International investment rulemaking takes place at bilateral, regional, interregional and multilateral levels, with over 3000 investment treaties currently in force. Investment treaties can take a variety of forms and includes, for example, bilateral investment treaties (BIT), which are agreements made between two States establishing the terms and conditions for private investment by nationals and companies of one State in another State. This type of investment is usually called “foreign direct investment” (FDI).
Investor-state dispute settlements (ISDS) are measures which can be contained within certain investment agreements and give investors the right to call for arbitration in the event they believe that a government has violated such an agreement. Controversy arises when, for example, the investment treaty provides that a state will not amend its regulatory environment for a period of time (e.g. no environmental law amendments for ten years), but the state later wishes to amend the regulatory environment to fulfil human rights obligations, but the ISDS gives investors grounds to take action against the state if it makes such amendments.
The UN Business and Human Rights Guiding Principles (UNGPs), Guiding Principle 9, states:
“States should maintain adequate domestic policy space to meet their human rights obligations when pursuing business-related policy objectives with other States or business enterprises, for instance through investment treaties or contracts.”
“Economic agreements concluded by States, either with other States or with business enterprises – such as bilateral investment treaties, freetrade agreements or contracts for investment projects – create economic opportunities for States. But they can also affect the domestic policy space of Governments. For example, the terms of international investment agreements may constrain States from fully implementing new human rights legislation, or put them at risk of binding international arbitration if they do so. Therefore, States should ensure that they retain adequate policy and regulatory ability to protect human rights under the terms of such agreements, while providing the necessary investor protection.”
For more information on how to align human rights and the SDGs in investment policy, see the Danish Institute for Human Rights’ Means of Implementation.
The growing awareness of both the positive and negative impacts of investment treaties, be they bilateral or international, has resulted in various organisations such as UNCTAD and the South Centre, as well as NGOs, developing recommendations and concrete proposals on how to ensure that investment treaties are aligned and support human rights protection, or at the least do not limit it. UNCTAD’s Work Programme on International Investment Agreements (IIAs) actively assists policymakers, government officials and other IIA stakeholders in negotiating new IIAs with a view to making them more conducive to sustainable development and inclusive growth, and “modernizing the existing stock of old-generation treaties”. UNCTAD’s World Investment Report 2017 presents and analyses the costs and benefits of 10 policy options that countries can take to reform their old-generation treaties. Some States such as South Africa, India, Indonesia and Ecuador are leading the way in terminating some of their bilateral intevestment treaties. Such efforts are important examples of States achieving UNGP 9 by maintaining “adequate domestic policy space to meet their human rights obligations when pursuing business-related policy objectives with other States or business enterprises, for instance through investment treaties.” The UN Sustainable Development Goals also call for “respect [of] each country’s policy space and leadership to establish and implement policies for poverty eradication and sustainable development.”
One of the most controversial and disputed elements of the international investment agreements (IIAs) are provisions concerning the treaty-based Investor-State Dispute Settlement (ISDS). ECIPE has noted that “ISDS is a legal instrument in BITs, or other BIT-like bilateral and International Investment agreements, that grants investors the right to call for arbitration in the event they believe that a government has violated such an agreement”. Investor–state arbitration has greatly expanded over the past decade, with the total number of recorded cases rising from 51 in 2000 to 767 known arbitrations in 2016. Of those in 2016, UNCTAD has noted that 62 ISDS cases were initiated by investors pursuant to international investment agreements, who were mostly from Global South States. Alongside the increase in arbitrated cases, there has been growing concern by some states about the nature of arbitration claims by foreign investors against host states, which have included challenges to legitimate environmental and other public welfare and financial policy measures. The high costs of arbitration and lack of transparency, independence and predictability have also led several states to rethink the scope of their investment treaty obligations as well as the arbitration mechanisms incorporated in their investment treaties. While there is no legal aid equivalent for states defending themselves from these suits, corporations have access to a growing group of third-party financiers who are willing to fund their cases against states, usually in exchange for a cut of any eventual award. UNCTAD has launched the ISDS Navigator, which contains information about known international arbitration cases initiated by investors against States pursuant to international investment agreements (IIAs).
The ISDS mechanism came to be at the centre of controversy in a debate over the Transatlantic Trade and Investment Partnership (TTIP) and CETA, not least due to lack of transparency around those treaties development. In this context, it is important to note that there have been a number of important transparency-related innovations in international arbitration in recent years, for example the UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration, which came come into effect from April 2014. Also the EU Multilateral Investment Court project, which had an overall objective of setting up a permanent body to decide investment disputes, that would replace the system of ISDS based on ad hoc commercial arbitration and, like the approach in the FTAs, would bring the key features of domestic and international courts to investment adjudication. Both the EU-Canada Comprehensive Economic Trade Agreement (CETA) and the EU-Vietnam Free Trade Agreement foresee setting up a permanent multilateral mechanism and contain a reference to it. However, the EU’s approach has been criticised as “putting a sheep’s disguise on the ISDS wolf that still lurks beneath.”
The recent 2018 Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) includes an ISDS mechanism. Notably, the text provides in relation to the Chapter on the ISDS that:
“Nothing in this Chapter shall be construed to prevent a Party from adopting, maintaining or enforcing any measure otherwise consistent with this Chapter that it considers appropriate to ensure that investment activity in its territory is undertaken in a manner sensitive to environmental, health or other regulatory objectives.”
However, commentators have suggested that the text ‘otherwise consistent with this Chapter’ negates the potential effect of this provision.
The Regional Comprehensive Economic Partnership (RCEP), which has 16 member states, but nonetheless has been predicted to play a major role in maintaining and promoting world trade, is expected not to include the ISDS mechanism.
