comment 28, at paras. 4, 20 and 31. J. Ruggie, Mapping State obligations for corporate acts: An examination of the UN Human Rights Treaty System Report No. 1: International Convention on the Elimination of All Forms of Racial Discrimination, Prepared for the Special Representative of the Secretary-General on Human Rights and Transnational Corporations and Other Business Enterprises With the support of The Office of the United Nations High Commissioner for Human Rights, 18 December 2006, available at: http://www.business-humanrights.org/Documents/State-Obligations-Corporate-Acts-CERD-18-Dec-2006.pdf.Google Scholar

See also Maastricht Guidelines on Violations of Economic, Social and Cultural Rights, Maastricht, January 22–26, 1997. See General Comment 12 of the UN Committee on Economic, Social and Cultural Rights, 12 May 1999, 15.Google Scholar

For a detailed discussion on tripartite human rights typology see: Magdalena Sepulveda, The Nature of the Obligations under the International Covenant on Economic, Social and Cultural Rights (2003). Asbj⊘rn Eide, Right to Adequate Food as a Human Right, Human Rights Study Series No 1, United Nations publication (1989);Google Scholar

For a critical analysis of tripartite framework see: Ida Elisabeth Koch, Dichotomies, Trichotomies or Waves of Duties?, 5(1) Human Rights law Review 81–103 (2005). Brigit C.A Toebes, The Right to Health as a Human Right in International law Chapter 4 (1999). G.J.H. van Hoof: Legal nature of economic, social and cultural rights: a rebuttal of some traditional view, in The right to food, 106–108 (P. Alston and K. Tomaševski, eds., 1994). Nicola Jägers, Corporate Human rights Obligations (2002), Ernst-Ulrich Petersmann, On ‘Indivisibility’ of Human Rights, 14(2) European Journal of International law 381–385 (2003).CrossRefGoogle Scholar

7 Jägers, Nicola, Corporate Human rights Obligations 79–85 (2002). Hakeem O. Yusuf, Oil on Troubled Waters-Multinational Corporations and Realising Human Rights in the Developing World with Particular Reference to Nigeria, 8.1 African Human Rights Law Journal 79–107 (2008)., Arguing that corporations should be similarly obligated to respect, promote and protect human rights.Google Scholar

8 International Law Association, Committee on International Law on Foreign Investment, Final Report, 2008, 15, available at: http://www.ila-hq.org/en/committees/index.cfm/cid/1015.Google Scholar

9 U.N. Human Rights Council [HRC], Promotion and Protection of All Human Rights, Civil, Political, Economic, Social and Cultural Rights, Including the Right to Development: Protect, Respect and Remedy: A Framework for Business and Human Rights, U.N. Doc. A/HRC/11/13/, 22 April 2009. para. 46.Google Scholar

10 Id. para. 48.Google Scholar

11 Andrew Clapham, Human Rights Obligations of Non-State Actors 231 (2006).CrossRefGoogle Scholar

12 Amoco International Finance Corporations v. The Government of Islamic Republic of Iran, et al., Partial Award No. 310-56-3, 14 July 1987, reprinted in 15 Iran-US CTR at para. 239.Google Scholar

13 Beata Włodarczak, Stabilization clauses (2006), unpublished LL.M. thesis, 14. Also see Stabilization Clauses and Human Rights, A research project conducted for IFC and the United Nations Special Representative to the Secretary General on Business and Human Rights, 11 March, 2008.Google Scholar

14 Comments to the IFC: Baku-Tbilisi-Ceyhan Pipeline Project, Center for International Environment Law 6.Google Scholar

15 Libyan American Oil Company (LIAMCO) v. Government of the Libyan Arab Republic 12 April 1977, Yearbook of Commercial Arbitration VI 89 (1981). See also, R. Doak Bishop, International Arbitration of Petroleum Disputes: The Development of a Lex Petrolea 1131 (1998).Google Scholar

16 Comments to the IFC: Baku-Tbilisi-Ceyhan Pipeline Project, Center for International Environment Law 7.Google Scholar

17 Andrea Shemberg, Stabilization Clauses and Human Rights 6 (2008). A research project conducted for IFC and the United Nations Special Representative to the Secretary General on Business and Human RightsGoogle Scholar

