The double-edged sword of human rights treaties as a “lock-in formula” for countries seeking foreign investments : the extent to which host states can invoke human rights provisions as a defense against foreign investors

Abstract

The image of a “double-edged sword” or “double-mouthed sword”, seems to first appear in the Bible, to indicate that the truth of God is all-permeating, bringing to light the real thoughts and intents of the heart with a devouring, sharp power. Literally, a “double-edged sword” is a weapon which cuts either way and over the time, it has assumed the metaphoric meaning of something that “applied to an argument… makes both for and against the person employing it”. Nowadays, more and more countries ratify human rights treaties and submit themselves to the enforcement mechanisms attached thereto, therefore taking on great sovereignty costs. According to scholars, this is used by developing countries and emerging democracies as a sign, to the rest of the world, of their willingness to lock-in liberal policies and to show their commitment to consolidate the rule of law, in an attempt to attract foreign investments and make their capital flow. Investors’ choice of trusting host States’ signing of human rights treaties may well become a double-edged weapon against them: if on the one hand, developing countries’ adherence to human rights regimes is a guarantee that they will abide by international standards, on the other hand, human rights norms can be invoked by host States to justify breaches of the Bilateral Investment Treaty and be, therefore, detrimental to foreign investors. Many define this phenomenon as a “tension” between the investment law and the human rights realms. This study demonstrates that, from a theoretical perspective, there is no actual tension, nor threat of fragmentation of international law. The case law of arbitral tribunals has also shown a positive trend in taking into consideration human rights arguments in resolving investment disputes, although the system is far from being perfect. To this end, while international investment arbitration is a powerful and effective tool to resolve investment disputes, when the core issues deviate from traditional economic arguments, investment tribunals may not be the perfect fit. In an attempt to identify a suitable mechanism that would offer stronger guarantees for human rights arguments to be taken into consideration in investment proceedings, this study claims that a review of an award limited to national or international ordre public grounds, available at the stage of enforcement or annulment of the investment award is the least invasive and most reasonable solution to give host States a second chance against an award disregarding the host State’s human rights obligations owed to the population under its jurisdiction. Ultimately, to avoid any sort of warfare and metaphors attached thereto, investors and States, taking cognizance of today’s new legal order based on the global governance model, should begin a dialogue that would craft in the agreements new rules insuring that foreign investments support the public interest.