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A number of influential international organizations recently have issued publications that discuss the promotion of sustainable development in international investment. These organizations include the United Nations; 1 UNCTAD 2; FAO, IFAD, the UNCTAD Secretariat, and the World Bank Group3; the Commonwealth Secretariat4; the Organisation for Economic Co-operation and Development (OECD)5; the International Chamber of Commerce (ICC)6; and the South African Development Community (SADC).7
These publications evince two theoretically distinct, but complementary, approaches to the promotion of sustainable development in international investment:8
While the two variants of the first approach purport “to set forth the responsibilities” of the relevant stakeholders in the international investment process,13 their observance, in and of themselves, by investors is “voluntary and not legally enforceable.” 14 The effectiveness of such principles and guidelines thus depends on, among other things, their incorporation by investors into corporate policies and “project identification and implementation.”15 The second approach goes further by seeking to “operationalize” sustainable development objectives into IIAs by enumerating “a comprehensive compilation of policy options available to IIA negotiators.”16 A number of proposed IIA design options merit particular attention:
These IIA design options could be complemented by further designing IIAs to limit investor access to investor-state dispute settlement where the investor fails to comply with such obligations (e.g., an IIA provision requiring compliance with domestic law), and/or provide a counterclaim mechanism for the host country against an investor that has made an international investment treaty claim.20 The former could serve to exclude claims in respect of investments that fail to respect sustainable development-related obligations, while the latter would enable the home country to obtain relief for injuries suffered as a result of an investor’s non-compliance with such obligations.
The practical implementation of these IIA design options would, of course, involve a significant shift in the design of future IIAs, since they require balancing traditional state commitments against new investor commitments introduced in connection with the achievement of sustainable development objectives. 21
It remains to be seen if IIAs can be utilized in a way that imposes sustainable development-related obligations on investors. Nonetheless, these IIA design options represent significant “game changers” in the area of international investment, including in relation to investor-state dispute settlement, and merit serious consideration by stakeholders.
Previously published by Columbia FDI Perspectives, No. 108, November 11, 2013 and ICC UAE quarterly Magazine. Co-authored with Janani Sarvanantham.