18 Id., 9.Google Scholar

21 Id., 5–8.Google Scholar

22 TOPCO v. Libya, Award of 17 January 1977, 17 ILM (1978) 3 at 24.Google Scholar

23 The nationalization of Libyan American Oil Company (LIAMCO) by the Libyan government triggered arbitration proceedings.Google Scholar

24 Libyan American Oil Company (LIAMCO) v. Government of the Libyan Arab Republic, 12 April 1977, Yearbook 89 (1981). 62 ILR 31 (1977)See also Libyan American Oil Co. v. Socialist Peoples's Libyan Arab Jamahirya, United States District Court, District of Columbia, 482 January 18, 1980. F. Supp. 1175 (1980). See also Government of the State of Kuwait v. American Independent Oil Co. (AMINOIL), Award of 24 May 1982, 21 International Legal Materials (ILM) 726 (1982); and Texaco, 53 ILR 471 (1979).Google Scholar

25 M. Sornarajah, The International Law on Foreign Investment 331 (1994).Google Scholar

26 U.N. High Commissioner for Human Rights, Report on Human Rights, Trade, Investment, E/CN.4/Sub.2/2003/9, 2 July 2003, para. 24. See also Andrea Shemberg, Stabilization Clauses and Human Rights, A research project conducted for IFC and the United Nations Special Representative to the Secretary General on Business and Human Rights, 11 March 2008, paras. 34–37 available at: http://www.ifc.org/ifcext/sustainability.nsf/AttachmentsByTitle/p_StabilizationClausesandHumanRights/$FILE/Stabilization+Paper.pdf.Google Scholar

27 Beata WŁodarczak, Stabilization clauses (2006), unpublished LL.M. thesis, 34.Google Scholar

28 International Law Association, The Final report of the International Committee of International Law on Foreign Investment, 4 (2008), available at: http://www.ila-hq.org/en/committees/index.cfm/cid/1015. See generally N. Schrijver, Sovereignty Over Natural Resources: Balancing Rights and Duties (2008), and Beata WŁodarczak, Stabilization clauses (2006), unpublished LL.M. thesis, 35.Google Scholar

29 This may inter alia include the following norms: freedom from genocide, crimes against humanity and war crimes, prohibition of torture, inhumane and degrading treatment, prohibition of slavery, prohibition of forced labour and child labour, prohibition of racial discrimination and forced disappearances.Google Scholar

30 See next section for an example of how a stabilization clause results in some abnegation of fundamental human rights.Google Scholar

31 Global Witness notes that the MDA agreement identifies Mittal Steel (Liberia) Holdings Limited as the party to the MDA agreement where it is referred to as concessionaire’ ‘CONCESSIONAIRE'. The Mittal Steel Liberia Limited is identified as ‘as the agent of the Concessionaire and operating company in Liberia.’ Global Witness notes that Mittal Steel (Liberia) Holdings Limited is ‘70% owned by Mittal Steel Holdings AG and 30% by the Government of Liberia'. Mittal Steel Holdings AG is a wholly owned subsidiary of the Mittal Steel NV, which is incorporated in the Netherlands and is the parent company in the Mittal corporate group. Global Witness, Heavy Mittal? A State within a State: The inequitable Mineral Development Agreement between the Government of Liberia and Mittal Steel Holdings NV, Report, 15, October 2006, available at: http://www.globalwitness.org/media_library_detail.php/156/en/heavy_mittal. Mittal Steel NV merged in 2006 with Arcelor and now operated under the name of Arcetal Mittal, available at: http://www.arcelormittal.com/.Google Scholar

32 For the text of the MDA Agreement see Global Witness, Heavy Mittal? A State within a State: The inequitable Mineral Development Agreement between the Government of Liberia and Mittal Steel Holdings NV, Report, October 2006, available at: http://www.globalwitness.org/media_library_detail.php/156/en/heavy_mittal.Google Scholar

33 Id., 7.Google Scholar

34 Id., 30.Google Scholar

35 The Mineral Development Agreement (MDA) Agreement, 17 August 2005, Article XIX, section 9, 21.Google Scholar

36 Id. Article XXI, section 3, 22.Google Scholar

37 Lorenzo Cotula, Foreign investment contract, Briefing 4, International investment contracts, 10 June 2005.Google Scholar