Some recent examples of ISDS in practice include:
After a decade-long fight, the citizens of the Italian region of Abruzzo won an important battle against the oil industry: they stopped the OmbrinaMare oil project, which would have had a large impact on the environment and climate. The Italian government agreed to pass a new law banning oil drilling near the Italian coast. However, the Italian government is now being sued for up to 350 million dollars in compensation under the Energy Charter Treaty.
For 13 years, the citizens of Dubrovnik have opposed the construction of a luxury resort on the hill overlooking their city. Ultimately, the project was stopped by Croatian courts. But the company behind it is now suing Croatia in a parallel justice system for corporations called ISDS, seeking $500 million in compensation – and trying to silence the community in local courts.
For 20 years, residents of Romanian town Roşia Montană have fought plans to build a gold mine which would impact on their homes and the environment. The project was stopped through a court caset, where the mine was declared illegal. But now Canadian company Gabriel Resources is suing Romania in an international tribunal, seeking US$5.7 billion in compensation – nearly 3% of Romania’s GDP.
The 2030 Agenda for Sustainable Development clearly recognises the role of investment, including in the form of Foreign Direct Investment (FDI), in achieving its objectives, especially through SDG target 17.3 on mobilising additional financial resources for developing countries from multiple sources; and SDG target 17.5 on adopting and implementing investment promotion regimes for least developed countries.
The need for a better investment climate for sustainable development is also detailed in the Addis Ababa Action Agenda (AAAA). The UNGPs firmly establish the relevance of international human rights law and due diligence to investment law and policy by emphasising the need for policy coherence. Moreover, they require ‘heightened’ due diligence where investment is supported directly by the State. This approach is reaffirmed in the 2030 Agenda, which, emphasises that investment must be targeted where the need is greatest, and meet certain prerequisites to ensure that it effectively contributes to sustainable development
The federal government states that during negotiations at the European level, Belgium will advocate for the respect and inclusion of fundamental labour rights and international environmental standards – including in cases of development cooperation – in investment agreements and free trade agreements. “Any new trade or investment agreement must not have negative impact on sustainable development.”
Flanders mentions its support of the EU’s efforts to include separate chapters covering sustainable development, in which the environment, labour (including dignity in work) and transparency (including consultation with civil society) in free trade and investment agreements. Flanders aims to continue its advocacy for the inclusion of clauses promoting socially responsible entrepreneurship, including compliance and enforcements mechanisms, into these chapters.
Flanders also mentions its support to the EU practice of always referring, in the preambles to these agreements, to the Universal Declaration of Human Rights.
The Flemish government also stated that it is funding the ILO project ‘Workers’ rights in globalising economies: assessment of labour provisions in trade and investment arrangements’ for an amount of € 450,000 (Flemish ILO Trust Fund). The project started in July 2014 and will be completed in the course of 2016.
The main purpose of this project is to conduct a survey on how employment standards and arrangements are reflected in trade and investment agreements, and what effect these provisions have on the employment situation in the country with which the agreement was concluded.
The region of Brussels will ensure that a HRIA has been carried out before any ratification of investment and trade agreements, and that any major negative impact on the respect, protection and promotion of human rights has not been detected in third-party countries.
“Under the common commercial policy, the negotiation of commercial agreements is in the sole competence of the EU. Agreements are negotiated on behalf of the Union by the European Commission, which acts in the name of Member States (they must always mandate it to do so). The European Commission pursues the common commercial policy in furtherance of the principles and objectives of the European Union, i.e. inter alia by promoting democracy, the rule of law and human rights. Subject to the European Commission’s approval, the Czech Republic may negotiate bilateral investment agreements.
Current state of play: …
The Czech Republic’s model agreement on the support and protection of foreign investments makes references to internationally acknowledged CSR standards and principles and the OECD Guidelines for Multinational Enterprises.
Tasks: …
Within the European Union, actively participate in the production of opinions in negotiations on international commercial agreements and, in the Czech Republic’s viewpoints, balance the economic nature of those agreements with the objectives of promoting democracy, the rule of law and human rights.
Coordinator: Ministry of Trade and Industry
Deadline: Running
In the negotiation of bilateral investment agreements, try to take into account not only economic interests, but also the issues of sustainable development and human rights protection by referencing respect for human rights and for the principles of corporate social responsibility, and/or the principles of sustainable development.
Coordinators: Ministry of Finance, Ministry of Industry and Trade
Deadline: Running”
Protection of human rights through state regulation and policy [page 12]
“Together with more than 40 countries Denmark adheres to the OECD Declaration on International Investment and Multinational Enterprises.”
Appendix 1, GP 4
Status in Denmark (initiatives implemented before the UN ratification of the Guiding Principles) [page 28]
“In 2008 the state financing fund, Vækstfonden, has committed to adhere to the UN Principles for Responsible Investment (PRI). The Export Credit Agency (EKF), the Investment Fund for Developing Countries (IFU) and Investment Fund for Central and Eastern Europe) (IØ) has committed to join the UN Global Compact.”
Appendix 1, GP 9
State Duty to Protect [page 31]
“States should maintain adequate domestic policy space to meet their human rights obligations when pursuing business-related policy objectives with other States or business enterprises, for instance through investment treaties or contracts.”
Initiatives taken or planned as a dedicated measure to implement the UNGPs (after the UN ratification of the Guiding Principles) [page 31]
“When Danida signs contracts with companies, it is a requirement that companies live up to Danida’s anti-corruption policy and to the UN Global Compact. A description of the applicant’s approach to quality assurance and how it will comply with Danida’s anti-corruption code of conduct and the principles of the UN Global Compact during implementation are requested from pre-qualified tenderers and form part of the tender evaluation.
