5. Review and Appeal

(a) Each Party shall establish or maintain judicial, quasi-judicial, or administrative tribunals or procedures for the purpose of the prompt review and, where warranted, correction of final administrative actions regarding matters covered by this Treaty. Such tribunals shall be impartial and independent of the office or authority entrusted with administrative enforcement and shall not have any substantial interest in the outcome of the matter. (b) Each Party shall ensure that, in any such tribunals or procedures, the parties to the proceeding are provided with the right to: (i) a reasonable opportunity to support or defend their respective positions; and (ii) a decision based on the evidence and submissions of record or, where required by domestic law, the record compiled by the administrative authority. (c) Each Party shall ensure, subject to appeal or further review as provided in its domestic law, that such decisions shall be implemented by, and shall govern the practice of, the offices or authorities with respect to the administrative action at issue.’ 17 See the US-Uruguay BIT of 25 October 2005 in 44 ILM 265 (2005) Arts 10 and 11. 18 See UNCTAD, Investment Provisions in Economic Integration Agreements (New York and Geneva, United Nations, 2006) at 88, citing the US-Singapore FTA Art 19.5. See too US-Chile FTA of 6 June 2003 Art 10.20, available at <http://www.unctad.org/sections/dite/iia/docs/Compendium//en/290%20volume%2012.pdf>. 19 See eg the Canadian Model BIT 2004 Art 19, available at <http://ita.law.uvic.ca/documents/Canadian2004-FIPA-model-en.pdf>. 20OECD, Public Sector Transparency and International Investment Policy (Paris, OECD, 11 April 2003) at 5. 21UNCTAD, Key Issues, above n 1 at 285–9. 22 See further UNCTAD, Bilateral Investment Treaties 1995–2006: Trends in Investment Rulemaking (New York and Geneva, United Nations, 2007) at 76–80. The study concludes: ‘only a small—albeit growing—number of BITs of the last decade include provisions on transparency. However, to the extent that BITs deal with this issue, there have been significant developments concerning the content of the clause. Transparency is no longer perceived as a matter of the contracting parties exchanging investment-related information. In addition, a few recent BITs grant information rights to “all interested persons” and even allow them to comment upon draft legislation. Some BITs also enhance investor rights in administrative and judicial proceedings and provide for third-party participation’. 23 See eg Japan-Vietnam BIT 2003 Art 7 in UNCTAD, above n 22 at 77. 24 Howard Mann, ‘The IISD Model International Agreement on Investment for Sustainable Development: An Introductory Note’, 20 ICSID Rev-FILJ 84 ff (2005). 25 See Stephen Vasciannie, ‘The Fair and Equitable Treatment Standard in International Investment Law and Practice’, 70 BYIL 99 (1999) at 102–5. 26 When the arbitration under NAFTA started in the 1990s, the issue whether damage to investments might arise from expropriation by host states was highly controversial. Following that, the definition of fair and equitable treatment has come to be a central topic of discussion as it has been shown that the theory of regulatory expropriation is not so easily confirmed: on which see further August Reinisch, Ch 11 above and Todd Grierson-Weiler and Ian A Laird, ch 8 above. 27Metalclad Corporation v The United Mexican States , ICSID Case No. Arb(AF)/97/1, 40 ILM 36 (2001). 28 Ibid at paras 75–6. 29 Ibid at para 99. 30 See Patrick G Foy and Robert J Deane, ‘Foreign Investment Protection under Investment Treaties: Recent Developments under Chapter 11 of the North American Free Trade Agreement’, 16 ICSID Rev-FILJ 299 at 325–9 (2001). 31 The United Mexican States v Metalclad Corporation , 2001 BCSC 664. 32 Ibid at paras 70–2. 33T?cnicas Medioambientales Tecmed, SA v United Mexican States , ICSID Case No. Arb(AF)/00/2 (Spain/ Mexico BIT), Award, 29 May 2003, 43 ILM 133 (2004). 34 Ibid at para 154. 35Saluka Investments BV (The Netherlands) v The Czech Republic (Dutch/Czech BIT) , Partial Award, 17 March 2006 at <http://ita.law.uvic.ca/documents/Saluka-PartialawardFinal.pdf>. 36Myers (SD) Inc v Canada , NAFTA Arbitration, UNCITRAL Award of 12 November 2000, 40 ILM 1408 (2001) para 263. 37Saluka , above n 35 at para 297. 38 Ibid at para 298. 39 Ibid at para 302. 40 According to the tribunal, ‘A foreign investor whose interests are protected under the Treaty is entitled to expect that the Czech Republic will not act in a way that is manifestly inconsistent, non-transparent, unreasonable (i.e. unrelated to some rational policy), or discriminatory (i.e. based on unjustifiable distinctions). In applying this standard, the Tribunal will have due regard to all relevant circumstances.’ Ibid at para 309. 41 Note Ian Brownlie, Principles of Public International Law (Oxford, Oxford University Press, 6th edn, 2003) at 501–2. 42Pope and Talbot v Canada , UNCITRAL; Award on the Merits of Phase 2, 10 April 2001 at <http://ita.law.uvic.ca/documents/PopeandTalbot-Merit.pdf>. 43 Ibid at para 110. 44Tecmed , above n 33 at para 153. 45MTD Equity Sdn Bhd & MTD Chile SA v Chile , ICSID Case No. Arb/01/7 Final Award, 25 May 2004, 44 ILM 91 (2005). 46 Ibid at paras 114–15. 47 Ibid at para 109. 48 Ibid at para 113. 49 See eg Genin v Estonia , ICSID Case No. Arb/99/2 Award of 25 June 2001, 17 ICSID Rev-FILJ 395 (2002) where the reality of administering financial sector supervisory functions in a transitional economy was thought relevant to determining whether the investor had been unfairly and inequitably treated. Indeed, the tribunal noted that the investor had been less than fully transparent towards the regulatory authorities as to the precise ownership structure of their investment in that country, which led in part to their decision to revoke his licence to operate. See further Peter Muchlinski, ‘“Caveat Investor?” The Relevance of the Conduct of the Investor under the Fair and Equitable Treatment Standard’, 55(3) ICLQ 527 (2006) at 540–1. 50 But note that the investor may also have responsibilities to act reasonably in assessing the commercial viability of the investment: see MTD Equity , above n 45 and Muchlinski, above n 49 at 542–7. Authors: Peter Muchlinski ? Keywords: Investment – Investment defined in treaties – Standards of treatment – Enforcement This chapter examines the legal implications arising from calls for ‘international corporate social responsibility’. It begins with a brief overview of the reasons why investor responsibilities have become a major strand in the debates on the future development of international investment law. It then considers what is meant by the term ‘international corporate social responsibility’ (ICSR). Thirdly, the major legal developments to date in the field of standard setting for corporate responsibilities are considered, followed by a brief overview of monitoring and enforcement issues. The chapter concludes by considering the implications of these developments for the evolution of international investment agreements (IIAs).

0subscriber_article?script=yes&id=%2Fic%2FMonograph%2Flaw-iic-9780199231386&recno=62&searchType=browse Chapter 17 Corporate Social Responsibility

(1)The Investor Responsibilities Debate638

(2) Defining ‘International Corporate Social Responsibility’ 643

(3)Developments in Substantive Standards645

(a) Labour Rights 646

(b) Human Rights 654

(c) Environmental Issues 662

(4)Monitoring and Enforcement673

Concluding Remarks681

THE majority of the contributions to this volume concentrate, quite rightly, on the issues of investor/investment protection on the substantive and procedural planes. As such, they represent the most significant aspects of international investment law which have been developed over the last century or so. However, if this volume were to rest on these issues alone, it would be incomplete. Indeed, it could be said to display an anachronistic perception of the subject as one born out of historical circumstances that are no longer the principal features of the globalizing economy and society that we are now experiencing. For, in the most recent years, not only have the concerns of investors over the protection and promotion of a clear, transparent, and predictable investment environment become more focused, new concerns about the very effects of investor activities have also arisen. These have led to increased calls for a new, more balanced, regime in international investment law, one that responds to the concerns not only of investors but also of the wider communities in which they operate. Thus, not only investor rights should be the focus of international investment law but also investor responsibilities. In addition, home countries may have responsibilities to oversee investors based in their jurisdictions to ensure that they operate their foreign investments in accordance with wider social and public interests in mind and that those investors are given opportunities and incentives to engage in investments that promote the sustainable development of less developed host countries in particular. 1

Accordingly, this chapter seeks to consider what are the legal implications arising out of such calls for ‘international corporate social responsibility’. It begins with a brief overview of the reasons why investor responsibilities have become a major strand in the debates on the future development of international investment law. It then considers what is meant by the term ‘international corporate social responsibility’ (ICSR). Thirdly, the major legal developments to date in the field of standard setting for corporate responsibilities will be considered, followed by a brief overview of monitoring and enforcement issues. The chapter will conclude by considering what the implications of these developments might be for the evolution of international investment agreements (IIAs).

(1) The Investor Responsibilities Debate

To date, the predominant concern of international investment law has been the development of rules and procedures to promote and protect foreign investment by both

end p.638

individuals and corporations. It grew out of the belief that uncontrolled state power was a potential obstacle to the security of such investments, which could not always be adequately protected by national laws and procedures. This was particularly the case in newly independent post-colonial states, emerging from foreign control and administration during the decades after World War II. In such states, an understandable hostility to foreign domination, a necessary spur to the independence struggle, might be combined with highly state-centric policy instruments and practices, inspired by the model of the Soviet Union and its satellites, to create an administrative climate that was heedless of notions of respect for contractual obligations, or private property rights, when faced with the immediate needs of national reconstruction and development. Such policy responses took place in the context of the Cold War between the East and West, exacerbating the perception that foreign investors and their investments were not safe in the wider post-war world. 2 As noted throughout this work, such fears were not without substance, especially when major nationalizations of foreign-owned and controlled assets occurred. 3

Yet the post-colonial states offered major investment opportunities whether as sources of natural resources or potential new markets for goods and services. In order to seek a solution to the confidence problem that investing in these states had created, Western governments responded by introducing bilateral investment protection and promotion treaties (BITs). Their contents have provided a mechanism for the protection of vital proprietary interests against arbitrary state interference, thereby contributing to the reduction of investment risk in newly independent countries. The model for such agreements followed closely these concerns, with the protection of investors' property and assets against expropriation being central to the structure of the agreement. 4 More recently, as mass nationalizations of foreign-owned assets has become a less serious problem, 5 the standards of non-discrimination and fair and equitable treatment have become a major source of concern for investors. This shift reflects the fact that host countries are far more willing than before to encourage and admit foreign investment and to seek benefits from it. Thus, the major problem arising under BITs is no longer the termination of an investment through expropriation as such, but the undermining of its economic value through administrative measures that violate these standards. Such action

end p.639

could also amount to a de facto expropriation should the administrative action in question nullify any economic value of the investment to the investor. 6

It has been argued elsewhere in this volume that these changed causes of action have given rise to an interpretation of BITs in arbitral decisions as containing one overarching protection standard based on the investor's legitimate expectations. 7 If so, then this indicates an entry point for reconsideration of the nature and content of existing BITs. The protection of the investor's legitimate expectations requires an understanding of what those expectations are and how they come about. Clearly, such expectations will be conditioned by a number of factors. These will include, most obviously, the need for a stable and predictable investment environment free from arbitrary and capricious decision-making by the host state and its agencies. Thus far, existing BITs can serve to provide a useful function in protecting this class of expectations. However, the investor's expectations are not only tied up with preferences for certain types of governmental conduct. They arise out of the wider environment in which the investment is being made. They cannot, therefore, arise in some asocial context.

Investors cannot enter a country as if there was no society or community there, upon which their activities will impact, whether for good or ill. 8 Equally, the security and profitability of the investment will be closely linked with the investor's assessment of its feasibility within the context of the society that it enters. Good investment decisions are made in this light. It is also a major motivation behind increasing corporate concern about the social impact of their investments. The long-term stability of an investment will be enhanced if it is able to bring tangible benefits to the society in which it is located. Accordingly, corporations may build in a social responsibility component into their project plans to further this goal. 9 Equally, they will not be surprised by, or seek to change, regulatory regimes that can ensure a good social return on the investment. 10 The consequences of

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not doing so may be too costly in the changing environment of global business activity, set as it is in a new order of social and political expectations of business. Whether BITs in their current form can respond to these aspects of investor expectations is open to discussion. This issue will be revisited at the end of the chapter. For now, the reasons behind the new expectations of business conduct will be briefly examined.

The ‘international corporate social responsibility’ of multinational enterprises (MNEs), as the main type of foreign investor, can be seen as a response to popular perceptions concerning the loss of corporate accountability as an effect of economic globalization. 11 It may be said to rest on the obligations that corporations owe to the societies in which they operate. This may be justified philosophically by appeals to a ‘social contract’ and to the need of all actors, including non-state actors, to observe the preservation of human dignity through adherence to fundamental human rights. 12 There remains a great deal of disagreement over the precise extent of this issue. Indeed, there are equally strong voices arguing that the whole question of ICSR is much exaggerated and may well lead to policies that will harm the beneficial effects of international business activity. 13

This movement appears to be new, an expression of dissatisfaction with the social ills of contemporary globalization. That would be to misconstrue the situation. Calls for corporate responsibility are as old as business itself. Indeed when one thinks of the campaign to emancipate slaves in the 18th and 19th centuries, is this not a call for the social and moral responsibility of commercial actors? 14 Equally, calls

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for ICSR can be viewed as no more than the extension, to the international arena, of standards of regulation that are well known and highly entrenched in national laws, regulations, and practices. They are the result of centuries of reform towards a more civilized performance of commercial activities and a recognition that, in the absence of regulation, human nature can direct itself to the commission of evil for personal gain. 15

The principal movers for reform at the international level are non-governmental organizations (NGOs) campaigning for the increased regulation of foreign investors, mainly from an environmental and developmental perspective, with observance of human rights also becoming an increasingly important topic. Their impact in the investment field was first strongly felt in the course of the negotiations for the Multilateral Agreement on Investment (MAI), where they sought to highlight the absence of any social responsibility provisions for MNEs, leading them to the view that the draft MAI was too one-sided and cared only for the protection of investors. Indeed, the MAI went further than many existing IIAs in that it not only covered post-entry treatment of investors and their investments but gave positive rights of non-discriminatory entry to them, as well as rights to delocalize disputes and take them to international arbitration. 16 As a result, the NGOs succeeded in placing environmental protection and labour rights issues into the draft negotiating text, though this was never adopted as the negotiations broke down in 1998. In addition, NGO campaigning has highlighted numerous cases of abuse of human rights by or with the complicity of corporations. Perhaps the most important example has been the sustained campaign against the use of baby milk substitutes in developing countries, which has resulted in international codes of conduct, 17 and the campaigns for justice for the victims of the Bhopal accident 18 as well as more recent human rights campaigns in a range of areas. 19

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(2) Defining ‘International Corporate Social Responsibility’ 20

As argued above, ICSR obligations may be seen as the quid pro quo for the protection of investors and investments under international investment protection agreements and international economic rules such as those of the WTO. 21 Such obligations can be drawn rather widely. 22 For example, the OECD Guidelines for Multinational Enterprises contain a section on ‘General Policies’ which is worth reproducing in full as it offers what appears to be an emerging consensus on the social obligations of MNEs: 23

‘Enterprises should take fully into account established policies in the countries in which they operate, and consider the views of other stakeholders. In this regard, enterprises should:

1. Contribute to economic, social and environmental progress with a view to achieving sustainable development.

2. Respect the human rights of those affected by their activities consistent with the host government's international obligations and commitments.

3. Encourage local capacity building through close co-operation with the local community, including business interests, as well as developing the enterprise's activities in domestic and foreign markets, consistent with the need for sound commercial practice.

4. Encourage human capital formation, in particular by creating employment opportunities and facilitating training opportunities for employees.

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5. Refrain from seeking or accepting exemptions not contemplated in the statutory or regulatory framework related to environmental, health, safety, labour, taxation, financial incentives, or other issues.

6. Support and uphold good corporate governance principles and develop and apply good corporate governance practices.

7. Develop and apply effective self-regulatory practices and management systems that foster a relationship of confidence and mutual trust between enterprises and the societies in which they operate.

8. Promote employee awareness of, and compliance with, company policies through appropriate dissemination of these policies, including through training programmes.

9. Refrain from discriminatory or disciplinary action against employees who make bona fide reports to management or, as appropriate, to the competent authorities, on practices that contravene the law, the Guidelines or the enterprise's policies.

10. Encourage, where practicable, business partners, including suppliers and sub-contractors, to apply principles of corporate conduct compatible with the Guidelines.

11. Abstain from any improper involvement in local political activities’. 24

As may be apparent from this wide-ranging list of issues, the precise classification of ICSR standards is difficult as, potentially, the phrase could cover all aspects of corporate regulation. By contrast, the UN Global Compact contains a more specific set of standards. The Ten Principles on which the Global Compact is founded concern the areas of human rights, labour, the environment, and anti-corruption. These are said to enjoy universal consensus and are derived from a number of significant international instruments. 25 From the above, it is clear that social responsibility may take both an economic, social, and ethical dimension in that MNEs are expected to conduct their economic affairs in good faith and in accordance with proper standards of economic activity, while also observing fundamental principles of good social and ethical conduct.

end p.644

Finally, ICSR should be distinguished from corporate governance as a concept. The latter is a specific term of art used to denote the organization of ownership, participation, disclosure, and decision-making in corporations rather than a general term that concerns the conduct of wider relationships between the corporation and various social actors. That said, the interaction of the two concepts is significant from the perspective of putting ICSR aims into operation. For example, one way to ensure corporate responsibility in the field of employment rights or health and safety might be to ensure adequate worker participation and consultation within the firm. Thus the law may require the setting up of works councils or the placing of worker representatives on the company board. In this way, the ICSR goal of observance of workers' rights is given real force through corporate governance laws. 26 Equally, the observance of human rights by the firm might entail the institution of a human rights impact assessment system within the managerial decision-making structure of the firm. 27

(3) Developments in Substantive Standards

In the introductory chapter to this volume it was said that three areas in particular stand out as being central to the substantive content of ICSR, namely, labour rights, human rights, and environmental issues. Of these, labour rights have the oldest pedigree, with environmental and human rights issues being of more recent concern. That said, other issue areas could also figure in this list. For example, the UN Global Compact has added anti-corruption as a further matter for corporations to consider in their responsibilities as members of this scheme. Equally, as pointed out in Chapter 1, the contribution of MNEs to the development policies of the countries in which they operate could also be seen as an issue of corporate responsibility and of ‘good corporate citizenship. 28 Another possible element concerns corporate transparency and disclosure, which would bring an element of corporate governance into the wider ambit of ICSR. As noted in Chapter 1, the range of issues that could

end p.645

be included is potentially vast. For present purposes, this section will concentrate on developments in the three main areas recognized as covering the core of ICSR. Consideration of corporate disclosure will be included in the next section on monitoring and enforcement, while anti-corruption issues are the subject of Chapter 15 above.