38 Id., see also Lorenzo Cotula, Reconciling regulatory stability and evolution of environmental standards in investment contracts: Towards a rethink of stabilization clauses, 1(2) The Journal of World Energy law & Business 158–179 (2008).Google Scholar

39 Lorenzo Cotula, The regulatory taking doctrine, Briefing 3, International Institute for Environment and Development, August 2007.Google Scholar

40 Sheldon Leader, Human Rights, Risks, and New Strategies for Global Investment, 9(3) Journal of International Economic Law 657–705 (2006).Google Scholar

41 Global Wittness, Update on the Renegotiation of the Mineral Development Agreement between Mittal Steel and the Government of Liberia, August 2007, available at: http://www.globalwitness.org/media_library_detail.php/156/en/heavy_mittal.Google Scholar

42 Terre-Eve Lawson Remer, A Role for the IFC in Integrating Environmental & Human Rights Standards into Core Project Covenants: Case Study of the Baku-Tbilisi-Ceyhan Oil Pipeline Project, in Global Law Working Paper 01/05, Symposium - ‘Transnational Corporations and Human Rights', NYU School of Law.Google Scholar

43 Oil corporations include: BP (UK) SOCAR (the state oil company of Azerbaijan); TPAO (Turkey); Statoil (Norway); Unocal (USA); Itochu (Japan); Amerada Hess (USA); Eni (Italy); TotalFinaElf, now renamed Total (France); INPEX (Japan) and ConocoPhillips (USA).43 BP holds a 30% stake in the consortium running the pipeline. Other consortium members include Azerbaijan's state oil company SOCAR (25%), Amerada Hess (2.36%), ConocoPhillips (2.5%), Eni (5%), Inpex (2.5%), Itochu (3.4%), Statoil (8.71%), Total-FINA-ELF (5%), TPAO (6.53%) and Unocal (8.9%).Google Scholar

44 The European Bank for Reconstruction and Development, Striking a balance: Intergovernmental and host government agreements in the context of the Baku-Tbilisi-Ceyhan pipeline project, European Bank for Reconstruction and Development, available at: http://www.ebrd.com/pubs/legal/lit042e.pdf.Google Scholar

45 Host Governments Agreements, 1 August 2002.Google Scholar

46 Turkey-BTC HGA, paragraphs 7.2 (vi) and (xi), 10.1. This goes along with the dual nature of the stabilization clause.Google Scholar

47 In this respect see also preambular paragraph 10 of HGA with Turkey: ‘[T]he intergovernmental Agreement shall become effective as law of the Republic of Turkey and (with respect to the subject matter thereof) prevailing over all other Turkish Law (other than the Constitution) and the terms of such agreement shall be the binding obligation of the Republic of Turkey under international law.'Google Scholar

48 Comment to the IFC Baku-Tbilisi-Ceyhan Pipeline Project, Center for International Environmental Law, 7.Google Scholar

49 The Host Government Agreement between Turkey and the BTC Consortium, Article 10, para. 10.1. See The European Bank for Reconstruction and Development, Striking a balance: Intergovernmental and host government agreements in the context of the Baku-Tbilisi-Ceyhan pipeline project, European Bank for Reconstruction and Development, available at: http://www.ebrd.com/pubs/legal/lit042e.pdf.Google Scholar

50 Amnesty International UK, 2003, Human Rights on the Line: The Baku-Tbilisi-Ceyhan Pipeline Project, London: Amnesty International UK.Google Scholar

51 Andrea Shemberg, Stabilization Clauses and Human Rights, A Research project conducted for IFC and the United Nations Special Representative to the Secretary General on Business and Human Rights, available at: http://www.ifc.org/ifcext/sustainability.nsf/AttachmentsByTitle/p_StabilizationClausesandHumanRights/$FILE/Stabilization+Paper.pdf, 11 March 2008, para. 91.Google Scholar