The EU adheres to principles and standards on responsible business conduct such a s the OECD Guidelines for Multinational Enterprises, which is also reflected in negotiations for free trade agreements that includes the a rea of investment. The guidelines are considered the reference document on Corporate Social Responsibility, including human rights, intended to balance the rights and obligations between investors and host states. Furthermore, it is common practice to reference in the mandate the right of the parties to adopt and enforce measures necessary to pursue legitimate public policy objectives such a s social, environmental, human rights, security, public health and stability of the financial systems in a non-discriminatory manner.”
Initiatives taken or planned as a dedicated measure to implement the UNGPs (after the UN ratification of the Guiding Principles) [page 31]
“The Government actively supports substantial Trade and Development chapters in the EU’s bilateral free trade agreements as well as human rights suspension clauses in the same agreements. The new free trade agreement between the EU and Peru /Colombia is an important case in point, being substantially more ambitious in this a rea than earlier agreements.”
1.2 Activities in international organizations [page 14]
“As a follow-up measure, the working group proposes that …
Finland participates and actively influences the work related to human rights and CSR questions that is carried out in the OECD, for instance, by being involved in drafting and updating guidelines, templates and recommendations related to the subject. Finland shall support and participate in the update of the OECD Policy Framework for Investment.”
1.3 Activities in the EU [page 18-19]
TRADE POLICY
“As a follow-up measure, the working group suggests that in order to reinforce the human rights aspect in the EU trade policy:
Finland will support the strengthening of human rights assessments in third countries during EU trade or investment agreement negotiations and when monitoring their implementation. Finland shall make use of the human rights assessments in forming its own opinions related to trade policy positions. Finland supports that human rights will be taken in to account in the EU investment agreements or in potential new bilateral agreements made by Finland.”
3 Expectations towards companies and support services
3.5 Support for Finnish and international organisations promoting the subject [page 29]
“The OECD Policy Framework for Investment is being modernised to face the challenges of sustainable development, such as equality, CSR and human rights”
… It also promoted the inclusion of social, environmental and governance standards in trade and investment agreements …
8. Trade and Investment Agreements [page 19]
In its 2013 opinion, the CNCDH underlined that “the need for coherence should guide France’s foreign policy” and recommended that, in accordance with Guiding Principle no.10, “the Government support and promote the aforementioned instruments within multilateral institutions dealing with economic, commercial and financial issues, including those that are binding, that are designed to ensure that businesses respect human rights.”
As for the National CSR Platform, it issued the following recommendations:
“Promote CSR and human rights in international trade, finance and investment agreements;
Increase the involvement of stakeholders in impact studies completed before trade negotiations with respect to CSR;
Ensure social and environmental clauses are included and respected under these agreements;
Reinforce the monitoring and evaluation of these agreements.”
France discussed CSR issues in a report on its international trade strategy and European trade policy (December 2015), clearly indicating that CSR is a concern addressed in its trade policies.
State measures to control access to domestic markets are powerful tools when it comes to protecting and supporting businesses that respect human rights. However, in a document dated 24 June 2016, the Committee on Economic, Social and Cultural Rights expressed its concern at “the failure to devote sufficient attention to the impact that bilateral or multilateral trade or investment agreements concluded or being negotiated by the State party or the European Union have or will have on the enjoyment of Covenant rights in the other countries that are party to those agreements. The Committee is particularly concerned by the fact that the mechanisms for settling disputes between States and investors provided for in several agreements could reduce the State’s ability to protect and achieve some of the Covenant rights (art. 2 (1)).”
Indeed, most bilateral investment agreements and a growing number of bilateral and regional trade agreements implement mechanisms for investor-State dispute settlement (ISDS). ISDS enables foreign investors to bring arbitration proceedings when they consider that host States have not complied with the terms of the original agreement. ISDS makes it possible to obtain rulings against States that do not respect their commitments (for example, due to discrimination on the basis of gender, religion, nationality, etc.). In 2014, more than 600 cases were registered around the world, not including private disputes between parties whose details were kept confidential.
In 2013, the EU and the United States began negotiating a Transatlantic Free Trade Agreement (TAFTA,) also known as the Transatlantic Trade and Investment Partnership (TTIP), which originally featured an ISDS clause. The EU has suggested replacing the ISDS clause with a bilateral investment dispute court or Investment Court System until a permanent multilateral court can been established. This reform is being defended in all European trade negotiations, and has already been accepted by Canada and Vietnam.
European trade agreements incorporate CSR and adherence to international conventions on labour and the environment. EU free trade agreements all include sustainable development chapters, which contain provisions on labour law and environmental protection. These chapters also refer to CSR. Provisions mainly reiterate key existing multilateral agreements (for example, ILO’s fundamental conventions in the labour field and multilateral environmental agreements in the environmental field). They also set out cooperation mechanisms for the parties in order to support progress in these fields. Sustainable development chapters in EU free trade agreements and investment agreements contain two further important provisions: one prevents parties to the agreement from lowering social and environmental standards to promote trade and attract investments; the other confirms States’ right to regulate in the social and environmental fields.
These provisions have been included in European trade agreements since 2008. They are now systematically incorporated into agreements being negotiated, including the TTIP. The European Commission can adapt commitments to social and environmental standards based on a country’s level of development.
Otherwise, France is currently revising its model agreement for the protection of investments. In particular, it is planning to significantly reinforce provisions on CSR and the State’s capacity to regulate in the social, environmental, health and cultural fields, as per the European draft model.