(a) Labour Rights 29

This class of issues is the oldest to emerge in the international arena, in that the first international labour standards were established in the form of International Labour Conventions adopted by the International Labour Organization (ILO) since its inception in 1919 under the Treaty of Versailles. 30 The ILO is a tripartite organization with representatives of governments, business, and labour having access to its decision-making organs as members of national delegations. 31 For these reasons, it was natural for the ILO to be used as the vehicle for the development of new principles applicable to MNEs.

The ILO became involved in the formulation of a code of conduct in response to demands from labour representatives and developing countries that had been made since the 1960s. 32 In the early 1970s, the developing countries pressed for an ILO conference which could adopt a binding international code for MNEs. This was resisted by the employers' representatives who favoured the adoption of a voluntary

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code. In 1972, the negotiating process started with the first ‘Tripartite Meeting on the Relationship between Multinational Enterprises and Social Policy’. The Meeting set up a series of research studies that were carried out between 1972 and 1976. These resulted in a recommendation that a non-binding tripartite declaration of principles concerning multinational enterprises and social policy should be drafted. The ILO Declaration was finally adopted on 16 November 1977 (the ILO Declaration). 33 This has been supplemented by the ILO Declaration on Fundamental Principles and Rights at Work of 1998 (the 1998 Declaration). 34 This provides what can be termed an international ‘floor of fundamental labour rights’ in Article 2, which states:

… all Members, even if they have not ratified the Conventions in question, have an obligation arising from the very fact of their membership of the [ILO], to respect, to promote and to realize, in good faith and in accordance with the Constitution, the principles concerning the fundamental rights which are the subject of those Conventions, namely:

(a) freedom of association and the effective recognition of the right to collective bargaining;

(b) the elimination of all forms of forced or compulsory labour;

(c) the effective abolition of child labour; and

(d) the elimination of discrimination in respect of employment and occupation. 35

The ILO has a fairly restrictive definition of corporate social responsibility. In its InFocus Initiative on CSR, the ILO states:

Corporate Social Responsibility (CSR) is a way in which enterprises give consideration to the impact of their operations on society and affirm their principles and values both in their own internal methods and processes and in their interaction with other actors. CSR is a voluntary, enterprise-driven initiative and refers to activities that are considered to exceed compliance with the law. 36

In this, the ILO definition echoes industry-based definitions in that it excludes mandatory regulation. 37 Rather, the ILO's CSR initiatives will be based on the ILO Declaration which is described as ‘the only universal instrument addressed, among others, at enterprises which has been agreed to by governments, employers’ and

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workers' organizations'. 38 This Initiative builds on and complements the ILO's role in respect of governments of member states, setting, implementing, and supervising labour standards, promoting social dialogue and assisting countries to implement good policies in this regard. 39 It will do so by,

developing knowledge on the different aspects of CSR; facilitating dialogue in the ILO to clarify issues and share views on what constitutes good CSR practice; developing and providing training to support the constituents and other actors to give effect to the [ILO] Declaration; developing models of good practice on how enterprises, including within their supply chain architecture, are giving effect to the [ILO] Declaration in a particular country context through their CSR activities; collecting and disseminating information by upgrading the business and social initiatives database (BASI), publishing working papers and case studies, and supporting the activities of the ILO constituents; building dialogue with international intergovernmental organizations and engaging with other international initiatives related to CSR. 40

As to the content of the ILO Declaration, this covers a wide range of matters involving employment issues, the training of workers, conditions of work and life, and industrial relations. 41 Under the heading of employment issues, the ILO Declaration deals with three specific matters: employment promotion, equality of opportunity and treatment, and security of employment. In relation to equality of opportunity the ILO Declaration states that,

all governments should pursue policies designed to promote equality of opportunity and treatment in employment, with a view to eliminating any discrimination based on race, colour, sex, religion, political opinion, national extraction or social origin. 42

MNEs should be guided by the same principles throughout their operations but without prejudice to preferential treatment for host country employees or to governmental policies designed to correct historical patterns of discrimination. 43 Equally, governments should never encourage MNEs to pursue discriminatory policies. 44

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The ILO Declaration recommends that governments study the impact of MNEs on employment and develop suitable policies to deal with the employment and labour market impacts of MNE operations. 45 In their turn, MNEs and national enterprises should, through active manpower planning, ‘endeavour to provide stable employment for their employees and should observe freely negotiated obligations concerning employment stability and social security’. 46 Furthermore, MNEs, because of the flexibility they are assumed to have, are exhorted to assume a leading role in promoting security of employment, particularly in countries where the discontinuation of operations is likely to accentuate long-term unemployment. 47 The Declaration further states that arbitrary dismissal procedures should be avoided, 48 and that governments in cooperation with MNEs and national enterprises should provide some form of income protection for workers whose employment has been terminated. 49 The ILO Declaration accepts that MNEs are free to change their operations, even if this results in major employment effects, as in the case of the closure of an entity involving collective lay-offs or dismissals, or in a merger, takeover, or transfer of production which results in employment rationalization. 50

In a world economy characterized by increased industrial restructuring, training issues acquire an importance far greater than before. The ILO Declaration encourages governments to develop national policies for vocational training and guidance, closely linked with employment. 51 MNEs are encouraged to ensure that relevant training is provided for all levels of employees in the host country to meet the needs of the enterprise as well as the development policies of the country. This should develop generally useful skills and promote career opportunities. 52 Furthermore, in developing countries, MNEs should participate in special programmes aimed at encouraging skill formation and development. 53

The ILO Declaration divides the issues arising under the heading ‘Conditions of Work and Life’ between wages, benefits and conditions of work, minimum age, and safety and health matters. It applies the national treatment standard to these matters. Thus: ‘Wages, benefits and conditions of work offered by multinational enterprises should be not less favourable to the workers than those offered by comparable employers in the country concerned’. 54

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When operating in developing countries, where comparable employers may not exist, MNEs should provide the, ‘best possible wages, benefits and conditions of work, within the framework of government policies’. 55 These should be related to the, ‘economic position of the enterprise, but should be at least adequate to satisfy basic needs of the workers and their families’. 56 Where MNEs provide workers with basic amenities such as housing, medical care, or food, these should be of a good standard. 57 Finally, the Declaration exhorts governments, especially in developing countries, to endeavour to adopt suitable measures to ensure that lower income groups and less developed areas benefit as much as possible from the activities of MNEs. 58 Thus, the ILO Declaration does not prevent MNEs from moving their operations to lower wage areas if they so choose. It preserves the ability of MNEs to scan investment locations for lower cost operating bases. All that is required is that the firm does not fall below the national treatment standard in the host state.

A new section was added to ILO Declaration by the 2000 revision so as to incorporate ILO Conventions No 138 on Minimum Age and No 182, the Convention on the Prohibition and Immediate Elimination of the Worst Forms of Child Labour. 59 The ILO Declaration asserts that, ‘[m]ultinational enterprises, as well as national enterprises, should respect the minimum age for admission to employment or work in order to secure the effective abolition of child labour’. 60 In relation to safety and health, the ILO Declaration urges governments that have not already done so to ratify ILO Conventions in this field, 61 while MNEs are required to maintain the ‘highest standards of safety and health, in conformity with national requirements, bearing in mind their relevant experience within the enterprise as a whole, including any knowledge of special hazards’. 62 Furthermore, MNEs should make available

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information on safety and health standards relevant to their local operations which they observe in other countries, to workers' representatives in the enterprise and, upon request, to the competent authorities and to workers' and employers' organizations in the countries in which they operate. 63 In particular, special hazards and related protective measures associated with new products and processes should be made known to those concerned. 64 This part of the ILO Declaration ends with exhortations to MNEs to cooperate in the work of international organizations in the preparation of international safety and health standards, 65 and with national authorities, representatives of workers' organizations, and specialist safety and health organizations. 66 Where appropriate, matters relating to safety and health should be incorporated into agreements with workers’ representatives and their organizations. 67

The ILO Declaration deals with five issues under the heading of ‘Industrial Relations’: freedom of association and the right to organize, collective bargaining, consultation, examination of grievances, and the settlement of industrial disputes. Each area is subject to the overriding general principle of national treatment in that ‘multinational enterprises should observe standards of industrial relations not less favourable than those observed by comparable employers in the country concerned’. 68 National treatment leaves much to the discretion of the host government in the conduct of its industrial relations policy. Although recommended to observe the standards in the ILO Declaration, there is no legally binding international sanction should the host state fail to do so. 69 This considerably weakens the standard-setting function of the Declaration. In accordance with the most central guiding policy of the ILO, the ILO Declaration recognizes the right of workers to establish and to join organizations of their own choosing without previous authorization, and to enjoy adequate protection against anti-union discrimination in respect of their employment. 70

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The ILO Declaration asserts that the employees of MNEs should have the right, in accordance with national law and practice, to have representative organizations of their own choosing recognized for the purpose of collective bargaining. 71 What constitutes collective bargaining is a matter for interpretation in the context of different national situations. The ILO Declaration may offer some harmonization in this regard in that it recommends the taking of measures appropriate to national conditions for the encouragement and promotion of negotiations through collective agreements in accordance with ILO Convention No 98 Article 4. 72

Regarding workers' grievances, the following principle is recommended to MNEs: ‘that any worker who, acting individually or jointly with other workers, considers that he has grounds for a grievance should have the right to submit such grievance without suffering any prejudice whatsoever as a result, and to have such grievance examined pursuant to an appropriate procedure’. 73 This is seen as particularly important where the MNE operates in a country that does not abide by the principles of ILO Conventions relating to freedom of association, the right to organize and bargain collectively, and to forced labour. 74 The ILO Declaration ends with a recommendation that MNEs should seek to establish, with the representatives and organizations of the workers whom they employ, voluntary conciliation machinery to assist in the prevention and settlement of industrial disputes. This machinery should include equal representation for employers and workers, and it should be appropriate to national conditions. It may include provisions for voluntary arbitration. 75

The ILO Declaration represents one of the most comprehensive codes of practice for MNEs to follow in their social responsibility actions. However, it is not a strong instrument. This is so for three reasons. First, it is a non-binding code of conduct addressed to member states and MNEs. It carries only the moral persuasive force of a ‘soft law’ instrument which, as was noted in the introductory chapter, tends to be the form that international instruments covering corporate responsibility standards take. Secondly, the enforcement machinery is rather weak. In 1980, the Governing Body of the ILO established a Committee on Multinational Enterprises (the Committee). 76 States are to make periodic reports on the implementation of the Declaration on the basis of questionnaires sent through governments to unions and business organizations. In addition, the dispute settlement procedure is rather

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limited. The Committee is empowered to interpret the Declaration through a disputes procedure. This was revised in 1986. 77 Requests for interpretation are submitted to the Committee by governments and by national or international organizations of employers or workers. Workers' requests will be received only if they are not able to have these submitted through a national government. Requests are admissible if they do not conflict with or duplicate appropriate procedures at national level, in the case of issues involving national laws, and with the ILO's international procedures under ILO Conventions, in the case of Convention-based issues. If the request is receivable, the International Labour Office will prepare a draft reply which is considered by the Committee. The reply is then submitted for approval by the Governing Body and, if approved, is published in the ILO Official Bulletin. 78 This procedure is not judicial in nature. It serves merely to clarify the standards contained in the Declaration. However, the Committee can only do so in the context of an ‘actual situation’. 79 Thus, the procedure may involve the ascertainment of certain facts but not a resolution of disputes over facts and laws.

The third major weakness in the ILO Declaration is its adherence to the national treatment principle. The ILO Declaration states:

All the parties concerned by this Declaration should respect the sovereign rights of States, obey the national laws and regulations, give due consideration to local practices and respect relevant international standards. 80

The primacy of national law is reinforced by the requirement that the above-mentioned disputes procedure cannot be used to determine issues arising out of national law. The reference to the primacy of national law tends to weaken the effectiveness of the ILO code as it preserves the right of each state to determine the nature, scope, and effect of its national labour laws. Consequently, the ILO Declaration can do little to prevent competition between states over the reduction of labour standards as a means of reducing the cost of investment in their respective territories. This may be contrasted with ‘no lowering of standards’ clauses concerning labour rights in US BITs. 81

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In this regard, the ILO Declaration contains certain additional provisions of a general nature. Thus, governments which have not yet done so are urged to ratify the core ILO Conventions as listed in paragraph 9 of the ILO Declaration. 82 Furthermore, MNEs are expected to take full account of the general policy objectives of the countries in which they operate, especially the development priorities and social aims and structures of these countries. To this end, consultations should be held between the firm and the government and employers' and workers' organizations in these countries. 83 Moreover, governments of home countries are urged to promote good social practice in accordance with the ILO Declaration, having regard to the social and labour law, regulations, and practices in host countries as well as to relevant international standards. Both home and host countries are encouraged to have consultations with each other on these matters. 84 This provision urges home states to ensure that home-based corporations observe good practice in their overseas operations, and at all times observe host states' laws. It therefore reinforces the territorial nature of labour regulation, in that this provision does not envisage the extraterritorial application of superior home country standards to employees in host states. This suggests that bilateral arrangements may offer a way forward in ensuring the observance of higher standards throughout the network of countries in which an MNE operates. Such efforts could be conducted under the auspices of the ILO itself. 85

(b) Human Rights 86

In recent times, it has been asserted with increasing frequency that MNEs should be required to observe fundamental human rights standards and, possibly, to be liable for their violation. Increased concern in this area may be attributed to a number of factors including increased unease at the seemingly unaccountable operations of private capital in a globalizing economy, the perception that the ability of the nation-state to act in the public interest has been weakened by the effects of economic globalization, and as a result of the greater ease of communicating cases of corporate misconduct through the media, wherever this may occur. 87 Indeed, the increased vigilance of NGOs that are concerned with such misconduct has led to greater

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awareness of this issue. 88 Cases of misconduct appear to be focused in a number of specific industries, which, by their characteristics and location, may be more likely to encounter human rights-related problems. In particular, light manufacture depending on cheap labour (such as the apparel and footwear industries) and natural resource extraction industries that may operate in less developed and more remote locations, and in politically destabilized countries or regions, seem prominent in the documented cases. There are also a number of cases involving major infrastructure projects that may have serious health and environmental implications, such as dams and oil and gas pipeline projects. 89

There has been an extensive philosophical debate upon whether MNEs can be the subject of human rights responsibilities. At a moral level, it would appear that there exists a widening consensus that MNEs should observe fundamental human rights standards. This can be supported by reference to the fundamental need to protect from assaults against human dignity regardless of whether their perpetrators are state or non-state actors. 90 Equally it is often said that ‘human rights is good for business’ in that a poor human rights record can adversely affect the public image of a firm and weaken its market power as consumers boycott its products or services. Though this may be open to question on an empirical basis, 91 the recent history of corporate embarrassment over allegations of complicity in human rights abuses,

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and the adoption of human rights impact assessments by firms and industry groups, suggests that this is a matter taken increasingly seriously by business. 92

On the other hand, as the UN Special Representative on the issue of human rights and transnational corporations and other business enterprises has pointed out, given the lack of international legal personality of corporate actors, that they cannot directly be bound by international law as such, and that, apart from certain narrowly drawn responsibilities in the field of international criminal law, corporations have no existing international obligations in the field of human rights as most codes are voluntary in nature and are addressed to states. 93 Accordingly, from a legal perspective, corporate actors can only be bound by human rights norms to the extent that these are incorporated into national laws and regulations that are directly applicable to non-state actors, or where they are subjected to direct treaty-based responsibilities. This narrow view leaves the question of human rights responsibilities for foreign investors in a legal twilight. 94

Notwithstanding this view, much has been written to show that responsibilities for compliance with human rights standards can emerge from within international law. 95 Historically, the observance of human rights standards has been an obligation

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of the state alone. Accordingly, the first step in the evolution of substantive standards for MNEs and other business entities requires the assertion of a direct link between the obligations of states, and of non-state actors, to promote universal respect for, and observance of, human rights and fundamental freedoms. An express reference to such a link can be found in the Universal Declaration of Human Rights (UDHR). This instrument is addressed both to governments and to ‘other organs of society’. Following this provision, the third recital of the Preamble to the UN Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with Regard to Human Rights (the UN Norms) recognizes that, ‘even though States have the primary responsibility to promote, secure the fulfilment of, respect, ensure respect of and protect human rights, transnational corporations and other business enterprises, as organs of society, are also responsible for promoting and securing the human rights set forth in the Universal Declaration of Human Rights’ (emphasis added). 96 This is a clear acceptance of the view that corporate entities do have human rights responsibilities on the basis of their social existence. However, the legal status of the UDHR remains that of a non-binding declaration, and so this reference to the UDHR wording in the UN Norms may be no more than a statement of an ethical duty at best, reinforced by the fact that the UN Commission on Human Rights (now the Council on Human Rights) regards the UN Norms as a draft proposal that has

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no legal standing. 97 That said, the UN Norms are an example of ‘modelling’ in the development of law. 98 They exist as a non-binding example of how a future set of binding principles might look. Thus, their value as an object of study, discussion, and influence should not be underestimated. Indeed, they form a useful framework to guide corporate human rights impact assessments. 99 Accordingly, they will be briefly analysed here.