53 Leader (note 40), 700.Google Scholar

54 Relevant part reads as follows: not assert or advance, in any claim against, demand to, or dispute with another party, or in any legal action or proceeding an interpretation of any Project Agreement that is inconsistent with Articles 7 and 8 of the Joint Statement, which confirm that the HSE [health, safety and environmental] and human rights standards for the Project are dynamic, will evolve when and as standards under domestic law in the relevant State, EU Standards, and applicable international treaty standards evolve, and thus require conduct of the Project's human rights and HSE activities in accordance with such evolving domestic law from time to time provided it is no more stringent than the highest of EU Standards, those World Bank Group standards referred to in the Project Agreements, and standards under applicable international labour and human rights treaties…’ See The BTC Human Rights Undertaking, available at: http://subsites.bp.com/caspian/Human%20Rights%20Undertaking.pdf. Article 2 (d).Google Scholar

55 The BTC Human Rights Undertaking, 22 September 2003, 2 (a).Google Scholar

56 Center for International Environmental Law, Comment to the IFC Baku-Tbilisi-Ceyhan Pipeline Project, October 2003, available at http://www.ciel.org/Publications/BTC_Comments_10Oct03.pdf, 8.Google Scholar

57 1 Methanex Corp. v. United States, Jurisdiction and Merits (NAFTA Ch. 11 Arb. Trib. Aug. 3, 2005), available at http://www.state.gov/s/l/c5818.htm; Part IV, chapter D, para 7.Google Scholar

58 M. Sornarajah, Linking State Responsibility for Certain Harms Caused by Corporate Nationals Abroad to Civil Recourse in the Legal Systems of Home States, in Torture as Tort, Comparative Perspectives on the Development of Transnational Human Rights Litigation (Craig Scott, ed., 2001). It must be noted there that is debatable to what extent this might require foreign investors to do more than domestic investors if domestic protection of human rights is defective.Google Scholar

59 L. E. Peterson and K. R Gray, International Human Rights in Bilateral Investment Reaties and Investment Reaty Arbitration 24 (2003). Available at: http://www.iisd.org/pdf/2003/investment_int_human_rights_bits.pdf.Google Scholar

60 UN Commission on Human Rights, Human Rights, Trade and Investment, Report of the High Commissioner for Human Rights, U.N. Economic and Social Council, U.N. Doc. E/CN.4/Sub.2/2003/9, 55, 2 July 2003.Google Scholar

61 International Law Association, First report of the Committee of International Law on Foreign Investment, 2006, 441, available at: http://www.ila-hq.org/en/committees/index.cfm/cid/1015.Google Scholar

62 International Law Association, the Committee on the International Law on Foreign Investment., The Final Report, 2008, available at: http://www.ila-hq.org/en/committees/index.cfm/cid/1015.Google Scholar

63 UN Commission on Human Rights, Human Rights, Trade and Investment, Report of the High Commissioner for Human Rights, U.N. Economic and Social Council, U.N. Doc. E/CN.4/Sub.2/2003/9, 4, 2 July 2003.Google Scholar

64 United Nations Conference on Trade and Development, State Contracts, UNCTAD Series in international investment agreements, United Nations, 2004, 45.Google Scholar

65 OECD, Declaration on International Investment and Multinational Enterprises, 21 June 1976.Google Scholar

66 The Norway 2007 Model BIT, Investment Treaty Arbitration, available at: http://ita.law.uvic.ca/documents/NorwayModel2007.doc.Google Scholar

67 E/CN.4/Sub.2/2003/9, 30.Google Scholar

68 The UN Principles for Responsible Investment, An investor initiative in partnership with UNEP Finance Initiative and the UN Global Compact, available at: http://www.unpri.org/.Google Scholar

69 Id, Principle 1.Google Scholar

70 Id, Principle 2.Google Scholar

71 Multilateral Centre for Private Sector Development Istanbul, Basic Elements of a Law on Concession Agreements, OECD and Federation of Euro-Asian Exchanges, available at: www.oecd.org/dataoecd/41/20/33959802.pdf.Google Scholar

72 UN Commission on Human Rights, Human Rights, Trade and Investment, Report of the High Commissioner for Human Rights, U.N. Economic and Social Council, U.N. Doc. E/CN.4/Sub.2/2003/9, 57, 2 July 2003.Google Scholar

74 Sachs, Jeffrey, The End of Poverty: Economic Possibilities of Our Time 356 (2005).Google Scholar

75 International Law Association First report of the International Committee of International Law on Foreign Investment, 2006, 441, available at: http://www.ila-hq.org/en/committees/index.cfm/cid/1015.Google Scholar