From the French perspective, addressing these issues in free trade agreements results in a number of weaknesses:
Firstly, State-to-State dispute settlement (SSDS) mechanisms do not apply to social and environmental standards and human rights clauses. If standards are not met, consultations take place between the EU and the third country, after which an expert committee is created to suggest possible solutions. Moreover, European trade agreements do not provide for sanctions, unlike US agreements, which have lower human rights standards than those concluded by the EU. The lack of sanctions makes these provisions difficult to enforce.
Secondly, although trade agreements include social and environmental standards and human rights clauses taken from the main international texts on labour laws and the environment, international organizations (the UNDP, ILO, etc.) are not involved in negotiations, despite the fact they carefully monitor the implementation of these texts (through regular reports by State parties, etc.). Instead, in trade agreements, a committee meeting at least once per year is charged with monitoring the implementation of sustainable development chapters. Civil society (NGOs and nonprofit organizations) can also act as whistleblowers if these regulations are breached, although this power is not institutionalized. Discussions with civil society are generally formalized by way of an annual forum or consultative committee bringing together stakeholders from different backgrounds. To respect human rights and support responsible practices, social and environmental costs must be included in cost prices. The EU condemns social and environmental dumping and selling at a loss. France must encourage the international bodies to which it is party to implement measures guaranteeing fair and undistorted competition.
In 2013, France issued a number of proposals to improve the way in which social and environmental standards were addressed in European trade agreements. These proposals are still relevant.
These proposals focus on five main areas:
Improving cooperation with international organizations working in the labour and environmental protection fields (ILO, UNDP, UNEP, etc.). Some of these organizations, particularly UN organizations, are running cooperation projects in countries currently negotiating trade agreements with the EU. Some of these cooperation activities are oriented in such a way that they directly support the social and environmental goals set down in agreements. This is the case for some countries that have just concluded trade agreements or countries benefitting from Europe’s Generalised Scheme of Preferences (GSP).
Improving the evaluation of sustainable development chapters through rigorous impact assessments. These impact assessments must provide a clear overview of social and environmental standards in countries negotiating agreements with the EU. France has completed a major revision of the European manual used to write these impact assessments. This could lead to progress in the field.
Giving civil society more power to monitor these chapters. In addition to the annual forums currently planned by the European Commission, European trade agreements could give civil society (NGOs and trade unions) a formal “whistleblower” role, denouncing breaches of social and environmental standards. The Commission has decided not to look further into this option at this stage.
Improving the enforcement of existing sustainable development chapters by reinforcing implementation mechanisms. In November 2015, the French Minister of State for Foreign Trade sent a letter to European Commissioner Cecilia Malström asking the European Commission to investigate ways of including these chapters in dispute settlement mechanisms in trade agreements.
Increasing the involvement of businesses by including CSR requirements in sustainable development chapters in trade agreements. Currently, these chapters contain a short paragraph on CSR, but this should be reinforced by adding references to key international texts on the subject (particularly the OECD Guidelines).
Actions Underway [page 21]
France has undertaken to promote the UN Guiding Principles in its trade relations with other States and confirms its commitment to the hierarchy of norms when signing trade and investment agreements.
France also checks that all trade and investment agreements comply with international human rights law.
France, working with other European partners who support this initiative, is building on proposals made to the previous European Commission (in March 2013) to reinforce social and environmental standards in free trade agreements and monitor their enforcement.
France supports the inclusion of a new European model investment chapter in all EU trade negotiations and, in the long run, the adoption of this approach in bilateral French agreements, in order to reinforce States’ right to regulate and overhaul investor-State dispute settlement procedures.
France contributes to the debate on setting up a permanent multilateral court to deal with investment disputes.
Actions to be Implemented [page 22]
Monitor compliance with the recommendations issued by the Committee on Economic, Social and Cultural Rights in its opinion of 24 June 2016.
Encourage impact assessments to be completed before and after agreements are concluded and make all free trade agreements conditional on the inclusion of human rights clauses and the prioritization of the UN Guiding Principles.
Ensure that sustainable development chapters in EU free trade agreements are binding and enforceable under these agreements’ dispute settlement mechanisms.
Support responsible businesses by giving goods and services produced in compliance with human rights obligations better access to French and European
markets.
Initiate discussions on the consequences of failing to respect human rights and the inclusion of human rights in policies tackling unfair competition.
Contribute to debate on recognizing the concept of a group of companies in the EU.
France’s General Secretariat for European Affairs will support this work and distribute relevant documentation to lead ministries, in order to guarantee inter-ministerial coordination on European issues and their assessment by European institutions.
10. The Reinforcement of Legislation [page 23]
Recent public policies have led France to adopt new legislative measures supporting CSR.
… The Act of 12 July 2010, also referred to as the Grenelle II Act, reinforced transparency requirements in two ways:
Under Article 224 of this act, the annual reports of asset management companies must mention the ways in which their investment policies take into account environmental, social and governance criteria.
…
The National Framework
15. Economic Sectors and Human Rights
The Agriculture and Food Sector [page 32]
The strategic importance of national food security and economic opportunities in the agricultural sector have led a number of countries and businesses to invest (and support investment) in agrifood production. Given this large-scale investment, which often involves large-scale land purchases, the international community has sought to implement guidelines and directives to regulate these projects. Two major initiatives have been launched:
…
The Principles for Responsible Investment in Agriculture and Food Systems (also known as the RAI), adopted by the CFS in October 2014, which are partly based on the UN Guiding Principles on Business and Human Rights.
… Working with actors involved in French cooperation efforts, it developed the Guide to Ex-Ante Analysis of Agricultural Investment Projects that Affect Land and Property Rights to facilitate the enforcement of these principles …
Actions Underway
Partner States are encouraged to apply the Voluntary Guidelines on the Responsible Governance of Tenure of Land (VGGT) and the Principles for Responsible Investment in Agriculture and Food Systems (RAI).
