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Sustainable international trade

The relationship between States and foreign corporations are regulated by international economic law and international investment law in particular. Any disputes between States and foreign corporations must therefore also be solved by reference to this body of public international law, for example when a State does not honour its agreements with a corporation. But a State may have good reasons for not observing its obligations towards such corporation, such as protection of the natural environment or respect for human rights. International investment law offers little room for these kinds of arguments. Nico Schrijver and Eric de Brabandere are top researchers of the Grotius Centre who focus on this jurisdiction. Both are also active in judicial practice.

Investment protection

Developing countries are keen to negotiate investment protection agreements with foreign investors. After all, these investors provide for infrastructure, employment and prosperity. They may invest in gold mines, oil extraction or logging, or they may take over privatised companies. States and investors lay down their agreements in concessions and contracts. Furthermore, international treaties, such as bilateral investment treaties, between industrial States (where the investors are based) and developing countries ensure that these agreements are observed and that the interests of the investors are protected.

Damage

Developing countries therefore have obligations both towards the foreign investors directly and towards the States where these investors are based. But developing countries also have obligations towards their own populations, whom they have to protect and to whom they are accountable. Sometimes, these countries let the interests of their own people prevail over those of the investors. For example, in the 1990s in Argentina, a French investor was forced to keep the price of drinking water artificially low. In South Africa, following the Apartheid, mining companies were forced to transfer some of their possessions to black South Africans.

In Germany, foreign investors are not happy with the decision of the German government to move away from nuclear energy. Australia has irked tobacco producers by making it compulsory for cigarette packs to be dark brown with deterrent notices and images instead of brand names. And an American oil company is embroiled in a lengthy international procedure with Ecuador following a conflict about the exploitation of oil fields, environmental pollution and damage to human health.

Protest against the presence of Shell in Canada. The group refers to 'Shell's exploitive and destructive history in Nigeria.'

Reconciling two worlds

Eric de Brabandere has noticed that investors are increasingly filing claims against States. In a growing number of cases, these claims are submitted to international arbitral tribunals established by the company and the State involved. The awards of such tribunals are binding for both parties. In these kinds of conflicts, the private and commercial interests of both parties conflict with the public international legal character of the arbitration procedure. De Brabandere decided to find ways to reconcile the two. ‘It is legitimate for States to appeal to their sovereign duty to protect health and environment. This means that in such a conflict, public legal principles clearly play a role. It seems highly artificial to try and keep these principles out when resolving such conflicts, and rely only on the private aspects of investment law.’

Open the doors

De Brabandere performed a thorough analysis of the existing arbitration practices worldwide and their potential bottlenecks. This research resulted among other things in a monograph in which he offers arguments for the integration of investment law within public international law. When settling these kinds of disputes, it is essential to take public interests into account. Human rights and environmental organisations can under certain conditions be heard by arbitral tribunals, the decision making need not take place behind closed door, and arbitration tribunals can award other forms of reparation than financial compensation to corporations, such as restitution. ‘I hope and expect that my research will impact the way in which arbitrators look at disputes,’ says De Brabandere. ‘That when dealing with international trade conflicts, people will not only look at the commercial aspects of the dispute, but also at legal principles. Very slowly, you see that mentalities are shifting. I hope to have been able to contribute to this shift.’

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