The first question raised by the UN Norms is their scope of coverage. They are said to apply to ‘transnational corporations’ (TNCs) and ‘other business enterprises’. The definition given of what constitutes a ‘transnational corporation’ is rather vague. The UN Norms state that this term ‘refers to an economic entity operating in more than one country or a cluster of economic entities operating in two or more countries—whatever their legal form, whether in their home country or country of activity, and whether taken individually or collectively’. 100 Unlike other commonly used definitions of TNCs (or MNEs), this definition does not refer to control, influence or co-ordination of activities as a key element in determining whether the entity is indeed a TNC. 101 This element must be inferred from the reference to economic entity. Its absence would render the instrument applicable to any type of business relationship that crosses borders. Perhaps that is the intention, given the continued reference to ‘other business enterprise’ which is defined as including ‘any business entity, regardless of the international or domestic nature of its activities, including a transnational corporation, contractor, subcontractor, supplier, licensee or distributor; the corporate, partnership or other legal form used to establish the business

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entity; and the nature of the ownership of the entity’. 102 This definition continues by presuming that the instrument will apply, as a matter of practice, if the business enterprise has any relation with a TNC, the impact of its activities is not entirely local, or the activities involve violations of the right to security of persons as defined in the text of the instrument at paragraphs 3 and 4. Taking the definitions of both ‘TNC’ and ‘other business entity’ together, the UN Norms are capable of covering a wide ‘sphere of influence’ that the activities of a corporate network, whatever its actual form, help to create. 103

Turning to the substantive content of the UN Norms, at least five different types of provisions can be identified. First, there are those which cover ‘traditional’ civil and political human rights issues, namely: the right to equal treatment; 104 the right of security of persons as concerns business engagement in, or benefit from, ‘war crimes, crimes against humanity, genocide, torture, forced disappearance, forced or compulsory labour, hostage-taking, extrajudicial, summary or arbitrary executions, other violations of humanitarian law and other international crimes against the human person as defined by international law’; 105 rights of workers dealing, in particular, with those rights listed in Article 2 of the ILO Declaration on Fundamental Principles and Rights at Work 1998, namely, the prohibition on forced or compulsory labour, 106 the rights of children to be protected against economic exploitation, 107 and freedom of association. 108 In addition, the UN Norms require respect for other civil and political rights, such as privacy, education, freedom of thought, conscience, and religion, and freedom of opinion and expression. 109 Secondly, following the contents, in the main, of the ILO Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy, 110 the UN Norms contain provisions reflecting the main economic social and cultural rights, including the provision of a safe and healthy working environment; 111 compensation of workers with remuneration that ensures ‘an adequate standard of living for them and their families’; 112 protection of collective bargaining; 113 respect for the social, economic, and cultural policies of the countries in which companies operate; 114 respect for the rights to

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health, adequate food, and adequate housing, and other economic social and cultural rights such as rights to ‘adequate food and drinking water; the highest attainable standard of physical and mental health, adequate housing, ’ and refrain from actions which obstruct the realisation of those rights’. 115 No distinction is made in the UN Norms as to the relative importance of these so-called ‘first’ and ‘second’ generation human rights. Indeed, as the Preamble explains, the UN Norms are based on the ‘universality, indivisibility, interdependence and interrelatedness of human rights including the right to development …’. 116 This approach also covers the so-called ‘third generation’ rights of collective solidarity, as expressed through the inclusion, in the UN Norms, of the right of development 117 and the obligation on TNCs and other business enterprises to promote, respect, and protect the rights and interests of indigenous peoples and other vulnerable groups. 118

A fourth group of provisions deals with the special problems created by the operations of TNCs for the realization of the types of rights listed above. Thus, the UN Norms cover the operation of security arrangements for companies. Such arrangements ‘shall observe international human rights norms as well as the laws and professional standards of the country or countries in which they operate’. 119 This general principle is further elaborated in the Commentary to the Norms, which requires companies to observe the emerging best practices evolving in this field through various codes of conduct, particularly the UN Principles on the Use of Force and Firearms by Law Enforcement Officials, the UN Code of Conduct for Law Enforcement Officers, the UN Convention Against Torture, and the Rome Statute of the International Criminal Court. Business enterprises and TNCs are further urged not to supplant the state military and law enforcement services, but only provide for their own preventive or defensive services, and not to hire individuals known to have been responsible for human rights or humanitarian law violations. 120 Other provisions that can be added to this category are: the duty to recognize and respect applicable norms of international law, national laws and regulations, administrative practices and the rule of law, 121 and the final saving provision which makes clear that ‘nothing in these Norms shall be construed as diminishing, restricting, or adversely

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affecting the human rights obligations of States under national and international law, nor shall they be construed as diminishing, restricting, or adversely affecting more protective human rights norms’. 122 Not only does this provision offer a rule of interpretation favourable to the effective protection of human rights, but it also emphasizes that the operations of business enterprises can observe higher standards than the minimum standards required by the UN Norms.

A fifth, and final, group of substantive provisions goes beyond a conventional human rights-based agenda and belongs more to a general corporate social responsibility code. This reflects the fact that many of the sources, referred to as contributing to the UN Norms, 123 constitute more general codes of business ethics, which, by their nature, will deal with social issues not usually described as human rights issues. Thus, for example, the UN Norms require that TNCs and other business enterprises shall act ‘in accordance with fair business, marketing and advertising practices and shall take all necessary steps to ensure the safety and quality of the goods and services they provide, including observance of the precautionary principle. Nor shall they produce, distribute, market or advertise harmful or potentially harmful products for use by consumers’. 124 This introduces general consumer protection standards into the instrument. Other such social responsibility provisions include a prohibition against bribery 125 and obligations with regard to environmental protection. 126 Whether these are truly ‘human rights’ issues is open to debate. On the other hand, as the Preamble to the UN Norms notes, ‘new international human rights issues and concerns are continually emerging and that transnational corporations and other business enterprises often are involved in these issues and concerns, such that further standard-setting and implementation are required at this time and in the future’. In this light, it may well be that consumer and environmental protection are emergent human rights issues. It has been argued, for example, that a right to a clean and healthy environment is a human right, though this has been disputed. 127 Whether consumer protection is a human right seems rather more tenuous, as it is hard to see how elevating such issues to the status of quasi-constitutional rights makes such protection more effective. In any case, other established human rights could be sufficient. For example, death or serious injury caused by unsafe products or processes could come within the right to life and the right to personal security under Article 3 of the Universal Declaration on Human Rights and Articles 6 and 9

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of the International Civil and Political Rights Covenant. Loss of livelihood, due to disability, could be covered by Article 25 of the Declaration. As for the prohibition against bribery, a human rights approach seems ill-conceived, as it is not entirely clear whether there is an identifiable human victim. This is an area in which the wider social undesirability of such practices is at issue, rather than any significant adverse effects on any one individual. It would thus be better dealt with as a regulatory matter under national law and specialized international conventions than a human rights-oriented instrument. 128

The precise content of the human rights obligations of MNEs is open to considerable speculation. 129 However, it is clear that corporate actors will not carry the same responsibilities as states. Some state responsibilities are simply impossible for MNEs and other business enterprises to carry out. Examples include: protecting rights of asylum, the right to take part in government, rights to nationality, and provision of rights of due process. Equally, states, as public actors, do not themselves enjoy human rights protection, while, as noted above, MNEs, as private actors, can possess rights that may need to be balanced against those of other non-state actors. 130 Against this background, the development of substantive obligations will require some adaptation of existing human rights standards. In addition, it may require a wider conception of what obligations may count as human rights obligations for private corporate actors, given their influence over the development of economic and social welfare in the societies in which they operate. The UN Norms offer a valuable illustration of how this can be achieved, notwithstanding their obvious limitations as sources of binding legal obligations.

(c) Environmental Issues 131

The globalization of production and services provision by MNEs has created a heightened sense of awareness concerning the potential for transnational environmental harm that the activities of such firms might create. On the other hand, MNEs may also be seen as the main repositories of modern, environmentally friendly,

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technology, and as the most advanced experts on environmentally sound management practices. 132 Thus, this emerging area of concern covers not only issues of control and regulation that seek to prevent environmental harm from arising out of the activities of MNEs, but also issues of how MNEs might be encouraged to use the best technologies and managerial practices that will enhance the ability of host countries to develop their economies and societies in an environmentally friendly manner. This is also an area where a strong element of self-regulation has been used alongside more traditional ‘command and control’ strategies. 133

In the context of international investment law and ICSR a number of specific issues arise. The first concerns the substantive content of environmental obligations for MNEs under international agreements and customary international law. The second concerns the interaction of IIAs with national regulatory discretion over environmentally sensitive activities of foreign investors.

As to substantive obligations, at present there are no detailed international rules, or procedures, for the environmental regulation of MNEs. Therefore, MNEs cannot be held liable for environmental harm under international law as such, only under applicable national laws. On the other hand, there exist a number of international instruments that create non-binding commitments for MNEs in this field, coupled with certain mandatory provisions of Multilateral Environmental Agreements (MEAs) which, though addressed to the state contracting parties, have regulatory consequences for MNEs. 134 In addition, the possible effects of customary international law on the environmental regulation of MNEs should be considered. One feature of the international environmental protection field that should be noted at the outset is the extent to which it has become an area of contestation and lobbying by both business and civil society groups. Indeed, it is arguable that MNEs have used such influence to help construct a more benign set of standards than might otherwise have been adopted. 135

Turning to the substantive content of international instruments covering MNE responsibilities in the environmental field, two voluntary codes are particularly important. These are, first, the Rio Declaration on Environment and Development and its Agenda 21, the Programme of Action for Sustainable Development, whose

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continuing importance in this area was reaffirmed at the World Summit on Sustainable Development (WSSD) in Johannesburg in 2002, 136 and, secondly, the OECD Guidelines on Multinational Enterprises. 137 Both instruments emphasize, in essence, the furtherance of sustainable development through the transfer of environmentally sound technology and management practices. 138

Under Agenda 21, MNEs are seen as playing a major role in the development of environmentally sound technologies and in their transfer. 139 Following from this, Agenda 21 offers certain general commitments for both governments and MNEs in furthering a cooperative vision of sustainable development through technological improvement and transfer. In particular, governments and MNEs are urged to strengthen partnerships that will promote the use of cleaner technologies and develop new methods for internalizing environmental costs into accounting and pricing, while MNEs are urged to report annually on their environmental records, adopt codes of conduct reflecting best environmental practice, incorporate cleaner technologies into their production processes, and cooperate with workers and trade unions and with other businesses for the development of knowledge and skills in the environmental field. 140 Furthermore, MNEs are specifically urged to establish worldwide policies on sustainable development, arrange for environmentally sound technologies to be made available to their affiliates in developing countries without extra charge, and to modify local practices in line with local ecological needs. 141

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Moreover, the transfer of environmentally useful technology to developing countries is to be encouraged. 142 Such measures should be taken to avoid abuse of intellectual property rights. 143

Agenda 21 introduces some specific principles of regulation into the field of environmentally sustainable action. First, regulatory controls are seen as going hand in hand with market controls over environmental action involving full environmental costing through the ‘polluter pays’ and ‘natural resource user pays’ principles. 144 MNEs are to be consulted over such matters. 145 Secondly, a programme to develop systems for integrated environmental and economic accounting should be set up. 146 Thirdly, trade in environmentally damaging products, chemicals, toxic substances, and hazardous wastes can be lawfully banned. 147 Furthermore, MNEs, wherever they operate, are specifically urged to introduce policies, commitments, and standards of operation in relation to hazardous waste generation and disposal that are equivalent to or no less stringent than those in the country of origin. 148

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In 1991, a new Guideline on environmental protection was introduced into the non-binding OECD Guidelines on Multinational Enterprises. 149 The Guideline seeks to reflect the principles and objectives laid down in Agenda 21 and in the Aarhus Convention, 150 as well as in the ISO Standard on Environmental Management Systems. 151 It recommends that enterprises should take due account of the need to protect the environment, public health and safety, and generally to conduct their activities in a manner contributing to the wider goal of sustainable development within the framework of laws, regulations, and administrative practices in the countries in which they operate and in consideration of relevant international agreements, principles, objectives, and standards. The Guideline goes on to specify particular duties to be observed by enterprises in relation to the establishment and maintenance of a system of environmental management appropriate to the enterprise, the provision of adequate and timely information to the public and employees as to the environmental impact of enterprise activities, and consideration of environmental impacts in decision-making and the preparation of appropriate environmental impact assessments. Enterprises are urged to apply the precautionary principle, consistent with scientific understanding of risks and cost-effectiveness of measures, and to maintain contingency plans for preventing, mitigating, and controlling serious environmental and health damage arising out of their operations. They are also expected to adopt the best available environmental technologies, develop products and services that are safe, have no undue environmental impacts, are energy efficient and recyclable. Finally, enterprises are urged to develop adequate education and training programmes and to contribute to the development of public policy, including through partnerships or initiatives that will enhance environmental awareness and participation.

Apart from such ‘soft’ responsibilities, MNEs may find themselves subjected to ‘hard’ obligations arising out of the contents of MEAs, as a result of the implementation of international obligations by the states that are parties to these agreements. Certain key examples need to be briefly mentioned. Perhaps the most significant is the Clean Development Mechanism (CDM) established by Article 12 of the Kyoto Protocol to the United Nations Framework Convention on Climate Change. 152 The CDM allows for developed countries (Annex I parties) to enter into investments

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aimed at reducing carbon emissions in developing countries (Annex II parties) and credit these to their emission limitation and reduction commitments under Article 3 of the Protocol. Article 12(9) makes clear that participation in CDM projects may involve private and/or public entities and is to be subject to ‘whatever guidance may be provided by the executive board of the clean development mechanism’. Thus MNEs may be directly involved in such activities and will find themselves subject to the regulatory control of the home and host country, as parties to the Protocol. In addition to the CDM, other MEAs have established civil liability rules that apply directly to private actors involved in the conduct of a potentially harmful environmental activity. Thus, the 1999 Protocol to the Basel Convention on Liability and Compensation for Damage resulting from Transboundary Movements of Waste and their Disposal provides a comprehensive regime for liability and compensation placed upon any person who is in operational control of the waste. It is yet to enter into force. 153 A further example arises out of the various conventions dealing with civil liability for oil pollution that set direct liabilities upon shipowners, subject to limits on recovery, establish funds from which compensation can be paid, and which require owners to carry adequate insurance. 154 Such government-led initiatives have been shadowed by industry-based agreements establishing compensation schemes. 155 Indeed, the use of multilateral funds to further environmental policy and technology transfer in developing countries, or to establish pools of resources from which compensation can be paid to victims of environmental harm, may be a valuable additional approach to dealing with the costs associated with the environmental operations of MNEs as well as governments. 156

While obligations can arise for MNEs out of treaty provisions, the implications of customary international law on the regulation of the environmental activities of MNEs are less clear. Should any standard of environmental regulation amount to a principle of customary international law, then the regulating state would be bound to apply it in its legal order, and supranational systems of regulation would also have to comply. In addition, breach of such a principle might found the basis of a claim against the state for failure to regulate corporate activity. The corporate actor could also be directly liable in a legal system that recognizes its susceptibility

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to actions based on violations of international law. To date, the evidence for such a basis of action is weak. Although the principle of sustainable development has been held to be a principle of international law, 157 this is not a uniformly held view, given the complexity and vagueness of the concept. 158 Indeed, other concepts, such as the polluter pays and the precautionary principle, have also been doubted as rules of customary international law. 159 For example, in the US case of Beneal v Freeport-McMoran the plaintiffs argued that the defendant mining corporation had inter alia violated the Alien Tort Claims Act by reason of its violation of principles of international environmental law that had become part of customary international law and could, therefore, found an action under this legislation. 160

In particular, they alleged that Freeport's mining operations in Iriyan Jaya, Indonesia, had led to environmental damage that it was obliged to compensate for under the polluter pays, precautionary, and proximity principles. Judge Duval noted that environmental torts based on these principles had not acquired the status of customary law. 161 Even if they had, the judge doubted whether they could apply to a non-state corporation in the absence of a treaty provision to that effect. Equally, the precautionary principle was not accepted as a general principle of international law that could bind a WTO Panel or Appellate Body in the EC—Beef Hormones case. 162 The WTO Appellate Body held that this principle did

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not override the requirements of Articles 5.1 and 5.2 of the WTO Agreement on Sanitary and Phytosanitary Measures, which applied a cost-benefit risk assessment analysis, and a test of reasonable scientific knowledge, to the evaluation of whether the EC ban on the importation of hormone-treated beef into the EU from the US infringed the GATT.

On the other hand, it is well established that a country is liable under international law for harm caused by the transboundary escape of airborne pollutants originating in privately owned facilities within its borders. 163 This may offer a cause of action where it is not possible to sue the corporation that caused the harm directly. 164 The host country acts as an ‘insurer of last resort’ in such cases. In addition, the host country, and any neighbouring countries that are affected by the airborne pollution, may seek to arrive at a cooperative solution to the underlying problem, bearing in mind not only the harm to those affected by the pollution, but also the social and economic interests associated with the polluting operation in the host country. Furthermore, the risk of responsibility may encourage the host country to undertake preventive measures which may include the passing of necessary legislation and other legal or administrative action, and international cooperation with other governments and international organizations. 165

A further issue arising specifically in relation to the environmental regulation of MNEs is the effect of IIAs on national policy space in this area. Limitations on national regulatory discretion may arise in a number of ways. First, where the host country has concluded an investment protection agreement that extends to both pre- and post-entry treatment, 166 the application of environmental laws at the pre-entry

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stage may require that any controls over entry and establishment conform to the protection standards contained in the agreement. Thus, any screening or licensing requirement, or environmental impact assessment, made at this stage must be non-discriminatory and should comply with notions of fair and equitable treatment, as defined in the agreement. However, such obligations may need to be interpreted in the light of legitimate rights to regulate for environmental purposes, which may be most efficiently done at the point of entry in the case of FDI projects. 167

It is at this point, too, that host countries may impose environmental performance requirements as a condition of entry. Such requirements may be prohibited under applicable IIAs. For example, NAFTA prohibits the imposition of performance requirements as a condition of entry and establishment, including a requirement for technology transfer in paragraph (1)(f). However, Article 1106(2) of NAFTA provides that ‘a measure that requires an investment to use a technology to meet generally applicable health, safety or environmental requirements shall not be construed to be inconsistent with paragraph (1) (f)’. This approach is further developed in the most recent US BITs, where the imposition of performance requirements, including environmental measures, necessary to protect human, animal, or plant life or health, or related to the conservation of living or non-living exhaustible natural resources, is permitted provided such measures are not applied in an arbitrary or unjustifiable manner and that they do not constitute a disguised restriction on international trade or investment. 168 This provision follows the pattern of the general exception clause in GATT Article XX. Assuming that the US BIT provision is to be interpreted in line with this WTO provision, 169 it subjects national discretion to a number of tests. In relation to the protection of human,

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animal, or plant life or health, the measure applied must be ‘necessary’, which has been interpreted in WTO jurisprudence to mean that a country should take the least GATT-inconsistent measure that is reasonably available, given the objective to be sought. In other words, the measure must be both reasonably necessary for the purpose of the environmental policy being pursued and proportionate to that aim. 170 In relation to the conservation of living and non-living exhaustible natural resources the measure must be ‘related to’ these objectives, that is, it must have such conservation as its primary aim and is again subject to a test of proportionality. 171 In addition, both types of exception must come within the requirements of application in a non-arbitrary and justifiable manner and not as a disguised restriction on trade or investment. These have been interpreted to require a balancing process between the right of a country to invoke the exception and its obligation to respect the rights of other countries under the agreement. It introduces an element of good faith in the decision to rely on the exception. 172 This determination will be made on a case-by-case basis and will involve consideration of whether the measure in question has been applied without discrimination or arbitrariness as to both its substantive and procedural aspects. 173

A second restriction arising out of the terms of IIAs concerns the use of a ‘no lowering of standards’ clause to combat the risk of host countries lowering their environmental standards as an inducement to investment. Such provisions are a response to the ‘pollution haven’ hypothesis, whereby a host country will seek to attract environmentally damaging foreign investment by reason of lax regulatory standards. Such clauses may take a non-binding ‘best efforts’ approach, as does NAFTA Article 1114(2), which recognizes that it is ‘inappropriate to encourage investment by relaxing domestic health, safety or environmental laws’. 174 Alternatively, a clause