Recommendations in the Guide to Ex-Ante Analysis of Agricultural Investment Projects that Affect Land and Property Rights are being integrated into the AFD’s due diligence procedures in the land, social and environmental fields.
Actions to be Implemented
Ensure the VGGT and RAI are respected by French economic actors abroad. Training on the implementation of these principles and directives will be offered to government employees (in embassies and economic services) and agencies.
The Financial Sector [page 34]
… There have been a number of voluntary international initiatives by the financial sector to promote human rights (…, the development of Socially Responsible Investment, …).
Footnote: Socially Responsible Investment (SRI) is an investment that reconciles economic performance and social and environmental impact by financing enterprises and public bodies that support sustainable development, regardless of their sector of activity. By influencing governance and behaviour, SRI encourages the development of a responsible economy. In France, SRI represented €170 billion in 2013.
Actions Underway
France promotes, at the national and European levels, investment policies that incorporate due diligence and highlight the principles and practices of institutional investors.
France is examining whether to extend environmental, social and governance reporting requirements for institutional investors in Europe to cover human rights.
Bi- and multilateral economic relations [page 17-18]
“Under Article 207 of the Treaty on the Functioning of the European Union (TFEU), commercial policy lies within the sphere of competence of the EU. Within the Federal Government, the Federal Ministry for Economic Affairs and Energy is responsible for formulating German positions in the realm of commercial policy and advancing them in European and global forums. For the export-driven German economy, particular importance attaches to the elimination of trade barriers and reinforcement of the multilateral trade system. Trade, moreover, can make a major contribution to sustainable development. In this context, it is important that trade should be shaped in a development-friendly way. This means, for example, that environmental, social and human rights standards should firmly underpin free-trade agreements, which should be accompanied by impact-assessment and monitoring mechanisms.”
The current situation
“The institutions and Member States of the EU are also bound by their human rights obligations when implementing Union legislation. Germany supports the EU practice of agreeing on provisions designed to safeguard human rights in framework agreements with trading partners and using sustainability chapters in all new free-trade agreements to enshrine high labour, social and environmental standards. Germany is committed to the negotiation of comprehensive binding standards for inclusion in these sustainability chapters. The EU ‘Trade for All’ strategy which was presented in the autumn of 2015 also emphasises that commercial policy should advance sustainable development and human rights throughout the world. At the same time, freetrade agreements also guarantee the right to regulate, which preserves the necessary leeway for states to protect human rights.
The Federal Government supports further development of the range of instruments for human rights impact assessment of trade and investment agreements.”
Measures
“The Federal Government is pressing for the inclusion of an ambitious sustainability chapter in the planned TTIP agreement with the United States.
The Federal Government advocates and supports further development of the range of instruments for human rights impact assessments of the EU’s trade and investment agreements. Moreover, comprehensive impact assessments should be conducted before negotiations begin, so as to guarantee that the findings of the assessments can influence the negotiations.
In the framework of the Aid for Trade initiative, the Federal Government supports developing countries’ efforts to improve their trading opportunities. In the future, the Federal Government will focus even more sharply on supporting compliance with labour, social and environmental standards.
The EU Special Incentive Arrangement for Sustainable Development and Good Governance (‘GSP+’) can be used as a format for promoting the observance and application of human rights standards by governments of developing countries. In the forthcoming review process of 2018, the Federal Government will press for further strengthening of that instrument.”
2.1 Ensuring the protection of human rights in supply and value chains
Measures [page 30]
“The Federal Government will support the systematic inclusion of sustainability chapters in free-trade agreements, which will prescribe, among other things, compliance with the ILO Core Labour Standards.”
“I believe that the protection of human rights and the promotion of economic growth, trade and investment should be complementary and mutually reinforcing”
Section 3: Actions
I. Key commitments to ensure policy coherence across government [page 17]
The Departments of Foreign Affairs and Trade, Enterprise and Innovation, Education and Skills, Transport, Tourism and Sport, Community and Rural affairs, Arts, & Heritage & the Gaeltacht, Agriculture, Fisheries and Marine
Section 3: Actions
II. Initial priorities for the Business and Human Rights Implementation Group [page 18]
“vii. Promote awareness of relevant multi-stakeholder and multilateral initiatives such as the UN Global Compact, the Principles for Responsible Investment and the Children’s Rights and Business Principles among state owned or controlled companies.”
Annex 1 – List of additional and ongoing actions to be carried out across Government
EU and Multilateral Efforts [page 20]
“7. Continue to take account of the human rights elements of European Commission impact assessments when providing input in the course of Free Trade Agreement (FTA) negotiations and support the appropriate implementation of human rights clauses in FTAs as they arise in EU agreements.”
Trade and Investment [page 21]
“11. Provide information to participants in overseas trade missions led by Government representatives on human rights issues in the destination countries.
12. Ensure that State agencies and staff involved in promoting two-way trade and investment have received briefing and guidance on the purpose and implementation of the UN Guiding Principles.
13. Encourage Irish companies operating abroad to adopt good practice with regards to consultation with human rights defenders and civil society in local communities, particularly on environmental and labour conditions.
15. Provide up to date guidance on the protection of human rights defenders working in the area of business and human rights through the circulation of Human Rights Defenders Guidelines to all Embassies.
16. Provide information from Embassies, working in cooperation with state agencies as appropriate, to Irish companies on business and human rights issues in their host countries.
18. Provide advice to business enterprises of the possible risks of human rights situations when operating in conflict affected areas.
19. Ensure awareness of the International Finance Corporation (IFC) performance standards among state owned companies that invest in or manage projects, outside of OECD high income countries, which exceed the euro equivalent of US$10 million.”
Development Cooperation [page 21]
“21. Support developing countries to improve their business and investment environment and continue to promote transparent, accountable and effective governance systems, rule of law, and equitable and inclusive economic growth, including transforming economic opportunities and outcomes for women and girls.”
ANNEX 1 – Accountability Grid and Assessment Tools for the Implementation of the NAP
“46. Strengthen support, at international and European level, for the promotion and inclusion of social and environmental sustainability clauses in international and trade and investment treaties.” (p. 68)
(2) Measures of the Government as an Actor regarding State Duty to Protect Human Rights
E. Promotion and Expansion of the Business and Human Rights Agenda in the International Community
(Existing framework/Measures taken）
In the areas directly related to business activities, the Government has incorporated clauses concerning social issues, including labour and the environment in some of the EPAs and investment treaties that Japan has signed or ratified in a manner consistent with trade rules such as those of the World Trade Organization (WTO), and promoted shared understanding between signatories on values to be respected, such as securing appropriate labour standards and conditions and protection of the environment. For example, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (TPP11 Agreement) includes an independent Labour Chapter and Environment Chapter as well as provisions on women’s participation, and the Japan-EU Economic Partnership Agreement (EPA) includes a Trade and Sustainable Development Chapter. On top of this, the Japan-EU EPA also stipulates that the parties shall convene joint dialogue with civil society, establishing that civil society shall play a certain role through exchange of opinions on themes such as trade and sustainable development, the environment, and labour.
(Future measures planned)
（…)
(d）Continue to make efforts towards concluding EPAs and investment agreements that benefit not only industry but also a wide range of people, including workers [Ministry of Foreign Affairs, Ministry of Finance, Ministry of Agriculture, Forestry and Fisheries, Ministry of Economy, Trade and Industry]
3.1. Pillar 1: The State Duty to Protect [Page 16]
[…] States are expected to guarantee policy coherence across different government agencies, thereby ensuring that different state institutions are aware of and observe the State’s human rights obligations. The State’s duty in this regard includes providing these institutions with the requisite information through training and support (horizontal coherence) while ensuring that the policies and regulatory frameworks are consistent with the state’s international human rights obligations (vertical coherence). This coherence should extend to the State’s investment treaties with other States or with business enterprises. […]
Policy Actions [Page 18]
The Government will:
xii. Review current trade and investment promotion agreements and bring them into compliance with the Constitution and international human rights standards to ensure that they are not used to facilitate illicit financial flows and tax evasion by businesses.
CHAPTER FOUR: IMPLEMENTATION AND MONITORING
ANNEX 1: SUMMARY OF POLICY ACTIONS
Strategic Objective
Policy Actions
Key Actors
Strategic Objective 1:
Enhance existing policy, legal, regulatory and administrative framework for ensuring respect of human rights by business through legal review and development of specific guidance for business
Review current trade and investment promotion agreements and bring them into compliance with the Constitution and international human rights standards and to also ensure that they are not used to facilitate illicit financial flows and tax evasion by businesses.
Ministry of Trade and Industry, KRA, Financial Reporting Centre (FRC)
‘Luxembourg’s NAP does not explicitly address this issue’
The 2020-22 NAP states the second edition of the National Action Plan complements the first NAP. Additional information about the first NAP can be found here.
“Incorporating the OECD Guidelines and UN Guiding Principles in trade and investment agreements was one of the suggestions made during the consultations.
The government is committed to including clear provisions on the relationship between trade, investment and sustainability in trade and investment agreements. Within the EU, the Netherlands urges the inclusion in these agreements of a section on trade and sustainable development, with monitoring and enforcement mechanisms. The aim is for parties to reaffirm their commitment to fulfilling their ILO obligations to eliminate child labour and forced labour and to working together to this end. Agreements also need to be made on cooperating on and promoting CSR, through the OECD Guidelines, for instance. For the Netherlands, involvement of civil society organisations is an essential component of any agreement.
The EU’s aim is for every trade agreement to be linked to a broader partnership and cooperation agreement reaffirming states’ human rights obligations. Where human rights are abused, the trade agreement could ultimately be suspended. …
The Lisbon Treaty gave the EU exclusive competence on direct foreign investment. With this shift, which does not apply to every aspect of investment, the EU now negotiates investment treaties together with the member states. Each EU investment agreement will most likely contain a separate section on environment, labour, sustainability and transparency, dealing with these issues in greater detail. The Netherlands is very much in favour of including such sections in all future EU investment protection agreements.”
2.8 Free-trade Agreements and Investment Contracts[page 26]:
States should maintain adequate domestic policy space to meet their human rights obligations when pursuing business-related policy objectives with other States or business enterprises, for instance through investment treaties or contracts.
Responsible management [page 22]:
Through the Government Pension Fund Global (GPFG) and the Government Pension Fund Norway (GPFN), Norway has financial investments both in Norway and the world at large. The role of the Fund is that of a financial investor, and the overriding objective is to achieve the highest possible return at moderate risk…The GPFG is not a foreign policy instrument, and only in special cases of comprehensive international sanctions or measures that Norway has endorsed, has such restrictions been imposed on investing in government bonds.
Pillar II: The corporate responsibility to respect human rights
4. Investment strategy and an ideal investor’s profile [page 31 – 32]:
The development of the objectives of the Investment Strategy and investment support tools, including the amendment of the Programme for Supporting Investments of Significant Importance for the Polish Economy in 2011-2023, constitutes one of the measures implementing the Responsible Development Plan and the Strategy for Responsible Development. Defining the criteria for obtaining government assistance by selected investors who meet certain criteria (the so-called good practice catalogue) that, at the same time, are consistent with the concept of corporate responsibility, is an important element of the investment strategy from the perspective of respecting human rights. Apart from the elements of a purely economic nature, assistance should be granted to investors who not only contribute to the economic development of the country, but who also affect its development in the social, environmental, and work culture areas.