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may place the obligation in mandatory language. 175 However, to date, no such clause has been linked up to dispute settlement provisions, possibly due to the difficulties of litigating a claim. The intent element in particular might be very problematic to prove. 176 As an alternative, the NAFTA Side Agreement on Environmental Co-operation has established institutional machinery that oversees national legal and policy developments in the environmental field, aiming at high overall standards and providing for a complaints procedure concerning alleged failure by a contracting party to enforce its environmental law. 177 Finally, it should be noted that, in this connection, the OECD Guidelines on Multinational Enterprises assert that MNEs should refrain from seeking or accepting exemptions from environmental measures that are not contemplated in the statutory or regulatory framework. 178

Notwithstanding the above-mentioned restrictions on host country discretion, the right of a country to regulate on environmental matters may be protected by the terms of an IIA. This can be achieved through a provision that ensures that nothing shall prevent a party from regulating on environmental matters as it deems appropriate, and in a manner consistent with the agreement. 179 In addition, as noted in relation to performance requirements, IIAs could ensure the preservation of host country discretion in environmental matters through suitably worded general exception clauses. 180 Furthermore, MEA provisions may override the terms of IIAs, and place environmental obligations above investment protection obligations, where this is necessary to achieve the objectives of the MEA in question. Thus, NAFTA Article 104 states that MEA obligations, listed in that provision, ‘shall prevail’ provided that where there is a choice of policy options to fulfil the obligation, that party chooses the least NAFTA-inconsistent option. In addition, an IIA could make clear that ordinary environmental regulation based on MEA standards will not constitute a regulatory taking, building on general provisions of this kind already in existence in certain BITs. These refer only to non-discriminatory regulatory actions applied to protect legitimate public welfare objectives such as environmental protection. 181 It can be said that where an MEA requires discriminatory action, this may be compatible with such a provision as this might not amount to a case of ‘like circumstances’

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between domestic and foreign investors. The environmental threat in question may require differences in treatment between various foreign investors and/or between foreign and domestic investors. 182

(4) Monitoring and Enforcement

The preceding discussion has concentrated on the substantive standards that MNEs may be required to observe as part of their ICSR obligations. The focus has been on the three most significant issue areas. In this section, the issue of how to monitor and enforce such standards will be briefly considered. The choices are between national and international mechanisms of regulation. At the national level, both standard setting, through new laws and regulations, and public interest litigation, taken against firms alleged to have broken their ICSR obligations, may be used. The latter raises the further question of whether the courts of the home country of the MNE should act as ‘watchdogs’ over their firms’ overseas activities. As will be seen below, the courts of the USA are already being used in this manner under the Alien Tort Claims Act (ATCA). At the international level, there arises the possibility that intergovernmental organizations (IGOs) have a monitoring role that can supplement such national initiatives, in particular, by requiring states to comply with certain obligations to ensure that their domestic regulatory structures adequately reflect the emergent norms in this area and by providing adequate and effective remedies for those who allege that they have been harmed by the failure of firms to observe fundamental ICSR standards.

At the national level, there are extensive laws and regulations in many countries dealing with labour standards and environmental protection. By contrast, there has, to date, been relatively little progress on standard setting through new laws or regulations embodying human rights standards. 183 The most significant examples in this regard may be the US and EU initiatives to link labour rights protection to

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the extension of trade preferences, or the UK Ethical Trading Initiative. 184 However, specialized legislation on MNEs and human rights is virtually non-existent. One example of what might be possible arose in Australia where the draft Corporate Code of Conduct Bill contained a provision that subjected the overseas subsidiaries of Australian companies to a general obligation to observe human rights and the principle of non-discrimination. 185 That Bill was never adopted. Similar proposals in the USA and the UK have also met with little success. 186

On the other hand, at the level of US national law, a degree of direct responsibility for human rights violations on the part of MNEs is being recognized through litigation brought by private claimants against the parent companies of affiliates operating in the claimants' countries. 187 Thus in the US District Court case of Doe v Unocal , 188 it was held, for the first time, that MNEs could, in principle, be directly liable for gross violations of human rights under the ATCA. 189 This case can be used to illustrate the conceptual problems involved in the bringing of a human rights claim against a corporation. 190 The key difficulty is to show that the corporation was in some way implicated in human rights violations. This raises the question whether there has to be evidence of direct involvement or whether some lesser degree of involvement is sufficient. In its decision of 31 August 2000, the US District Court in the Unocal case awarded a summary judgment to Unocal on the ground that although there was evidence that Unocal knew about, and benefited from, forced labour on the pipeline project in Burma in which it was a joint venture partner, it was not directly involved in the alleged abuses. These were the responsibility of the Burmese authorities alone. However, the principle that a private non-state actor can be sued before the US courts for alleged violations of human rights was not

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questioned. 191 The summary judgment was overturned in part on appeal to the US Court of Appeal for the Ninth Circuit. 192 The USCA held that there were genuine issues of material fact to be determined as regards the possible liability of Unocal for the alleged acts of forced labour, for aiding and abetting the Myanmar military in subjecting the plaintiffs to forced labour, and for aiding and abetting the Myanmar military in subjecting the plaintiffs to murder and rape occurring in furtherance of forced labour. On the other hand, there were insufficient facts to justify an examination of the allegations of liability on the part of Unocal for torture.

The affirmation of the applicability of the law relating to aiding and abetting an offence to crimes or torts involving alleged violations of fundamental human rights under ATCA is of great significance. 193 This allows for a finding that a corporation may be liable even if it has not directly taken part in the alleged violations, but has given practical assistance and encouragement to the commission of the crime or tort in question (the actus reus of aiding and abetting) and has actual or constructive knowledge that its actions will assist the perpetrator in the commission of the crime or tort (the mens rea of aiding and abetting). Thus the USCA accepts that a corporate actor can be complicit in a human rights violation even where there is no direct involvement. Accordingly, different levels of complicity, both direct and indirect, can be invoked as the basis of a corporate liability claim. 194

A further significant issue arising under national laws concerns the transparency of corporate action based on compliance with national disclosure laws. 195 The concern over MNE accountability and disclosure has many diverse sources. Apart from the traditional recipients of corporate information, namely its finance providers (the shareholders, bankers, lenders, and creditors), those interested in disclosure and accountability now include employees, trade unions, consumers, governments, and the general public. This has resulted in calls for a wider conception of disclosure than

end p.675

that needed by the financiers of the corporation. 196 Responding to such demands, international organizations have produced recommendations that widen the elements which may have to be included in a firm's annual report and in supplementary statements. 197 The general approach is well illustrated by the OECD Guideline on Disclosure which deserves quotation in full:

1. Enterprises should ensure that timely, regular, reliable and relevant information is disclosed regarding their activities, structure, financial situation and performance. This information should be disclosed by the enterprise as a whole and, where appropriate, along business and geographic areas. Disclosure policies of enterprises should be tailored to the nature, size and location of the enterprise, with due regard taken of costs, business confidentiality and other competitive concerns.

2. Enterprises should apply high quality standards for disclosure, accounting and audit. Enterprises are also encouraged to apply high quality standards for non-financial information including environmental and social reporting where they exist. The standards or policies under which both financial and non-financial information are complied should be reported.

3. Enterprises should disclose basic information showing their name, location and structure, the name, address and telephone number of the parent enterprise and its main affiliates, its percentage ownership, direct and indirect in these affiliates, including shareholdings between them.

4. Enterprises should also disclose material information on:

a) The financial and operating results of the company.

b) Company objectives.

c) Major share ownership and voting rights.

d) Members of the board and key executives, and their remuneration.

e) Material foreseeable risk factors.

f) Material issues regarding employees and other stakeholders.

g) Governance structures and policies.

5. Enterprises are encouraged to communicate additional information that could include:

a) Value statements or statements of business conduct intended for public disclosure including information on the social, ethical and environmental policies of the enterprise and other codes of conduct to which the company subscribes. In addition, the date of adoption, the countries and entities to which such statements apply and its performance in relation to these statements may be communicated.

end p.676

b) Information on systems of managing risks and complying with laws, and on statements or codes of business conduct.

c) Information on relationships with employees and other stakeholders. 198

The Guideline offers a summary of responses to the various concerns underlying MNE disclosure. It should be read alongside the OECD Principles of Corporate Governance which offer more detailed analysis of the terms used in the Disclosure Guideline. 199 The basic starting point for disclosure in the Corporate Governance Principles is that ‘the corporate governance framework should ensure that timely and accurate disclosure is made on all material matters regarding the corporation, including the financial situation, performance, ownership and governance of the company’. 200 This is deemed central to shareholders' ability to exercise their ownership rights on an informed basis and thus to allow capital markets to operate efficiently. In this regard, the financial and operating results of the company must give the ‘whole picture’ and, where transactions relate to the performance of the group as a whole, the accounts must include information based on the highest international accounting standards and give full information about contingent liabilities and off-balance sheet transactions. 201 Apart from shareholder interests, the Disclosure Guideline and the Corporate Governance Principles both stress the need for a broad disclosure of company objectives. These cover not only commercial objectives but also policies relating to business ethics, the environment, and other public policy commitments, with the aim of better evaluating the relationship between companies and the communities in which they operate and the steps they have taken to implement their objectives. 202 The requirement to disclose major ownership and voting rights will assist not only shareholders, in having full knowledge of the structure of the group of companies and intra-group relations, but also regulators, who will need such information to identify potential conflicts of interest or insider trading. Similarly, the information on key board members and their remuneration will assist in identifying conflicts of interest and monitoring the effects of remuneration schemes such as stock options and their relationship to company performance. 203

end p.677

The Corporate Governance Principles go on to consider the issue of related party transactions in greater detail than the rather basic requirements of paragraph 3 of the Disclosure Guideline. Full disclosure of such transactions is necessary to ensure that the company is being run with due regard to the interests of all its investors. This should be done on an individual or grouped basis, indicating whether the transactions in question have been made at arm's length and on normal market terms. Related parties include ‘entities that control or are under common control with the company, significant shareholders including members of their families and key management personnel'. 204 The inclusion of foreseeable risk factors relates to industry- or area-specific risks, financial market risks, risks related to derivatives and off balance sheet transactions (which were a key factor in the Enron scandal), and environmental liability risks. 205 The two final items for disclosure, employee and other stakeholder issues and corporate governance structures and polices, are a response to the fact that companies are now encouraged, if not actually obliged by law, in some countries, to provide information on these matters. In relation to employees, this includes any issue that may materially affect the performance of the company, including relations with creditors, suppliers, and local communities. As regards corporate governance policies, this is a response to the growing requirements for companies to set down a code of corporate governance and to report on why they may have departed from such standards on a ‘comply or explain’ basis. 206

From the foregoing, it is clear that the OECD approach to disclosure seeks to encourage greater openness and transparency by MNEs for public policy purposes, alongside their existing national disclosure requirements, as a means of creating a more informed environment for policy responses to be formulated. In this, the OECD approach goes beyond disclosure aimed at mere investor protection, the traditional concern of corporate disclosure laws. On the other hand, the OECD Disclosure Guideline also shows sensitivity to the concerns of corporate managers, specifically mentioning confidentiality and cost as factors to be considered when contemplating the form and extent of the recommended disclosure. Finally, it should be noted that the Guideline has only persuasive and not legal force. The ultimate arbiter of disclosure requirements still remains the law of the OECD member country in which the MNE operates.

Turning to monitoring by IGOs, the procedure under the ILO Declaration has already been described above. It is a relatively weak procedure which cannot make binding decisions on existing disputes concerning alleged infringements of labour

end p.678

rights by MNEs. It is firmly rooted in the culture of member country reporting, and of institutional interpreting of international standards, which pervades intergovernmental social standard setting instruments. In this regard, the UN Norms have sought to provide a more exacting mechanism. 207 The UN Norms require TNCs and other business enterprises to adopt, disseminate, and implement internal rules of operation in compliance with the Norms. In addition, they must incorporate the principles contained in the UN Norms in their contracts or other arrangements and dealings with contractors, sub-contractors, suppliers, and licensees in order to ensure their implementation and respect. 208 This represents a significant advance on the earlier drafts, which did not contain express provisions on the use of such legal measures to give force to their contents, though such measures were recommended in commentaries on those earlier drafts. 209 The UN Norms also require that TNCs and other business enterprises shall monitor and verify their compliance in an independent and transparent manner that includes input from relevant stakeholders. 210 This may be done by national, international, governmental, and/or non-governmental mechanisms in addition to internal review procedures. 211 Earlier drafts of the UN Norms focused on corporate implementation. However, the current UN Norms suggest that other actors could use the Norms to assess business practice and performance in the area of human rights responsibilities. For example, they could form the basis of industry monitoring; unions could use them as a benchmark for their expectations of company conduct, as could NGOs; and the UN's human rights treaty bodies could apply the UN Norms to create additional reporting requirements about corporate compliance with this instrument. 212 In addition, TNCs must ensure that outside stakeholders have access to information about human rights remediation efforts by firms and that workers have proper avenues by which to make complaints with regard to the violation of the Norms. 213

In addition, the draft presented to the 54th Session of the UN Sub-commission on Human Rights in 2002 introduced, for the first time, a provision requiring TNCs and other business enterprises to provide compensation for violations of the UN Norms. 214 The final version reads:

Transnational corporations and other business enterprises shall provide prompt, effective and adequate reparation to those persons, entities, and communities that have been adversely affected by failures to comply with these Norms through, inter alia, reparations, restitution, compensation and rehabilitation for any damage done or property taken. 215

end p.679

The UN Norms have also introduced some clarification of where such reparation is to be determined. In the words of paragraph 18 of the UN Norms: ‘In connection with determining damages, in regard to criminal sanctions, and in all other respects, these Norms shall be applied by national courts and/or international tribunals, pursuant to national and international law’. By taking this approach, the UN Norms envisage a binding enforcement mechanism, centred on national courts and/or international tribunals, which offers directly effective rights of reparation for the individuals or groups affected as a consequence of a violation of the instrument. This presupposes a legally binding document that is effective within the national laws of the UN member states that adopt it. Such an effect could not be presumed from a non-binding declaration or recommendation of the UN, neither of which normally have the force of positive international law nor as sources of directly effective individual rights that can be invoked before national tribunals. Arguably, the UN Norms, as an instrument that contains many binding norms of international human rights law, may be enforceable by that fact alone. However, as argued above, not all the norms contained in its provisions are uncontroversial in this respect. Some of the rights that are included may not have such a legal status. 216 Therefore, if the reparation mechanism is to be real and effective, it requires the adoption of an instrument that has the force of law within the legal orders of the signatory states, and which recognizes the legal effectiveness of all the norms that it contains. This would need to be something akin to an international convention, which contains an obligation to implement its contents and enforcement mechanisms into the municipal law of the signatory state. This is a far cry from a ‘soft law’ instrument of the kind usually adopted in this field. Equally, it is unlikely that a UN framework could enforce binding rules and norms relating to the activities of TNCs. 217 In the light of these matters, there is a significant need for further clarification as to what legal form this enforcement mechanism will take and on how it is expected to work. However, given the uncertainty surrounding the status and future importance of the UN Norms in the work of the UN Human Rights Council and of the Special Representative appointed to oversee the issue of human rights and TNCs, a clear answer to this question is unlikely in the near future. 218

end p.680

Concluding Remarks

The present chapter has sought to offer an overview of the substantive content and monitoring and enforcement issues arising out of calls for greater ICSR for MNEs and other business entities. As such, it has described what may be fairly called a ‘work in progress’ rather than an established and fully functioning system of international regulation of private corporate conduct. This leads to a final issue relevant to the purposes of this volume. What is the impact of these developments for the future evolution of IIAs and BITs in particular?

At present, there are few signs that host country responsibilities will be balanced out by the introduction of corporate responsibilities in such agreements. Indeed, there are a number of major obstacles that need to be cleared for such a development to occur. First, and most obviously, it is hard to see where the political will for such a development will come from. The major capital-exporting states are happy to retain the first generation BITs, with their exclusive emphasis on investor and investment protection, which serve well the need for protection and promotion of investments in the manner discussed in Chapter 1 of this work. Although there is some evidence of a ‘backlash’ against BITs among some host states, such as for example the decision of Bolivia to leave the ICSID Convention, this is as yet not a significant trend. 219 Equally, newer bilateral and regional agreements are taking an even more strongly protective approach, with commitments to pre-entry protection and internationalized dispute settlement becoming more frequent, but with little to offer in relation to development concerns. 220 Thirdly, the introduction of ICSR responsibilities could create major drafting and negotiating problems, including the choice of which standards to include, how detailed those standards should be, whether they could be couched in mandatory or merely hortatory language, and whether they would represent an international minimum standard or something more.

In this regard, the relationship between treaty-based standards and national regulatory standards would need to be addressed. In particular, the issue of whether development concerns should allow for a lower standard of commitment to ICSR norms on the part of the host country would need to be considered, as would the

end p.681

need for technical assistance and the provision of resources to the least developed countries so that they could meet higher CSR standards. In addition, the effect of international standards on national regulatory environments would need to be clarified. Should the signatory country only have to comply with international minimum standards, this could encourage a lowering of higher national standards to the international base-line. It may, perversely, reduce national CSR obligations rather than raise them. In addition, where, as in the ILO Declaration, the national treatment approach is followed, a very wide discretion may be given to the investor not to apply best practices but only local practices, which may be inadequate to ensure compliance with ‘best practice’ standards. Thus, clear duties of compliance with international standards will be required in the case of countries where lower standards apply, and international agreements would need to build in commitments not to lower existing standards as per the types of clauses noted above in relation to labour and environmental standards. Furthermore, progressive improvement of standards would need to be catered for by way of periodic reviews.

Notwithstanding these obstacles, the eventual inclusion of certain commitments to ICSR in future IIAs cannot be ruled out. As noted in Chapter 1, the experience of the MAI shows that engaged NGOs, and other civil society groups and affected communities, may create an atmosphere in which it would be hard to ignore calls for greater corporate accountability and increasing recognition of emerging international standards of good corporate practice in key issue areas. The continued legitimacy of IIAs may require the eventual recognition of the responsibilities of investors as well as host states, not to mention home countries as well. 221 Of the various areas that could come within the rubric of ICSR, the four areas of labour rights, human rights, environmental protection and anti-corruption seem to offer the first major contributions to the substantive content of ICSR. They are already being ‘codified’ in non-binding and, in certain cases, binding international instruments. At the very least, future IIAs may need to ensure that they refer to the major instruments in these areas as a source of important standards by which the balance of rights and obligations of investors can be interpreted.

That such an interpretation may be increasingly called for cannot be doubted. Indeed, it may be an integral issue in many investor-state disputes. For example, where the investor claims the breach of an IIA protective standard by the respondent state, the latter may respond by referring to the investors' corporate conduct as a justification for its regulatory reaction which leads to the investor's claim. In such cases, some arbitral tribunals do take into account investor conduct where this is deemed relevant in determining the nature of the respondent state's actions, or where the actual cause of the loss to the investor is in issue. 222 Arguments based on breaches

end p.682

of ICSR standards may well become a part of this litigation process, especially if reforms concerning greater openness and accountability of international arbitration come about, permitting a wider group of amici curiae to make themselves heard. Indeed, one may conclude by saying that the future may require not only transparency and accountability of the host country but also that of the investor, and of the dispute settlement system charged with the resolution of differences between them. Otherwise, that system itself may prove to be the greatest brake on the development of a true international law of ICSR.

There is a real danger that arbitral tribunals, seeing themselves bound by the limits of the treaties upon which their jurisdiction is based, will feel understandably compelled to give a very narrow interpretation of the nature and scope of IIA obligations to the exclusion of interests other than those of the investor as an alleged victim of regulatory malpractice. If they do not offer a creative interpretation of IIA obligations, which allows for the balancing of investor expectations with those of the wider society in which they operate and which, as argued above, must act as a formative influence on investor expectations, then arbitral tribunals risk being perceived as upholding an increasingly unjust and biased system of existing pro-investor BITs and other IIAs. It may be said that this creative approach is itself an illegitimate abuse of arbitral power. Arbitral bodies are not the right place to determine major issues of economic and social policy through creative interpretation of treaty texts. However, it would be na?ve to believe that, by emphasizing only a narrow, asocial, perception of investors' legitimate expectations concentrated on the conduct of the host country alone, arbitral tribunals are not already making such major policy determinations. We see at present arbitral tribunals taking on functions which, in a truly accountable system of governance, would only be undertaken by transparent and publicly accountable courts, whether national or international. 223 The countries that signed up to BITs appear not to have understood the actual power of the international investor-state tribunals to which they gave their consent until the current wave of arbitrations came about. However, unless and until an international investment court is established and we continue to be faced with this imperfect system, it would be the lesser of two evils if arbitral tribunals were more generally able and willing to take account of corporate conduct where it is of relevance in determining the legitimacy or otherwise of governmental action. Failure to do so may well result in strong ‘backlash’ and an end to BITs as such, a result that may not necessarily be in the interests of the countries and communities in which foreign investors operate. In particular, such an outcome might prevent an evolution of existing BITs

end p.683

and other IIAs into a new generation of more development— and socially friendly arrangements, responsive not only to the needs of investors for protection against maladministration, but also to the calls for greater responsibility among investors and home countries for the proper conduct of investments.