…
In addition, of special importance will be those investors who provide employees with tools that enable or facilitate saving. Investors should act in accordance with the UN principles for responsible investment and positively affect the regional communities and their immediate economic environment.
“The Government will promote the inclusion of references to the respect of human rights in agreements on trade, investment or other related business activities signed by Spain that affect the scope of the Guiding Principles. Likewise, the Government will promote the inclusion of such references in the agreements entered into by the European Union with third-party States.”
Measure 2
“The Government will promote awareness-raising and the implementation of the United Nations Principles for Responsible Contracts recommendations, developed in 2011 by the then Special Representative of the Secretary-General John Ruggie (A/HRC/17/31/Add.3, 2011)”
“Sweden has pushed for the inclusion of references to CSR in the chapters on sustainability in the EU’s bilateral and regional trade agreements, investment agreements and partnership and cooperation agreements.”
Annex: Measures planned [page 29]
Trade promotion
“Sweden will act to ensure that the EU includes references to CSR, including the UN Guiding Principles for Business and Human Rights, in the sustainability chapters of its bilateral and regional trade agreements, investment agreements and partnership and cooperation agreements.”
2 National Action Plan on Business and Human Rights 2020-23
2.1 Pillar 1: state duty to protect
2.1.5 Policy coherence
Guiding Principle 9
The federal government enters into economic agreements with other States or with business enterprises. They include bilateral investment promotion and protection agreements, free trade agreements and agreements governing investment projects. The federal government should ensure that these agreements provide sufficient domestic policy scope to fulfil the human rights obligations of both Switzerland and the contracting partner.
Guiding Principle 10
Measure 19: Promotion of respect for human rights and labour standards within financial institutions
Investments by the Swiss Investment Fund for Emerging Markets (SIFEM) are subject to full due diligence with regard to its environmental, social (including working conditions) and governance (ESG) responsibilities. The relevant human rights standards are applied in all ESG risk assessments. This means that the risks of human rights abuses are always taken into account in the investment decision-making process. SIFEM partners (fund managers) are required to submit an annual or half-yearly report detailing their ESG activities and any major ESG accidents and incidents. This information makes it possible to improve the monitoring of human rights issues from the initial situation assessment and right through the investment cycle.
As part of its involvement in international financial institutions, Switzerland actively promotes the systematic reinforcement of ESG standards. It supports the strictest transparency standards and helps to mitigate the potential adverse human rights impacts of projects by strengthening the independent inspection committees that handle project-related complaints lodged by the communities concerned. By creating frameworks and exemplary programmes, financial institutions can advance the promotion of ESG standards, respect for human rights at international level and a shared understanding of problems.
Objective
Indicator
Responsibility
Ensuring that investments and projects supported by Switzerland in relation to its economic development cooperation and international financial institutions do not have an adverse impact on human rights and serve as an example of international best practices.
Human rights due diligence as part of SIFEM investments (source: summary report of the Federal Council on the achievement of its strategic goals).
Swiss contributions within international financial institutions to promote ESG standards, transparency and respect for human rights
EAER [Federal Department of Economic Affairs, Education and Research]
Actively incorporate human rights clauses into economic and trade agreements (page 10)
‘[…] during the process of discussing and signing bilateral or multilateral economic and trade agreements, Taiwan’s government agencies in charge of economic and trade negotiations will also continue seeking to include human rights clauses to be observed by all signatories.’
3. The core content of the National Action Plan on Business and Human Rights
3.4 Action Plan on Cross Border Investment and Multinational Enterprises
3.4.2 Challenges
Investment promotion
Government should consider human rights impacts before signing international trade or investment agreements and treaties. Review provisions for a stabilization clause in the investment agreement that will not affect government policies to promote the UNGPs. Measures for business organizations located in the territory or jurisdiction of the sovereignty of Thailand must comply with The UNGPs. The determination of measures to initiate or develop any project must consider the public interest, rights of public participation, and the impact on the people in the project area before deciding to implement the project. Establish foreign country investment supervision measures of Thai investors to respect human rights principles. Establish measures for businesses that receive investment support and ensure business investment respects human rights. Conduct a study of risks of human rights impacts in providing public services by independent academics to be accepted by people in the area and society. Determine measures and mechanisms to supervise the resolution of the impact. Propose the use of human rights risk assessment principles and human rights surveillance in the preparation of public service and joint venture agreement (in the case of the government authorizing the private sector to act). Consider cancelling assignments of the private sector to proceed with the construction of projects related to the infrastructure and public services through joint venture agreements (public-private partnerships).
3.4.1 Overview of the situation
… in the past, the Thailand Board of Investment (BOI) has implemented various measures to stimulate and encourage foreign investors to invest in Thailand, such as providing tax privileges to foreign businesses that invest in 10 categories of S-Curve Industries and opportunities to participate in Public Private Partnerships (PPPs) in communications infrastructure, including the government policy to push for the Eastern Economic Corridor (EEC) project.