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Zimmerman, James M, ‘International Dimension of US Fair Employment Laws: Protection or Interference?’, 131 Int'l Lab Rev 217 (1992) Footnotes ?This chapter relies heavily on chapters 12–14 of Muchlinski, Multinational Enterprises and the Law (Oxford, Oxford University Press, 2nd edn, 2007). The author would like to express his thanks to Oxford University Press for permission to adapt the material in these chapters. Full references and acknowledgements are provided. 1 See UNCTAD, World Investment Report 2003 (New York and Geneva, United Nations, 2003) ch VI. 2 See further M Sornarajah, The International Law on Foreign Investment (Cambridge, Cambridge University Press, 2nd edn, 2004) ch 1. 3 See eg Reinisch, ‘Expropriation’ ch 11 above or Ziegler and Gratton, ‘Investment Insurance’, Ch 13 above. See further Sornarajah, above n 2 at ch 2 and Peter T Muchlinski, Multinational Enterprises and the Law (Oxford, Oxford University Press, 2nd edn, 2007) at 577–8. 4 See Kotera, ‘Regulatory Transparency’, ch 16 above. 5 But one that may be resurgent as recent events in Bolivia, Venezuela, and Russia in the natural resources sectors suggest. On which see further UNCTAD, World Investment Report 2006 (New York and Geneva, United Nations, 2006) at 23 and see too Muchlinski, above n 3 at 577 n 4 for further sources. 6 See Reinisch, above n 3 and see Grierson-Weiler and Laird, ‘Standards of Treatment’, ch 8 above. 7Grierson-Weiler and Laird, ibid . 8 There is such a thing as ‘society’ even if one tries to sidestep this reality by referring only to individuals and families, which, incidentally, is a description of a society! This reference to the famous dictum of Margaret Thatcher should not be taken as a criticism of her views, but simply as pointing out the obvious fact that she clearly held a concept of what a society was, but she avoided reference to organized regulatory actions by the state—something she was ideologically opposed to—by way of focusing on the disaggregated components of that society. This is an example of trying to avoid identifying a larger whole by reference to its components, ie it is tantamount to saying: ‘There is no such thing as a forest, only trees and shrubs’. Does the conclusion follow that forests do not exist? 9 See further Christopher Bartlett, Sumantra Ghoshal, and Paul Beamish, Transnational Management, Text Cases and Readings in Cross Border Management (Boston, McGraw-Hill, International Edition, 5th edn, 2008) at 94–5 citing Shell and BP's commitments to sustainable development as an example of how multinational enterprises might seek to articulate the benefits they bring to less developed countries. 10 See in this connection Methanex v United States , Award of 3 August 2005 available at <http://www.state.gov/documents/organization/51052.pdf> or 44 ILM 1345 (2005) where the tribunal held that investors should be aware of the regulatory environment and the possibility of regulatory change in the absence of assurances to the contrary by the host country. In this case, the issue concerned environmental regulation. Such regulation can help to stimulate positive environmental performance from firms and to enhance their competitive position in this area. That in turn may result in calls for regulation not for deregulation. 11 See David Korten, When Corporations Rule the World (West Hartford, Conn, Kumarian Press, 1995) ch 11 ‘Marketing the World’ and Naomi Klein, No Logo (London, Flamingo Harper-Collins, 2000). For a more alarmist account see Noreena Hertz, The Silent Takeover: Global Capitalism and the Death of Democracy (London, Random House, Arrow Books, 2002). 12 See further Thomas Donaldson, The Ethics of International Business (Oxford, Oxford University Press, UK paperback edn, 1992) and Peter Muchlinski, ‘International Business Regulation: An Ethical Discourse in the Making?’ in Tom Campbell and Seumas Miller (eds), Human Rights and Moral Responsibilities of Corporate and Public Sector Organisations (The Hague, Kluwer Law International, 2004) 81. See too Muchlinski, above n 3 at ch 13. 13 See from a neo-liberal perspective David Henderson, Misguided Virtue: False Notions of Corporate Social Responsibility (Wellington, New Zealand Business Roundtable, 2001). For a critical development perspective, see Michael Blowfield and Jedrzej George Frynas (eds), ‘Critical Perspectives on Corporate Social Responsibility’, 81(3) International Affairs (May 2005). 14 On the issue of the abolition of slavery as an early campaign for commercial social responsibility (used to denote the fact that most slave owners were individual plantation owners not companies), see further the history of what may be the world’s first campaigning international human rights NGO, Anti-Slavery International (Originally the Anti-Slavery Society) available at <http://www.antislavery.org/homepage/antislavery/history.pdf>. The fact that this campaign led to the eventual outlawing of slavery and, indirectly, to its later condemnation as an international crime, points to the possibility for international law to reform, by regulation, corporate and other business practices that are seen as anti-social or criminal. 15 See further Jennifer A Zerk, Multinationals and Corporate Social Responsibility (Cambridge, Cambridge University Press, 2006) at 15–29. 16 See further Zerk, above n 15 at 18–21 and P Muchlinski, ‘The Rise and Fall of the Multilateral Agreement on Investment: Where Now?’ 34 Int’l Law 1033 (2000). 17 See the World Health Organization, International Code on the Marketing of Breast Milk Substitutes (Geneva, WHO, 1981) at <http://www.who.int/nutrition/publications/code_english.pdf>. See further Baby Milk Action website at <http://www.babymilkaction.org/pages/boycott.html> and the International Baby Food Action Network at <http://www.ibfan.org/site2005/Pages/index2.php?iui=1>. 18 See further the International Campaign for Justice in Bhopal at <http://www.bhopal.net/index1.html>. 19 See further the highly informative Business and Human Rights Resource Centre website at <http://www.business-humanrights.org/Home>. 20 This section is adapted from Muchlinski above n 3 at 102–4. 21 For a discussion of the concept of social responsibility and its implications for international standard setting and investment protection, see UNCTAD, The Social Responsibility of Transnational Corporations (New York and Geneva, United Nations, 1999); UNCTAD, World Investment Report 1999 (New York and Geneva, United Nations, 1999) ch XII; UNCTAD, World Investment Report 2003, above n 5. See too UNCTAD, Social Responsibility, Series on Issues in International Investment Agreements (New York and Geneva, United Nations, 2001), all available online at <http://www.unctad.org/iia>. 22 For instance, the Draft United Nations Code of Conduct on Transnational Corporations lists the obligations of transnational corporations (TNCs) across a wide range of issues dealing with such matters as respect for the sovereignty of the host state and its political system, respect for human rights, abstention from corrupt practices, refraining from using the economic power of the TNC in a manner damaging to the economic well-being of the countries in which a firm operates, including observance of tax and anti-monopoly laws, and ensuring full disclosure concerning the activities of the firm. See UNCTAD, International Investment Agreements: A Compendium (New York and Geneva, United Nations, 1996) Vol I 161. Indeed Zerk asserts, ‘Many writers have complained that [Corporate Social Responsibility] CSR, as a concept, is confusing and often ill defined. This is partly because definitions are often presented with an agenda in mind’. Zerk, above n 15 at 29. Zerk goes on to identify pro-business definitions that stress a voluntary approach to corporate action, contrasting this with mandatory regulation, while NGOs tend to favour a mandatory definition which focuses on regulation. She also distinguishes between CSR and corporate governance, on which see text below at nn 25–6. 23 The remaining chapters include: ‘Disclosure, Employment and Industrial Relations, Environment, Combating Bribery, Consumer Interests, Science and Technology, Competition and Taxation’. 24OECD Guidelines for Multinational Enterprises, 27 June 2000, pp 3–4. <http://www.oecd.org/dataoecd/56/36/1922428.pdf>. 25 See further <http://www.unglobalcompact.org>. These are: The Universal Declaration of Human Rights; The International Labour Organization’s Declaration on Fundamental Principles and Rights at Work; The Rio Declaration on Environment and Development; and The United Nations Convention Against Corruption. The Global Compact asks companies to embrace, support, and enact, within their sphere of influence, a set of core values in the areas of human rights, labour standards, the environment, and anti-corruption: ‘Human Rights: Principle 1: Businesses should support and respect the protection of internationally proclaimed human rights; and Principle 2: make sure that they are not complicit in human rights abuses. Labour Standards: Principle 3: Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining; Principle 4: the elimination of all forms of forced and compulsory labour; Principle 5: the effective abolition of child labour; and Principle 6: the elimination of discrimination in respect of employment and occupation. Environment: Principle 7: Businesses should support a precautionary approach to environmental challenges; Principle 8: undertake initiatives to promote greater environmental responsibility; and Principle 9: encourage the development and diffusion of environmentally friendly technologies. Anti-Corruption: Principle 10: Businesses should work against all forms of corruption, including extortion and bribery.’ 26 See further Muchlinski, above n 3 at 354 ff on European rules on worker participation in MNEs. 27 See further Report of the Special Representative of the Secretary-General on the issue of human rights and transnational corporations and other business enterprises, Human Rights Impact Assessments—Resolving Key Methodological Questions (UN Doc A/HRC/4/74, 5 February 2007). 28 See further on this concept, UNCTAD, World Investment Report 2003, above n 1 at 164–7. According to Zerk, ‘Most commentators regard “corporate citizenship” as similar to CSR, although it is sometimes mistaken to cover issues such as philanthropy as well’. Above n 15 at 32 n 110. 29 This section draws extensively on Muchlinski, above n 3 at ch 12. 30 See UNCTAD, Employment, Series on Issues in International Investment Agreements (New York and Geneva, United Nations, 2000) at 3. There are now 185 ILO Conventions. The most important are the five Conventions that cover the contents of the 1998 Declaration, below n 34: Conventions No. 87, on Freedom of Association and the Protection of the Right to Organize, No. 98, on the Right to Organize and Collective Bargaining, No. 29 on Forced Labour, No. 105 on Abolition of Forced Labour, No. 138 on Minimum Age, No. 182 on Worst Forms of Child Labour, No. 100 on Equal Remuneration, and No. 111 on Discrimination in Employment. The ILO Conventions are available at <http://www.ilo.org/ilolex/english/convdisp2.htm>. For background on the ILO see Jean-Michel Servais, International Labour Law (Alphen an den Rijn, Kluwer Law International, 2005); Bob Hepple, Labour Laws and Global Trade (Oxford, Hart Publishing, 2005) ch 2; Damian Brown and Aileen McColgan, ‘UK Employment Law and the International Labour Organisation: The Spirit of Cooperation?’ 21 ILJ 265 (1992); SA Ivanov, ‘The International Labour Organisation: Control over Application of the Conventions and Recommendations on Labour’, in WE Butler (ed), Control over Compliance with International Law (Dordrecht, Martinus Nijhoff, 1991) 153. 31 By ILO Constitution Art 3(1), member states are entitled to send four representatives: two governmental representatives and, by agreement, one each from the most representative employers' and trade union organizations in the country: <http://www.ilo.org/public/english/about/iloconst.htm#a3p5>. 32 See G Hamilton, The Control of Multinationals: What Future for International Codes of Conduct in the 1980s? IRM Multinational Reports No 2 (Chichester, IRM/Wiley, 1984) 9–10; J Robinson, Multinationals and Political Control (Aldershot, Gower, 1983) 171-3; and see the ILO website at <http://www.ilo.org/public/english/employment/multi/history.htm>. 33Adopted 16 November 1977: 17 ILM 422 (1978), revised version adopted 17 November 2000: 41 ILM 186 (2002) and 28 March 2006, available at <http://www.ilo.org/public/english/employment/multi/download/declaration2006.pdf>. For comment, see: Gunter, H, ‘The ILO Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy’, The CTC Reporter, No. 12 (summer 1982) 27–9 and Bob Hepple, ‘New Approaches to International Labour Regulation’ 26 ILJ 353 (1997). 34ILO Declaration on Fundamental Principles and Rights at Work, 86th Session, Geneva, June 1998: 37 ILM 1233 (1998) or <http://www.ilo.org/dyn/declaris/DECLARATIONWEB.static_ jump?var_language=EN&var_pagename=DECLARATIONTEXT>. 35 Ibid. 36ILO Subcommittee on Multinational Enterprises, InFocus Initiative on Corporate Social Responsibility (CSR) GB.295/MNE/2/1, 295th Session Governing Body Geneva, March 2006, available at <http://www.ilo.org/public/english/standards/relm/gb/docs/gb295/pdf/mne-2-1.pdf> para 1. 37 See Zerk, above n 22. 38 See ILO, above n 36 at para 3. By para 5 of the Tripartite Declaration, above n 33, ‘The principles in the MNE Declaration are intended to guide governments, employers’ and workers' organizations and multinational enterprises in taking such measures and actions and adopting such social policies, including those based on the principles laid down in the Constitution and the relevant Conventions and Recommendations of the ILO, as would further social progress’. 39 See ILO website at <http://www.ilo.org/public/english/employment/multi/corporate/index.htm>. 40 Ibid. 41 These fundamental rights are echoed in the OECD Employment Guideline, see OECD Guidelines on Multinational Enterprises, above n 22: ‘IV Employment and Industrial Relations’. See further, for a comparative analysis with the ILO Declaration, Muchlinski, above n 29. 42ILO Declaration, above n 33 at para 21 and ILO Convention No 111 and Recommendation No 111 concerning Discrimination in Respect of Employment and Occupation and ILO Convention No 100 and Recommendation No 90 concerning Equal Remuneration for Men and Women Workers for Work of Equal Value. 43ILO Declaration, above n 33 at para 22. 44 Ibid at para 23. 45 Ibid at para 24. 46 Ibid at para 25. 47 Ibid . 48 Ibid at para 27 and Recommendation No. 119 concerning Termination of Employment at the Initiative of the Employer. 49ILO Declaration, above n 33 at para 28. 50 Ibid at para 26. 51ILO Declaration, ibid at para 29 and ILO Convention No. 142 and Recommendation No. 150 concerning Vocational Guidance and Vocational Training in the Development of Human Resources. 52ILO Declaration, above n 33 at para 30. 53 Ibid at para 31. 54 Ibid at para 33. 55 Ibid at para 34 and Recommendation No 116 concerning Reduction of Hours of Work. 56 Ibid. 57 Ibid and ILO Convention No 110 and Recommendation No 110 concerning Conditions of Employment of Plantation Workers; Recommendation No 115 concerning Workers' Housing; Recommendation No 69 concerning Medical Care; ILO Convention No 130 and Recommendation No 134 concerning Medical Care and Sickness. 58ILO Declaration, above n 33 at para 35. 59ILO Convention Concerning the Prohibition and Immediate Elimination of the Worst Forms of Child Labour, 17 June, 1999: 38 ILM 1207 (1999) or <http://www.ilo.org/ilolex/english/convdisp2.htm>; ILO Recommendation Concerning the Prohibition and Immediate Elimination of the Worst Forms of Child Labour, 17 June 1999: 38 ILM 1211 (1999) or ILO website at <http://www.ilo.org/ilolex/english/recdisp2.htm>. 60ILO Declaration, above n 33 at para 36. 61ILO Declaration, ibid at para 37, which specifically refers to Conventions No. 119 on Guarding of Machinery, No. 115 on Ionizing Radiation, No. 136 on Benzene, No. 139 on Occupational Cancer. See too the further Conventions and associated Recommendations listed in Addendum I to the ILO Declaration, most of which apply to para 37. Para 39 adds that the ILO codes of practice and guides in the current list of publications on occupational health and safety should also be taken into account. See further Catalogue of ILO Publications on Occupational Safety and Health, available at <http://www.ilo.org/public/english/protection/safework/publicat/iloshcat/index.htm>. 62ILO Declaration, above n 33 at para 38. 63 Ibid. 64 Ibid. 65 Ibid at para 39. 66 Ibid at para 40. 67 Ibid. 68 Ibid at para 41. 69 See, for example, the UK's apparent disregard for ILO Convention No. 87 on Freedom of Association and for the subsequent ILO Committee of Experts' Report of 1992 criticizing the UK on this matter: Brown and McColgan above n 30, and see further Keith Ewing, Britain and the ILO (London, Institute of Employment Rights, 2nd edn, 1994). The UK strike laws remain inconsistent with ILO standards as the Labour government of 1997 did not repeal the Conservative reforms: Hepple, above n 30 at 38. On the other hand, past complaints against Malaysia appear to have had more effect: see A Wangel, ‘The ILO and Protection of Trade Union Rights: The Electronics Industry in Malaysia’, in R Southall (ed), Trade Unions and the New Industrialisation of the Third World (London, Zed Books, 1988) 287. 70ILO Declaration, above n 33 at para 42, and ILO Convention No. 87 Art 2, Convention No. 98 Art 1(1). The establishment, functioning, and administration of such organizations should not be interfered with by other organizations whether representing MNEs or workers in their employment: ILO Declaration at para 43. 71ILO Declaration, ibid at para 49. 72 Ibid at para 50. 73 Ibid at para 58 and Recommendation No. 130 concerning the Examination of Grievances within the Undertaking with a View to their Settlement. 74ILO Declaration, above n 33. 75 Ibid at para 59. 76 See ILO website at <http://www.ilo.org/public/english/employment/multi/dispute.htm> and see too Jacques Lemoine, ‘The ILO Tripartite Declaration: Ten Years After’, The CTC Reporter No. 25, (spring 1988) 22. 77 See Procedure for Examination of Disputes Concerning the Application of the Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy by Means of Interpretation of its Provisions, adopted by the Governing Body of the International Labour Office at its 232nd Session, Geneva, March 1986, appended to the ILO Tripartite Declaration, above n 33. 78 For a summary of the main interpretations see, for cases: <http://www.ilo.org/public/english/employment/multi/case.htm> and for paragraphs: <http://www.ilo.org/public/english/employment/multi/paragraph.htm>. 79 ILO Doc.GB.232/12/15 February-March 1985, cited in Lemoine, above n 76 at 26. 80ILO Declaration, above n 33 at para 8. 81 See eg US-Uruguay BIT 2004 Arts 12, 13, 44 ILM 268 (2005) at 217, also available at <http://www.ustr.gov/assets/World_Regions?Americas/South_America/asset_upload_file440_6728.pdf>. These provisions assert that it is inappropriate for host countries to seek investment through the lowering of environmental or labour standards. 82ILO Declaration, above n 33 at para 9. 83 Ibid at para 10. 84 Ibid at para 12. 85 See James M Zimmerman, ‘International Dimension of US Fair Employment Laws: Protection or Interference?’ 131 Int'l Lab Rev 217 (1992). 86 This section draws on Muchlinski, above n 3 at ch 13. 87 On the relationship between globalization, business, and human rights, see Robert McCorquodale, ‘Human Rights and Global Business’, in Stephen Bottomley and David Kinley (eds), Commercial Law and Human Rights (Aldershot, Ashgate/Dartmouth Publishing, 2002) 89. 88 See further Peter T Muchlinski, ‘Human Rights and Multinationals—Is There a Problem?’ 77 International Affairs 31 at 33–5 (2001); UN Sub-commission on Human Rights, Working Group on the Working Methods and Activities of Transnational Corporations, Human Rights Principles and Responsibilities for Transnational Corporations and Other Business Enterprises: Introduction, UN Doc E/CN.4/Sub.2/2002/WG.2/WP.1/Add.1. (hereinafter Introduction) at 2–4. See too International Council on Human Rights Policy, Beyond Voluntarism: Human Rights and the Developing International Obligations of Companies (Versoix, 2002) at 1–2. 89 On the latter see Sheldon Leader, ‘Human Rights Risks and New Strategies for Global Investment’ 9 JIEL 657 (2006) and Amnesty International, Human Rights on the Line: The Baku-Tiblisi-Ceyhan Pipeline Project (London, Amnesty International UK, 2003) at <http://www.amnesty.org.uk/uploads/documents/doc_14538.pdf> and Contracting Out of Human Rights: The Chad-Cameroon Pipeline Project (London, Amnesty International UK, 2005) at <http://www.amnesty.org.uk/uploads/documents/doc_16423.pdf>. See further, for examples and analysis, Rory Sullivan (ed), Business and Human Rights: Dilemmas and Solutions (Sheffield, Greenleaf Publishing, 2003) parts 2–4; International Network for Economic, Social & Cultural Rights (ESCR-NET) Corporate Accountability Working Group Joint NGO Submission, Consultation on Human Rights and the Extractive Industry (Geneva, 9 December 2005) at <http://www.earthrights.org/files/Reports/escrnet9_dec_05.pdf>. Earthrights International, Earth Rights Abuses by Corporations in Burma Collective Summary and Recommendations (Submission to the Special Representative on the Issue of Human Rights and Transnational Corporations and Other Business Enterprises, 10 November 2005) at <http://www.earthrights.org/files/Reports/eri_submission.pdf>. 90 See further Muchlinski, above n 88 at 35–44. See further SR Ratner, ‘Corporations and Human Rights: A Theory of Legal Responsibility’ 111 Yale LJ 443 (2001); Phillip Alston (ed), Non-State Actors and Human Rights (Oxford, Oxford University Press, 2005) part III ‘Corporations’; Andrew Clapham, Human Rights Obligations of Non-State Actors (Oxford, Oxford University Press, 2006) ch 6. 91 See eg Simon Zadek and Maya Forstater, ‘Making Civil Regulation Work’, in Michael Addo (ed), Human Rights Standards and the Responsibility of Transnational Corporations (The Hague, Kluwer Law International, 1999) 69 who argue that consumer boycotts have little effect on share prices. However, threats of litigation do have an adverse effect on firms' share valuations, especially where very large claims are involved. 92 See further UN Special Representative, above n 27. The best example of such a reaction is that of Shell Oil, which, in response to alleged complicity in human rights abuses in the Niger Delta region, revised its social responsibility policy and included human rights impact assessment in its business planning. See further Royal Dutch Shell, Shell General Business Principles available at <http://www.shell.com/static/envirosoc-en/downloads/making_it_happen/our_commitments_and_standards/sgbp/sgbp.pdf>. see too Business Leaders Initiative on Human Rights, Human Rights Matrix at <http://www.blihr.org>. 93 See further Interim Report of the Special Representative of the Secretary-General on the Issue of Human Rights and Transnational Corporations and Other Business Enterprises, UN Doc E/CN.4/2006/97 (2006) at <http://www1.umn.edu/humanrts/business/RuggieReport2006.html> at paras 60–5. 94 Zerk, for example, suggests, ‘It is quite possible that new customary obligations could emerge from current international activities on CSR—for both multinationals and states. However, before new customary obligations can be said to exist, there needs to be much more evidence of real commitment from states on CSR-related principles.’ Above n 15 at 299–300. Zerk adds that, ‘While it is important not to confuse CSR and human rights, it is likely that any direct obligations for multinationals will emerge primarily from human rights law’. Ibid at 310. The UN Special Representative cites Zerk's book to support the proposition that, ‘preliminary research has not identified the emergence of uniform and consistent State practice establishing corporate responsibilities under customary international law’. Report of the Special Representative of the Secretary-General on the issue of human rights and transnational corporations and other business enterprises, John Ruggie, Business and Human Rights: Mapping International Standards of Responsibility and Accountability for Corporate Acts, UN Doc A/HRC/4/35, 19 February 2007, available at <http://www.business-humanrights.org/Documents/SRSG-report-Human-Rights-Council-19-Feb-2007.pdf> at para 34. 95 See eg Zerk, above n 15 at 76–93; David Kinley and Junko Tadaki, ‘From Talk to Walk: The Emergence of Human Rights Responsibilities for Corporations at International Law’ 44 Va J Int'l L 931 (2004); Nicola Jagers, Corporate Human Rights Obligations: In Search of Accountability (Antwerp, Intersentia, 2002); Beth Stephens, ‘The Amorality of Profit: Transnational Corporations and Human Rights’ 20 Berkeley J Int'l L 45 (2002); Sarah Joseph, ‘An Overview of the Human Rights Accountability of Multinational Enterprises’, in Menno Kamminga and Sam Zia-Zarifi (eds), Liability of Multinational Corporations under International Law (The Hague, Kluwer Law International, 2000) 75 and Sarah Joseph, Corporations and Transnational Human Rights Litigation (Oxford, Hart Publishing, 2004) (hereinafter Joseph 2004); Chris Avery, ‘Business and Human Rights in a Time of Change’, in Kamminga and Zia-Zarifi above 17; Menno Kamminga, ‘Holding Multinational Corporations Accountable for Human Rights Abuses: A Challenge for the EC’, in Philip Alston (ed), The EU and Human Rights (Oxford, Oxford University Press, 1999) 558; Amnesty International and Pax Christi International Dutch Sections, Multinational Enterprises and Human Rights (Utrecht, November 1998). 96Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with Regard to Human Rights (hereinafter UN Norms). (UN Doc E/CN.4/Sub.2/2003/12/Rev.2(2003) 13 August 2003, available at <http://www1.umn.edu/humanrts/links/norms-Aug2003.html>, or <http://www.business-humanrights.org>. See too Commentary on the Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with Regard to Human Rights (hereinafter Commentary) (UN Doc E/CN.4/Sub.2/2003/38.Rev.2(2003) available at <http://www1.umn.edu/humanrts/links/commentary-Aug2003.html> or <http://www.business-humanrights.org>. Other relevant documents are available at <http://www1.umn.edu/humanrts/links/omig.html>. See further David Weissbrodt and Muria Kruger, ‘Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with Regard to Human Rights’ 97 AJIL 901 (2003); David Weissbrodt, ‘The Beginning of a Sessional Working Group on Transnational Corporations within the UN Sub-Commission on Prevention of Discrimination and Protection of Minorities’ in Kamminga and Zia-Zarifi, above n 95 at 119–38; Amnesty International, The UN Human Rights Norms for Business: Towards Legal Accountability (London, Amnesty International, 2004); Rebecca MM Wallace and Olga Martin-Ortega, ‘The UN Norms: A First Step to Universal Regulation of Transnational Corporations' Responsibilities for Human Rights?’ 26 Dublin Univ LJ 304 (2004); Larry Cata Backer, ‘Multinational Corporations, Transnational Law: The United Nations Norms and the Responsibilities of Transnational Corporations as a Harbinger of Corporate Social Responsibility in International Law’ 37 Col HRLR 287 (2006). 97 See the discussion in Kinley and Tadaki, above n 95 at 948–9 and see UN Commission on Human Rights Report on the Sixtieth Session Resolution 2004/116 (UN Doc E/CN.4/2004/L.11/Add.7 22 April 2004 at 81–2) at point (c). In June 2006, the Commission was replaced by a new Human Rights Council: UNGA Resolution 60/251 ‘Human Rights Council’ 3 April 2006 at <http://www.ohchr.org/english/bodies/hrcouncil/docs/A.RES.60.251_En.pdf>. 98 On which see further John Braithwaite and Peter Drahos, Global Business Regulation (Cambridge, Cambridge University Press, 2000) at 539–43. 99 eg, the Business Leaders Initiative on Human Rights (BLIHR), Human Rights Matrix, above n 92, takes the UN Norms as part of its basic framework. The BLIHR has expressly welcomed the UN Norms in this regard: see BLIHR Report 2005, Foreword by Mary Robinson at 1–2, available at <http://www.blihr.org>; BLIHR Report 2006 at 18: ‘In our experience through these individual projects and through learning from a variety of stakeholders, there is much in the content of the draft Norms that is of practical use. They represent an example of how some of the key aspects of international human rights law might be translated into business contexts’. (See <http://www.blihr.org>.) 100UN Norms, above n 96 at para 20. 101 Cf eg the definition in the OECD Guidelines on Multinational Enterprises, above n 24: ‘3. A precise definition of multinational enterprises is not required for the purposes of the Guidelines. These usually comprise companies or other entities established in more than one country and so linked that they may co-ordinate their operations in various ways. While one or more of these entities may be able to exercise a significant influence over the activities of others, their degree of autonomy within the enterprise may vary widely from one multinational enterprise to another. Ownership may be private, state or mixed.’ 102UN Norms, above n 96 at para 21. Note the circuitous drafting which replicates the notion of ‘transnational corporation’ as a part of ‘other business entity’. 103 See Kinley and Tadaki, above n 95 at 962–6 and see the Report of the UN Commission for Human Rights, above n 97 at paras 37–9. 104UN Norms, above n 96 s B para 2. 105 Ibid s C para 3. 106 Ibid s D para 5. 107 Ibid s D para 6. 108 Ibid s D para 9. 109 Ibid s E para 12. 110ILO Tripartite Declaration on Multinational Enterprises and Social Policy, above n 33. 111UN Norms, above n 96 s D para 7. 112 Ibid at para 8. 113 Ibid at para 9. 114 Ibid s E para 10. These include transparency, accountability, and prohibition of corruption. 115 Ibid at para 12. 116 Ibid Preamble, Recital 13. 117 Ibid s E para 12. 118 Ibid s A para 1 and s E para 10 as explained in the Commentary at s E para 10 comment (c), above n 96. The UN Norms have dropped any explicit reference to self-determination, which was present in earlier drafts: see Draft Universal Human Rights Guidelines for Companies (UN Doc E/CN.4/Sub.2/2001/WG.2/WP.1/Add.I (2001)) s E para 11. This reference was dropped in 2002. On the issue of indigenous peoples rights and TNC obligations, see further the discussion in Kinley and Tadaki, above n 95 at 987–93 and Jagers, above n 95 at 157–60. 119UN Norms, above n 96 s C para 4. See further Amnesty International UK Business Group, Human Rights Guidelines for Companies (London, Amnesty International, 1998) at 8-11. 120 Commentary, above n 96 s C para 3 comments (a)–(d). 121UN Norms, above n 96 s E para 10. This principle is echoed in the OECD Guidelines and the ILO Tripartite Declaration. 122 Ibid s H para 19. 123 On which, see Draft Universal Human Rights Guidelines for Companies with Source Materials, UN Doc E/CN.4/Sub.2/2001/WG.2/WP.1/Add.2 (2001) available on <http://www1.umn.edu/humanrts/links/omig.html>. See too ch 1 above at 16–19. 124UN Norms, above n 96 s F para 13. 125 Ibid s E para 11. 126 Ibid s G para 14. 127 See generally M Fitzmaurice, ‘The Contribution of Environmental Law to the Development of Modern International Law’, in J Makarczyk (ed), The Theory of International Law at the Threshold of the 21st Century (The Hague, Kluwer Law International, 1996) 909 at 909–14. 128 On the issue of corruption and bribery, see further Raeschke-Kessler and Gottwald, ‘Corruption’, ch 15 above; UNCTAD, Illicit Payments, Series on Issues in International Investment Agreements (New York and Geneva, United Nations, 2001), S Rose-Ackerman, ‘Corruption and the global Corporation: Ethical Obligations and Workable Strategies’, in Michael Likosky (ed), Transnational Legal Processes: Globalisation and Power Disparities (London, Butterworths Lexis-Nexis, 2002) 148. The bribery of foreign officials was made a crime under the UK Anti-Terrorism, Crime and Security Act 2001 (2001 Chapter 24) ss 108–10 at <http://www.opsi.gov.uk/acts/en2001/01en24-d.htm>. 129 See further Kinley and Tadaki, above n 95 at 966–93; Jagers, above n 95 at 51–74; Janet Dine, Companies, International Trade and Human Rights (Cambridge, Cambridge University Press, 2005) at 178–87. 130 Kinley and Tadaki, above n 95 at 967. 131 This section draws on Muchlinski, above n 3 at ch 14. 132 See UNCTAD, Environment, Series on Issues in International Investment Agreements (New York and Geneva, United Nations, 2001) at 9–10. 133 See further Muchlinski, above n 3 at 546–56. 134 See UN Transnational Corporations and Management Division (TCMD), International Environmental Law: Emerging Trends and Implications for Transnational Corporations (New York, United Nations, 1993). See further, for a survey of the main MEAs, Patricia Birnie and Alan Boyle, International Law and the Environment (Oxford, Oxford University Press, 2nd edn, 2002) and Philippe Sands, Principles of International Environmental Law (Cambridge, Cambridge University Press, 2nd edn, 2003). 135 See generally Ian H Rowlands, ‘Transnational Corporations and Global Environmental Politics’, in Daphne Josselin and William Wallace (eds), Non-state Actors in World Politics (Basingstoke, Palgrave Publishers, 2001) 133. 136UNCED, Rio Declaration on Environment and Development 1992 (United Nations, 1992) at 9 or at <http://www.un.org/documents/ga/conf151/aconf15126-1annex1.htm>. UNCED, Agenda 21: Programme of Action for Sustainable Development, available at <http://www.un.org/esa/sustdev/documents/agenda21/english/agenda21toc.htm>. The results of the WSSD can be found in the United Nations Report on the World Summit on Sustainable Development Johannesburg, South Africa, 26 August-4 September 2002 (UN Doc A/CONF.199/20) (New York, United Nations, 2002). See especially: Annex: Resolution 2: The Plan of Implementation of the WSSD at paras 18 at p 15 (encouragement of corporate environmental and social responsibility); 49 at p 38 (promotion of corporate responsibility based on the Rio Principles); 84 at p 51 (encouragement of greater flows of FDI to developing countries to support sustainable development) 105 at p 58 (promotion of environmentally sound technology transfer as agreed in chapter 34 of Agenda 21). 137 See above n 24. Art 19 of the Energy Charter Treaty can also be mentioned in this regard (33 ILM 360 (1995)). See further Clare Shine, ‘Environmental Protection Under the Energy Charter Treaty’, in T. W?lde (ed), The Energy Charter Treaty (The Hague, Kluwer Law International, 1996) 520. The Draft UN Code of Conduct on Transnational Corporations also contained provisions on environmental protection in paras 41–3: see UNCTAD, Environment, above n 132 at 19–20. 138 The most widely quoted definition of sustainable development is that of the Brundtland Commission, which called for development that, ‘meets the needs of the present without compromising the ability of future generations to meet their own needs’, World Commission on Environment and Development, Our Common Future (Oxford, Oxford University Press, 1987) at 43. The Rio Declaration asserts, as Principle 1, that ‘[h]uman beings are at the centre of concerns for sustainable development. They are entitled to a healthy and productive life in harmony with nature’ (above n 136). 139Agenda 21, above n 136 paras 30.1–30.4. 140 Ibid, paras 30.7–30.16. 141 Ibid, paras 30.19–30.29. 142 Ibid para 34.11. On ‘best efforts’ provisions urging parties to encourage MNEs to transfer environmentally sound technology, see eg the Vienna Convention for the Protection of the Ozone Layer 1985 Art 4 and Annex II: 26 ILM 1529 (1987); Basel Convention on the Control of Transboundary Movement of Hazardous Wastes and their Disposal 1989 Art 10(2): UNTS vol 1673 p 57 (1992); Biodiversity Convention 1992 Art 16(1): 31 ILM 818 (1992). See further UNCTAD, Environment, above n 132 at 44–50; Gaetan Verhoosel, ‘Beyond the Unsustainable Rhetoric of Sustainable Development: Transferring Environmentally Sound Technology’, The Georgetown Int'l Envtl L Rev 49 (1998). See too the United States—Import Prohibition of Certain Shrimp and Shrimp Products (Shrimp Turtle) WT/DS 58/AB/R, 12 October 1998, adopted 6 November 1998 at para 175, where the WTO Appellate Body noted that the failure of the USA to transfer relevant environmental technology equally to all countries covered by the US ban on imports of shrimps caught using prohibited methods, amounted to ‘unjustifiable discrimination’ contrary to Art XX GATT. 143 Agenda 21, above n 136 para 34.18(iv). Following this principle, the 1992 Biodiversity Convention (above n 136) asserts, in Art 22, that rights granted under another international convention shall not be affected by this convention ‘except where the exercise of those rights and obligations would cause a serious damage or threat to biological diversity’. Thus, any intellectual property rights granted under the TRIPS Agreement may be subordinated to the obligations in the Biodiversity Convention, where they may give rise to such damage. However, such a clash is unlikely given the general framework nature of the Convention: see Sands, above n 134 at 1046 and 1052 and see too Re Legal Protection of Biotechnological Inventions: Netherlands v European Parliament and EU Council (Case C-377/98) [2001] 3 CMLR 1173, where the ECJ held that EC Directive 98/44 on the legal protection of biotechnological inventions was compatible with the TRIPS Agreement and with the Convention on Biological Diversity, even though it authorized Member States to patent certain biotechnological inventions. 144Agenda 21, above n 136 para 8.28. According to the Rio Declaration, Principle 16: ‘National authorities should endeavour to promote the internalization of environmental costs and the use of economic instruments, taking into account the approach that the polluter should, in principle, bear the cost of pollution, with due regard to the public interest and without distorting international trade and investment’ (above n 136). 145Agenda 21, above n 136 para 8.37. 146 Ibid para 8.41. On environmental accounting, see further Muchlinski, above n 3 at 378–82. 147 Ibid chs 19, 20. 148 Agenda 21, above n 136 para 20.29. 149The OECD Declaration and Decisions on International Investment and Multinational Enterprises 1991 Review (OECD, Paris, 1992) at 52–54. See now the 2000 version, above n 24 Chapter V ‘Environment’ on which the following text draws. 150 See Convention on Access to Information, Public Participation in the Decision-Making Process and Access to Justice in Environmental Matters, the Aarhus Convention, 25 June 1998: 38 ILM 517 (1999). 151 See Commentary on the OECD Guidelines for Multinational Enterprises (OECD, Paris, 2000) at para 30 available at <http://www.oecd.org/dataoecd/56/36/1922428.pdf>. On the ISO 14000 Standard Series, see further Muchlinski, above n 3 at 548–9. 152Kyoto Protocol to the United Nations Framework Convention on Climate Change, 10 December 1997 FCCP/CP/1997/L.7/Add.1 available on <http://www.unfcc.org/resource/convkp.htm> or 37 ILM 22 (1998). For a full discussion, see Sands, above n 134 at 357–81; PG Davies, ‘Global Warming and the Kyoto Protocol’ 47 ICLQ 446 (1998). 153 See Sands, above n 134 at 924–6. 154 See The Brussels International Convention on Civil Liability for Oil Pollution Damage 1992; Brussels International Convention on the Establishment of an International Fund for Compensation of Oil Pollution Damage 1992, both available on <http://www.iopcfund.org/engtextoc.pdf>. For analysis see Sands, above n 134 at 912–23. 155 Of these only the Oil Companies Offshore Pollution Liability Agreement 1974 remains active: see Sands, ibid at 922–3. 156 For examples such as the Montreal Protocol Multilateral Fund and the Global Environment Facility, see Sands ibid ch 20. See further Jutta Brunnee, ‘Of Sense and Sensibility: Reflections on International Liability Regimes as Tools for Environmental Protection’ 53 ICLQ 351 (2004). 157 See Sands, above n 134, who writes at 254, ‘[t]here can be little doubt that the concept of “sustainable development” has entered the corpus of international customary law …’, citing the ICJ judgment in the Gabcikovo-Nagymaros Case (1997) ICJ Reports 78 para 140 and the Separate Opinion of Judge Weeramantry at 92; see too the opinion of Justice Kuldip Singh in the Supreme Court of India in Vellore Citizen's Welfare Forum v Union of India AIR 1996 2715. 158 See eg MA Fitzmaurice, ‘International Protection of the Environment’ 293 Hague Receuil 13 (2002) at 47–64. 159 The precautionary principle is defined in the Rio Declaration Principle 15: ‘In order to protect the environment, the precautionary approach shall be widely applied by States according to their capabilities. Where there are threats of serious or irreversible damage, lack of full scientific certainty shall not be used as a reason for postponing cost-effective measures to prevent environmental degradation’ (above n 136). On the polluter pays principle see above n 144. 160 See Beneal v Freeport-McMoran 969 F Supp 362 (EDLA 1997) aff'd 197 F 3d 161 (USCA, Fifth Cir, 1999). On the Alien Tort Claims Act and its application to MNEs generally, see Muchlinski, above n 3 at 527–31 and Joseph 2004, above n 95 at ch 2 and see the discussion of the Unocal case below. 161 This finding is confirmed in other ATCA cases, see Flores v Southern Peru Copper 343 F 3d 140 (2d Cir 2003), 43 ILM 196 (2004); Sarei v Rio Tinto 221 F Supp 2d 1116 (CD Cal, 2002) overturned on other grounds; Sarei v Rio Tinto Case No. 02-56256 DC No. CV-00-11695-MMM. Filed 7 August 2006 (US CA 9th Cir). See further Joseph 2004, above n 95 at 28–30 and Zerk, above n 15 at ch 5. 162European Communities—Measures Concerning Meat and Meat Products WT/DS 48/AB/R adopted 13 February 1998 paras 120–5. The approach of the Appellate Body in the Hormones case was followed by the WTO Panel in the GMO case. See EC—Measures Affecting the Approval and Marketing of Biotech Products WT/DS291, 292 and 293 Panel Report circulated 29 September 2006 at paras 7.71–7.89. However, under WTO law it is possible to ban the importation of a dangerous substance in an appropriate case. Thus in European Communities—Measures Affecting Asbestos and Asbestos Containing Products WT/DS 135/AB/R adopted 12 March 2001, 40 ILM 1193 (2001), the Appellate Body held that France was entitled to ban the importation of asbestos-containing products from Canada on the basis that they were not ‘like products’, as compared to domestic substitute products that were asbestos free, for the purposes of the national treatment provision in Art III:4 of the GATT, as they were dangerous to health. 163 See the Trail Smelter Arbitration (1938, 1941) 3 RIAA 1905. The same company that operated the trail smelter in the 1930s Teck Cominco (Cominco at the time of the arbitration) is again involved in a dispute over cross-border pollution from the smelter, this time water-borne pollution in the Columbia River basin. This had led to litigation with Native American tribes on the US side of the river who claim their lands have been harmed by the discharges into the river. See further Austen A Parrish, ‘Trail Smelter D?j? vu: Extraterritoriality, International Environmental Law, and the Search for Solutions to Canadian-US Transboundary Water Pollution Disputes’ 85 Boston Univ LR 364 (2005) and see Pakootas v Teck Cominco Metals 452 F 3d 1066; 2006 US App LEXIS 16684; 62 ERC (BNA) 1705 (US CA 9th Cir).The Court of Appeals for the Ninth Circuit held that CERCLA could apply to the facts of the case as the release of hazardous substances was a domestic, rather than an extraterritorial, application of CERCLA, even though the original source of the hazardous substances was located in Canada. 164 See David Hunter and Stephen Porter, ‘International Environmental Law and Foreign Direct Investment’, in Daniel D Bradlow and Alfred Escher (eds), Legal Aspects of Foreign Direct Investment (The Hague, Kluwer Law International, 1999) 161 at 170. 165 See further International Law Commission, Draft Articles on the Prevention of Transboundary Harm from Hazardous Activities (2001) in ILC, Report of the International Law Commission 53rd Session 2001 GA Off Recs, 56th Sess Suppl No 10 (A/56/10), reproduced in I Brownlie Principles of Public International Law (Oxford, Oxford University Press, 6th edn, 2003) at 278–81. 166 Agreements that only apply to post-entry treatment will require the application of general standards of treatment to regulation after entry. At the point of entry, the host country is free to apply whatever environmental measures it wishes, though such measures could fall foul of WTO rules if they involve a trade-distorting element. 167 In this connection, Art 19 of the Energy Charter Treaty (33 ILM 360 (1995)) contains an extensive list of matters that the contracting parties should do in pursuit of sustainable development. Inter alia they should ‘promote the transparent assessment at an early stage and prior to decision, and subsequent monitoring, of Environmental Impacts of environmentally significant energy investment projects’ (Art 19(1)(i)). This accepts a degree of screening and monitoring of foreign investment for environmental purposes, where this is used to set up such a project. However, such screening should conform to the principles of fairness and non-discrimination laid down in Art 10 of the Charter Treaty. In addition, FDI insurance agencies of home countries and the Multilateral Investment Guarantee Agency (MIGA) may also require an environmental impact assessment before offering cover. Thus MNEs will be obliged to submit a full assessment to these authorities as a condition of cover, which will of necessity be done at the pre-entry stage: World Investment Report 1999 (New York and Geneva, United Nations, 1999) at 307 and UNCTAD, Environment, above n 132 at 61. See too Maffezini v Spain ICSID Case No ARB/97/7 award of 13 November 2000: 16 ICSID Rev-FILJ 248 (2001), where the tribunal held that Spain could not be held liable for loss resulting to the investor arising out of the latter's deliberate failure to undertake an environmental impact assessment of its investment in a chemical works, required under Spanish and EC law as a condition for the establishment of the investment. 168 See eg the US-Uruguay BIT, 25 October 2004, Art 8(3)(c): above n 81. 169 Given the virtually identical language this seems highly likely. On the effect of Art XX GATT in environmental cases, see further WTO Committee on Trade and Environment, ‘GATT/WTO Dispute Settlement Practice Relating to GATT Article XX, Paragraphs (b), (d) and (g)’, WTO Doc WT/CTE/W/203 8 March 2002, available at <http://www.docsonline.wto.org/gen_search_asp?searchmode=simple>. 170 See United States—Section 337 of the Tariff Act 1930, GATT Panel Report adopted 7 November 1983 36th Supp BISD 345 (1990) para 5.26; Korea—Measures Affecting Imports of Fresh, Chilled and Frozen Beef, WT/DS 161 and 169/AB/R Appellate Body Report, adopted 10 January 2001, para 166. The NAFTA Tribunal in SD Myers v Canada stated that the NAFTA, and its accompanying Side Agreement on Environmental Protection, required the parties to apply high levels of environmental protection but to adopt the measures that were most consistent with open trade: see 40 ILM 1408 at p 1431 paras 220–1 (2001). 171Canada—Measures Affecting Exports of Unprocessed Herring and Salmon, GATT Panel Report adopted 22 March 1988, 35th Supp BISD 98 (1989) at 114; Shrimp Turtle, above n 142 at paras 135–42. 172Shrimp Turtle, ibid at paras 1589. 173 Ibid at para 160. 174 This has been criticized as a weak response but one which may recognize the real limits of trying to apply a stronger scheme: see further UNCTAD, Environment, above n 132 at 38–9 and see further Pierre Marc Johnson and Andre Beaulieu, The Environment and NAFTA: Understanding and Implementing the New Continental Law (Washington, Island Press, 1996) at 112–13. A similar approach is taken in the pre- and post-2004 US BITs: see eg the US-Uruguay BIT, 25 October 2004, above n 81 Art 12(1). 175 Thus the MAI Negotiating Text stated, ‘A Contracting Party [shall] [should] not waive or otherwise derogate from, or offer to waive or otherwise derogate from, its [domestic] health, safety, environmental [measures] [standards], or [domestic] [core] labour standards, as an encouragement for the establishment, acquisition, expansion, operation, management, maintenance, use, enjoyment and sale or other disposition of an investment of an investor’. OECD, MAI Negotiating Text (OECD, Paris, 24 April 1998) at 54 (Alternative 2). 176 UNCTAD, Environment, above n 132 at 39. 177North American Agreement on Environmental Cooperation, 32 ILM 1480 (1993). See further Johnson and Beaulieu, above n 172 Part III. 178OECD Guidelines for Multinational Enterprises, above n 24 Chapter V para 5. 179 See eg NAFTA Art 1114(1): US-Uruguay BIT Art 12(2). 180 See further UNCTAD, Environment, above n 132 at 24–5. 181 See eg the US-Uruguay BIT above n 81 Annex B para 4. 182 But see SD Myers Inc v Canada (NAFTA Arbitration, 12 November 2000) 40 ILM 1408 (2001) where Canada was found to have discriminated against a US investor contrary to Art 1102 (national treatment) by imposing a temporary trade ban on certain chemical waste products. This favoured Canadian waste-processing firms in competition with the US claimant, who was unable to export the waste in question to its US waste-processing facility during the ban. The tribunal held that Canada could have taken a less investment-restrictive approach to achieve its environmental protection goals: para 255. 183 In this connection, the UN Norms state, ‘States should establish and reinforce the necessary legal and administrative framework for ensuring that the Norms and other relevant national and international laws are implemented by transnational corporations and other business enterprises’: UN Norms above n 96 s H para 17. 184 On the UK, see further <http://www.ethicaltrade.org>. For the US and EU position, see M Trebilcock and R Howse, The Regulation of International Trade (London, Routledge, 3rd edn, 2005) at 575–6. 185Corporate Code of Conduct Bill 2000 , The Parliament of the Commonwealth of Australia draft of 28 August 2000 clause 10. See Zerk, above n 15 at 165–7. 