The National Human Rights Commission of Thailand has received complaints regarding the impact of cross-border business operations of Thai entrepreneurs, such as a Thai private company that was granted a land concession for sugarcane cultivation and established a sugar factory in Cambodia and violated the human rights of the Cambodian people. The National Human Rights Commission of Thailand has investigated and has ruled that though the company is not the action maker, the impact is considered a part of their direct responsibility in the case of affecting human rights. In the case that a private company has entered into a Memorandum of Agreement with the Port Authority of the Union of Myanmar to operate a deep-sea port project in the Dawei Special Economic Zone Project in Myanmar, the National Human Rights Commission has investigated and found that the construction of infrastructure of the project caused human rights violation to the Myanmar people. The National Human Rights Commission of Thailand has recommendations for relevant government agencies to consider establishing mechanisms or defining the Investment Supervision to respect the basic principles of human rights by using The UNGPs as a framework.
3.4.3 Action Plan (2019–2022)
Pillar 1: State duties in protecting (Protect)
No.
Issues
Activities
Responsible agencies
Time-frame (2019–2022)
Indicators (wide frame)
Compliance with National Strategy/ SDGs/UNGPs
1.
Amendments of laws, regulations, policies
and related measures
Establish guidelines and procedures to provide comments to the contract that the government has with transnational
corporations, considering the Human Rights Assessment
– Office of the Attorney General
2019–2022
Established guidelines and process to provide comments to the contract that the government has with transnational corporations, considering the Human Rights Assessment
– National Strategy for National Competitiveness Enhancement
– National Strategy for Public Sector Rebalancing and Development
– SDG 8 and 16
– UNGPs Articles 1, 3, 4, 5, 7, 8, 9 and 10
Study and discuss with various relevant sectors to consider guidelines for developing laws, policies or concrete mechanisms to investigate human rights violations outside the territory to provide protection and remedy and take cross-border responsibility that
complies with international standards such as the OECD Guidelines for Multinational Enterprises
– Ministry of Foreign Affairs
– Ministry of Justice
2019–2022
Improved legislation, policies or mechanisms to investigate human rights violations outside the territory to provide protection and remedy and take cross- border responsibility that complies
with international standards, such as the OECD Guidelines for Multinational Enterprises
– National Strategy for National Competitiveness Enhancement
– National Strategy for Public Sector Rebalancing and Development
– SDG 8, 16 and 17
– UNGPs Articles 1, 3, 4, 5, 7, 8, 9 and 10
Review laws and regulations related to the Eastern Economic Corridor (EEC) project in order to supervise the operations of the business sector and investors with a clear penalty for cases that violate human rights.
– Office of the National Economic and Social Development Council
– Neighbouring Countries’ Economic Development Corporation Agency (Public Organization)
– Board of Eastern Economic Corridor (EEC)
2019–2022
Meetings to review laws and regulations related to Eastern Economic Corridor (EEC) Projects
– National Strategy for National Competitiveness Enhancement
– National Strategy for Eco- Friendly Development and Growth
– National Strategy for Public Sector Rebalancing and Development
– SDG 8 and 16
– UNGPs Articles 1, 3, 4, 5, 7, 8, 9 and 10
Create channel to disclose information about the Eastern Economic Corridor (EEC) project, including all borders, economic zones and mechanisms to discuss with affected communities
– Office of the National Economic and Social Development Council
– Neighbouring Countries’ Economic Development Corporation Agency (Public Organization)
– Ministry of Interior
– Ministry of Industry
– Board of Eastern Economic Corridor (EEC)
2019–2022
Created channel to disclose information about Eastern Economic Corridor (EEC) project, including all borders, economic zones
and mechanisms to discuss with affected communities
– National Strategy for National Competitiveness Enhancement
– National Strategy for Eco- Friendly Development and Growth
– National Strategy for Public Sector Rebalancing and Development
– SDG 8 and 16
– UNGPs Articles 1, 3, 4, 5, 7, 8, 9 and 10
3.
Promotion of Investment
Create awareness, promote and facilitate business for Thai investors going to foreign countries to respect the principles of human rights as well
as comply with various rules including regulations regarding human rights
of the host country by consider making
guidelines for investment in each country
– Office of the Board of Investment
– Bank for Export and Import of Thailand
– Office of the Securities and Exchange Commission
– Ministry of Commerce (Department of Trade Promotion International)
2019–2022
Entrepreneurs who are going to invest in foreign countries
trained and educated to respect human rights principles
– National Strategy for National Competitiveness Enhancement
– National Strategy for Human Capital Development and Strengthening
– SDG 8, 16 and 17
– UNGPs Articles 1, 3, 4, 5, 7, 8, 9 and 10
Require studies and assessments of the risk and impact on human rights (human rights due diligence) before undertaking large-scale projects or projects
related to public services, including in the case of joint investment between the government and private sectors to prepare conducting projects relating to infrastructure and public services that are a duty of the state, including in the case
that the government has assigned the private sector to do the project instead
– Office of the Economic and Social Development Council
– Ministry of Natural Resources and Environment (Bureau of Policy and Environmental Plan)
– Ministry of Transport
– Ministry of Finance (Office of the State Enterprise Policy Office)
– Ministry of Energy
– Ministry of Industry (Office of Economic Cooperation and Neighbouring Countries (Public Organization))
2019–2022
A study to assess the risk and human rights impact (human rights due diligence) before the implementation of large-scale projects
– National Strategy for National Competitiveness Enhancement
– National Strategy for Human Capital Development and Strengthening
– National Strategy for Public Sector Rebalancing and Development
The UK 2013 NAP states in relation to New Actions planned that [page 12]:
”The Government will do the following to reinforce its implementation of its commitments under Pillar 1 of the UNGPs:
(vii) Ensure that agreements facilitating investment overseas by UK or EU companies incorporate the business responsibility to respect human rights, and do not undermine the host country’s ability to either meet its international human rights obligations or to impose the same environmental and social regulation on foreign investors as it does on domestic firms.”
The UK 2016 Updated NAP makes no explicit reference to investment treaties or ISDS.