186 USA: Corporate Code of Conduct Act, HR 4596, 106th Cong (2000), Corporate Code of Conduct Act HR 2782, 107th Cong (2001). See Zerk, above n 15 at 167-8; UK: Corporate Responsibility Bill 2003, available at <http://www.parliament.the-stationery-office.co.uk/pa/cm200102/cmbills/145/2002145.pdf>. See Zerk, above n 15 at 168–70. It should be noted that the UK Bill, introduced as a private member's bill and not as a governmental initiative, concerns only civil liability and does not create specific human rights obligations on companies. 187 For a full discussion, see Joseph 2004, above n 95 ch 2. See too Jagers, above n 95 at 179–203. 188 963 F Supp. 880 US Dist Ct, CD Cal, 25 March 1997, noted in 92 AJIL 309 (1998). See too Wiwa v Royal Dutch Petroleum Company 96 Civ 8389 (SDNY). 18928 USC s 1350. ATCA states: ‘The district courts shall have original jurisdiction of any civil action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States’. 190 For discussion of human-rights-based claims in England, Australia, and Canada, see Joseph 2004, above n 95 ch 6, and for the Netherlands and England, see Kamminga and Zia-Zarifi, above n 94 part III chs 9-12. 191 See too in this regard, Kadic v Karadzic 70 F 3d 232 (2d Cir 1995) where it was held that the Alien Tort Statute reaches the conduct of private parties provided that their conduct is undertaken under the colour of state authority or violates a norm of international law that is recognized as extending to the conduct of private parties. 192Doe v Unocal Corp Judgment of 18 September 2002: 2002 US App LEXIS 19263 (9th Cir 2002); 41 ILM 1367 (2002). This decision was in turn vacated on 14 February 2003 to be re-heard by the en banc Court of Appeal for the Ninth Circuit: John Doe v Unocal 395 F 3d 978; 2003 US App. LEXIS 2716. The case settled in December 2004: ‘Unocal Settles Burma Abuse Case’, Financial Times, 14 December 2004 at 12. Since then, the District Court opinion of 2000 has also been vacated by the USCA Ninth Circuit: John Doe v Unocal 403 F 3d 708; 2005 US App LEXIS 6070 (filed 13 April 2005). 193 For this purpose, the USCA held that the distinction between the aiding and abetting of a crime and a tort was not significant, in that similar principles applied in each situation: ibid at ILM p 1376. 194 On the issue of corporate complicity in human rights violations see further Anita Ramasastry, ‘Secrets and Lies? Swiss Banks and International Human Rights’ 31 Vand Jo Transnat'l Law 325 (1998) and ‘Corporate Complicity from Nuremberg to Rangoon: An Examination of Forced Labor Cases and their Impact on the Liability of Multinational Corporations’ 20 Berkeley Jo. Int'l L 91 (2002); Andrew Clapham and Scott Jebri, ‘Categories of Corporate Complicity in Human Rights Abuses’ 24 Hastings Int’l & Comp LR 339 (2001). 195 See further Muchlinski, above n 3 ch 9. The ensuing paragraphs are taken from ibid at 337–40. 196 See: Lee H Radebaugh, Sidney J Gray, and Ervin L Black, International Accounting and Multinational Enterprises (New York, John Wiley, 6th edn, 2006) at 22–3. 197 See UN Group of Experts Report, International Standards of Accounting and Reporting for Transnational Corporations (UN Doc E/C.10/33 18 October 1977) paras 9–12 at p 28 and pp 53–79. See too Draft UN Code of Conduct on Transnational Corporations, text of 24 May 1990 (UN Doc E/1990/94 12 June 1990) paras 44–6 at pp 12–14. For a more recent reiteration of this position, see UNCTAD International Working Group of Experts on International Standards of Accounting and Reporting (hereinafter ISAR), Guidance on Good Practices in Corporate Governance Disclosure (UN Doc. TD/B/COM.2/ISAR/30 26 September 2005) at paras 19–20. 198 OECD Guidelines, above n 24 at 20. 199OECD, Principles of Corporate Governance (Paris, OECD, 2004), available at <http://www.oecd.org/dataoecd/32/18/31557724.pdf> at 22–3 and 49–57. See further Alan Dignam and Michael Galanis, ‘Governing the World: The Development of the OECD's Corporate Governance Principles’ 10 EBLR 96 (1999). 200 Ibid at 22. 201 Ibid at 50. 202 Ibid at 50–1. 203 Ibid at 51. 204 Ibid. 205 Ibid at 53. On Enron, see further Peter T Muchlinski, ‘Enron and Beyond: Multinational Corporate Groups and the Internationalization of Governance and Disclosure Regimes’ 37 Conn LR 725 (2005). The main facts of the Enron collapse are summarized at 726’35. See further for discussion of wider influences upon the series of corporate scandals of recent years, John Coffee, ‘What Caused Enron? A Capsule Social and Economic History of the 1990s’ 89 Cornell LR 302 (2004). 206 Ibid at 53–4. 207 The following paragraphs are taken from Muchlinski, above n 3 at 532–4. 208UN Norms, above n 96 s H para 15. 209 See UN Doc E/CN.4/Sub.2/2001/WG.2/WP.1/Add.1 (2001) s H para 17 Commentary at (c). 210UN Norms, above n 96 s H para 16. 211 Ibid. 212Commentary, above n 96 s H para 16 comments (a)–(c). 213 Ibid comments (d)–(e). 214 See UN Doc E/CN.4/Sub.2/2002/WG.2/WP.1 29 May 2002 at p 6 para 17. 215UN Norms, above n 96 s H para 18. 216 See further ‘In the Matter of the Draft Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with regard to Human Rights’, Opinion of Professor Emeritus Maurice Mendelson QC (4 April 2004). 217 See Working Group of the UN Sub-commission on Human Rights Report for 2002 (UN Doc E/CN.4/Sub.2/2002/13 15 August 2002) at p 7 para 17 (views of Mr Alfonso Martinez, member of the Working Group). 218 See further John Ruggie, Interim Report of the Special Representative of the Secretary-General on the Issue of Human Rights and Transnational Corporations and Other Business Enterprises, UN Doc E/CN.4/2006/97 (2006) at <http://www1.umn.edu/humanrts/business/RuggieReport2006.html>. The Special Representative states: ‘Indeed, in the SRSG's view the divisive debate over the Norms obscures rather than illuminates promising areas of consensus and cooperation among business, civil society, governments, and international institutions with respect to human rights’: para 69. 219 See ICSID News Release, 16 May 2007: ‘On May 2, 2007, the World Bank received a written notice of denunciation of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the ICSID Convention) from the Republic of Bolivia. In accordance with Article 71 of the ICSID Convention, the denunciation will take effect six months after the receipt of Bolivia’s notice, i.e., on November 3, 2007. In its capacity as the depository of the ICSID Convention, and as required by Article 75 of the ICSID Convention, the World Bank has notified all ICSID signatory States of the Republic of Bolivia's denunciation of the ICSID Convention.’ (See ICSID Highlights ‘3.Denunciation of ICSID Convention’ at <http://www.worldbank.org/icsid>). 220 See further UNCTAD, Investment Provisions in Economic Integration Agreements (New York and Geneva, United Nations, 2006) at 76 and UNCTAD, Bilateral Investment Treaties 1995-2006: Trends in Investment Rulemaking (New York and Geneva, United Nations, 2007) at pp xiii–xiv. 221 On which see further Ch 1 above at 37–9. 222 In this regard, the fair and equitable treatment standard may be interpreted as including consideration of investor conduct where relevant, as does the question whether a regulatory taking has occurred or whether the investor's own conduct has caused or contributed to their loss. See further Peter Muchlinski, ‘“Caveat Investor”? 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Zimmerman, James M, ‘International Dimension of US Fair Employment Laws: Protection or Interference?’, 131 Int'l Lab Rev 217 (1992) Footnotes ?This chapter relies heavily on chapters 12–14 of Muchlinski, Multinational Enterprises and the Law (Oxford, Oxford University Press, 2nd edn, 2007). The author would like to express his thanks to Oxford University Press for permission to adapt the material in these chapters. Full references and acknowledgements are provided. 1 See UNCTAD, World Investment Report 2003 (New York and Geneva, United Nations, 2003) ch VI. 2 See further M Sornarajah, The International Law on Foreign Investment (Cambridge, Cambridge University Press, 2nd edn, 2004) ch 1. 3 See eg Reinisch, ‘Expropriation’ ch 11 above or Ziegler and Gratton, ‘Investment Insurance’, Ch 13 above. See further Sornarajah, above n 2 at ch 2 and Peter T Muchlinski, Multinational Enterprises and the Law (Oxford, Oxford University Press, 2nd edn, 2007) at 577–8. 4 See Kotera, ‘Regulatory Transparency’, ch 16 above. 5 But one that may be resurgent as recent events in Bolivia, Venezuela, and Russia in the natural resources sectors suggest. On which see further UNCTAD, World Investment Report 2006 (New York and Geneva, United Nations, 2006) at 23 and see too Muchlinski, above n 3 at 577 n 4 for further sources. 6 See Reinisch, above n 3 and see Grierson-Weiler and Laird, ‘Standards of Treatment’, ch 8 above. 7Grierson-Weiler and Laird, ibid . 8 There is such a thing as ‘society’ even if one tries to sidestep this reality by referring only to individuals and families, which, incidentally, is a description of a society! This reference to the famous dictum of Margaret Thatcher should not be taken as a criticism of her views, but simply as pointing out the obvious fact that she clearly held a concept of what a society was, but she avoided reference to organized regulatory actions by the state—something she was ideologically opposed to—by way of focusing on the disaggregated components of that society. This is an example of trying to avoid identifying a larger whole by reference to its components, ie it is tantamount to saying: ‘There is no such thing as a forest, only trees and shrubs’. Does the conclusion follow that forests do not exist? 9 See further Christopher Bartlett, Sumantra Ghoshal, and Paul Beamish, Transnational Management, Text Cases and Readings in Cross Border Management (Boston, McGraw-Hill, International Edition, 5th edn, 2008) at 94–5 citing Shell and BP's commitments to sustainable development as an example of how multinational enterprises might seek to articulate the benefits they bring to less developed countries. 10 See in this connection Methanex v United States , Award of 3 August 2005 available at <http://www.state.gov/documents/organization/51052.pdf> or 44 ILM 1345 (2005) where the tribunal held that investors should be aware of the regulatory environment and the possibility of regulatory change in the absence of assurances to the contrary by the host country. In this case, the issue concerned environmental regulation. Such regulation can help to stimulate positive environmental performance from firms and to enhance their competitive position in this area. That in turn may result in calls for regulation not for deregulation. 11 See David Korten, When Corporations Rule the World (West Hartford, Conn, Kumarian Press, 1995) ch 11 ‘Marketing the World’ and Naomi Klein, No Logo (London, Flamingo Harper-Collins, 2000). For a more alarmist account see Noreena Hertz, The Silent Takeover: Global Capitalism and the Death of Democracy (London, Random House, Arrow Books, 2002). 12 See further Thomas Donaldson, The Ethics of International Business (Oxford, Oxford University Press, UK paperback edn, 1992) and Peter Muchlinski, ‘International Business Regulation: An Ethical Discourse in the Making?’ in Tom Campbell and Seumas Miller (eds), Human Rights and Moral Responsibilities of Corporate and Public Sector Organisations (The Hague, Kluwer Law International, 2004) 81. See too Muchlinski, above n 3 at ch 13. 13 See from a neo-liberal perspective David Henderson, Misguided Virtue: False Notions of Corporate Social Responsibility (Wellington, New Zealand Business Roundtable, 2001). For a critical development perspective, see Michael Blowfield and Jedrzej George Frynas (eds), ‘Critical Perspectives on Corporate Social Responsibility’, 81(3) International Affairs (May 2005). 14 On the issue of the abolition of slavery as an early campaign for commercial social responsibility (used to denote the fact that most slave owners were individual plantation owners not companies), see further the history of what may be the world’s first campaigning international human rights NGO, Anti-Slavery International (Originally the Anti-Slavery Society) available at <http://www.antislavery.org/homepage/antislavery/history.pdf>. The fact that this campaign led to the eventual outlawing of slavery and, indirectly, to its later condemnation as an international crime, points to the possibility for international law to reform, by regulation, corporate and other business practices that are seen as anti-social or criminal. 15 See further Jennifer A Zerk, Multinationals and Corporate Social Responsibility (Cambridge, Cambridge University Press, 2006) at 15–29. 16 See further Zerk, above n 15 at 18–21 and P Muchlinski, ‘The Rise and Fall of the Multilateral Agreement on Investment: Where Now?’ 34 Int’l Law 1033 (2000). 17 See the World Health Organization, International Code on the Marketing of Breast Milk Substitutes (Geneva, WHO, 1981) at <http://www.who.int/nutrition/publications/code_english.pdf>. See further Baby Milk Action website at <http://www.babymilkaction.org/pages/boycott.html> and the International Baby Food Action Network at <http://www.ibfan.org/site2005/Pages/index2.php?iui=1>. 18 See further the International Campaign for Justice in Bhopal at <http://www.bhopal.net/index1.html>. 19 See further the highly informative Business and Human Rights Resource Centre website at <http://www.business-humanrights.org/Home>. 20 This section is adapted from Muchlinski above n 3 at 102–4. 21 For a discussion of the concept of social responsibility and its implications for international standard setting and investment protection, see UNCTAD, The Social Responsibility of Transnational Corporations (New York and Geneva, United Nations, 1999); UNCTAD, World Investment Report 1999 (New York and Geneva, United Nations, 1999) ch XII; UNCTAD, World Investment Report 2003, above n 5. See too UNCTAD, Social Responsibility, Series on Issues in International Investment Agreements (New York and Geneva, United Nations, 2001), all available online at <http://www.unctad.org/iia>. 22 For instance, the Draft United Nations Code of Conduct on Transnational Corporations lists the obligations of transnational corporations (TNCs) across a wide range of issues dealing with such matters as respect for the sovereignty of the host state and its political system, respect for human rights, abstention from corrupt practices, refraining from using the economic power of the TNC in a manner damaging to the economic well-being of the countries in which a firm operates, including observance of tax and anti-monopoly laws, and ensuring full disclosure concerning the activities of the firm. See UNCTAD, International Investment Agreements: A Compendium (New York and Geneva, United Nations, 1996) Vol I 161. Indeed Zerk asserts, ‘Many writers have complained that [Corporate Social Responsibility] CSR, as a concept, is confusing and often ill defined. This is partly because definitions are often presented with an agenda in mind’. Zerk, above n 15 at 29. Zerk goes on to identify pro-business definitions that stress a voluntary approach to corporate action, contrasting this with mandatory regulation, while NGOs tend to favour a mandatory definition which focuses on regulation. She also distinguishes between CSR and corporate governance, on which see text below at nn 25–6. 23 The remaining chapters include: ‘Disclosure, Employment and Industrial Relations, Environment, Combating Bribery, Consumer Interests, Science and Technology, Competition and Taxation’. 24OECD Guidelines for Multinational Enterprises, 27 June 2000, pp 3–4. <http://www.oecd.org/dataoecd/56/36/1922428.pdf>. 25 See further <http://www.unglobalcompact.org>. These are: The Universal Declaration of Human Rights; The International Labour Organization’s Declaration on Fundamental Principles and Rights at Work; The Rio Declaration on Environment and Development; and The United Nations Convention Against Corruption. The Global Compact asks companies to embrace, support, and enact, within their sphere of influence, a set of core values in the areas of human rights, labour standards, the environment, and anti-corruption: ‘Human Rights: Principle 1: Businesses should support and respect the protection of internationally proclaimed human rights; and Principle 2: make sure that they are not complicit in human rights abuses. Labour Standards: Principle 3: Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining; Principle 4: the elimination of all forms of forced and compulsory labour; Principle 5: the effective abolition of child labour; and Principle 6: the elimination of discrimination in respect of employment and occupation. Environment: Principle 7: Businesses should support a precautionary approach to environmental challenges; Principle 8: undertake initiatives to promote greater environmental responsibility; and Principle 9: encourage the development and diffusion of environmentally friendly technologies. Anti-Corruption: Principle 10: Businesses should work against all forms of corruption, including extortion and bribery.’ 26 See further Muchlinski, above n 3 at 354 ff on European rules on worker participation in MNEs. 27 See further Report of the Special Representative of the Secretary-General on the issue of human rights and transnational corporations and other business enterprises, Human Rights Impact Assessments—Resolving Key Methodological Questions (UN Doc A/HRC/4/74, 5 February 2007). 28 See further on this concept, UNCTAD, World Investment Report 2003, above n 1 at 164–7. According to Zerk, ‘Most commentators regard “corporate citizenship” as similar to CSR, although it is sometimes mistaken to cover issues such as philanthropy as well’. Above n 15 at 32 n 110. 29 This section draws extensively on Muchlinski, above n 3 at ch 12. 30 See UNCTAD, Employment, Series on Issues in International Investment Agreements (New York and Geneva, United Nations, 2000) at 3. There are now 185 ILO Conventions. The most important are the five Conventions that cover the contents of the 1998 Declaration, below n 34: Conventions No. 87, on Freedom of Association and the Protection of the Right to Organize, No. 98, on the Right to Organize and Collective Bargaining, No. 29 on Forced Labour, No. 105 on Abolition of Forced Labour, No. 138 on Minimum Age, No. 182 on Worst Forms of Child Labour, No. 100 on Equal Remuneration, and No. 111 on Discrimination in Employment. The ILO Conventions are available at <http://www.ilo.org/ilolex/english/convdisp2.htm>. For background on the ILO see Jean-Michel Servais, International Labour Law (Alphen an den Rijn, Kluwer Law International, 2005); Bob Hepple, Labour Laws and Global Trade (Oxford, Hart Publishing, 2005) ch 2; Damian Brown and Aileen McColgan, ‘UK Employment Law and the International Labour Organisation: The Spirit of Cooperation?’ 21 ILJ 265 (1992); SA Ivanov, ‘The International Labour Organisation: Control over Application of the Conventions and Recommendations on Labour’, in WE Butler (ed), Control over Compliance with International Law (Dordrecht, Martinus Nijhoff, 1991) 153. 31 By ILO Constitution Art 3(1), member states are entitled to send four representatives: two governmental representatives and, by agreement, one each from the most representative employers' and trade union organizations in the country: <http://www.ilo.org/public/english/about/iloconst.htm#a3p5>. 32 See G Hamilton, The Control of Multinationals: What Future for International Codes of Conduct in the 1980s? IRM Multinational Reports No 2 (Chichester, IRM/Wiley, 1984) 9–10; J Robinson, Multinationals and Political Control (Aldershot, Gower, 1983) 171-3; and see the ILO website at <http://www.ilo.org/public/english/employment/multi/history.htm>. 33Adopted 16 November 1977: 17 ILM 422 (1978), revised version adopted 17 November 2000: 41 ILM 186 (2002) and 28 March 2006, available at <http://www.ilo.org/public/english/employment/multi/download/declaration2006.pdf>. For comment, see: Gunter, H, ‘The ILO Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy’, The CTC Reporter, No. 12 (summer 1982) 27–9 and Bob Hepple, ‘New Approaches to International Labour Regulation’ 26 ILJ 353 (1997). 34ILO Declaration on Fundamental Principles and Rights at Work, 86th Session, Geneva, June 1998: 37 ILM 1233 (1998) or <http://www.ilo.org/dyn/declaris/DECLARATIONWEB.static_ jump?var_language=EN&var_pagename=DECLARATIONTEXT>. 35 Ibid. 36ILO Subcommittee on Multinational Enterprises, InFocus Initiative on Corporate Social Responsibility (CSR) GB.295/MNE/2/1, 295th Session Governing Body Geneva, March 2006, available at <http://www.ilo.org/public/english/standards/relm/gb/docs/gb295/pdf/mne-2-1.pdf> para 1. 37 See Zerk, above n 22. 38 See ILO, above n 36 at para 3. By para 5 of the Tripartite Declaration, above n 33, ‘The principles in the MNE Declaration are intended to guide governments, employers’ and workers' organizations and multinational enterprises in taking such measures and actions and adopting such social policies, including those based on the principles laid down in the Constitution and the relevant Conventions and Recommendations of the ILO, as would further social progress’. 39 See ILO website at <http://www.ilo.org/public/english/employment/multi/corporate/index.htm>. 40 Ibid. 41 These fundamental rights are echoed in the OECD Employment Guideline, see OECD Guidelines on Multinational Enterprises, above n 22: ‘IV Employment and Industrial Relations’. See further, for a comparative analysis with the ILO Declaration, Muchlinski, above n 29. 42ILO Declaration, above n 33 at para 21 and ILO Convention No 111 and Recommendation No 111 concerning Discrimination in Respect of Employment and Occupation and ILO Convention No 100 and Recommendation No 90 concerning Equal Remuneration for Men and Women Workers for Work of Equal Value. 43ILO Declaration, above n 33 at para 22. 44 Ibid at para 23. 45 Ibid at para 24. 46 Ibid at para 25. 47 Ibid . 48 Ibid at para 27 and Recommendation No. 119 concerning Termination of Employment at the Initiative of the Employer. 49ILO Declaration, above n 33 at para 28. 50 Ibid at para 26. 51ILO Declaration, ibid at para 29 and ILO Convention No. 142 and Recommendation No. 150 concerning Vocational Guidance and Vocational Training in the Development of Human Resources. 52ILO Declaration, above n 33 at para 30. 53 Ibid at para 31. 54 Ibid at para 33. 55 Ibid at para 34 and Recommendation No 116 concerning Reduction of Hours of Work. 56 Ibid. 57 Ibid and ILO Convention No 110 and Recommendation No 110 concerning Conditions of Employment of Plantation Workers; Recommendation No 115 concerning Workers' Housing; Recommendation No 69 concerning Medical Care; ILO Convention No 130 and Recommendation No 134 concerning Medical Care and Sickness. 58ILO Declaration, above n 33 at para 35. 59ILO Convention Concerning the Prohibition and Immediate Elimination of the Worst Forms of Child Labour, 17 June, 1999: 38 ILM 1207 (1999) or <http://www.ilo.org/ilolex/english/convdisp2.htm>; ILO Recommendation Concerning the Prohibition and Immediate Elimination of the Worst Forms of Child Labour, 17 June 1999: 38 ILM 1211 (1999) or ILO website at <http://www.ilo.org/ilolex/english/recdisp2.htm>. 60ILO Declaration, above n 33 at para 36. 61ILO Declaration, ibid at para 37, which specifically refers to Conventions No. 119 on Guarding of Machinery, No. 115 on Ionizing Radiation, No. 136 on Benzene, No. 139 on Occupational Cancer. See too the further Conventions and associated Recommendations listed in Addendum I to the ILO Declaration, most of which apply to para 37. Para 39 adds that the ILO codes of practice and guides in the current list of publications on occupational health and safety should also be taken into account. See further Catalogue of ILO Publications on Occupational Safety and Health, available at <http://www.ilo.org/public/english/protection/safework/publicat/iloshcat/index.htm>. 62ILO Declaration, above n 33 at para 38. 63 Ibid. 64 Ibid. 65 Ibid at para 39. 66 Ibid at para 40. 67 Ibid. 68 Ibid at para 41. 69 See, for example, the UK's apparent disregard for ILO Convention No. 87 on Freedom of Association and for the subsequent ILO Committee of Experts' Report of 1992 criticizing the UK on this matter: Brown and McColgan above n 30, and see further Keith Ewing, Britain and the ILO (London, Institute of Employment Rights, 2nd edn, 1994). The UK strike laws remain inconsistent with ILO standards as the Labour government of 1997 did not repeal the Conservative reforms: Hepple, above n 30 at 38. On the other hand, past complaints against Malaysia appear to have had more effect: see A Wangel, ‘The ILO and Protection of Trade Union Rights: The Electronics Industry in Malaysia’, in R Southall (ed), Trade Unions and the New Industrialisation of the Third World (London, Zed Books, 1988) 287. 70ILO Declaration, above n 33 at para 42, and ILO Convention No. 87 Art 2, Convention No. 98 Art 1(1). The establishment, functioning, and administration of such organizations should not be interfered with by other organizations whether representing MNEs or workers in their employment: ILO Declaration at para 43. 71ILO Declaration, ibid at para 49. 72 Ibid at para 50. 73 Ibid at para 58 and Recommendation No. 130 concerning the Examination of Grievances within the Undertaking with a View to their Settlement. 74ILO Declaration, above n 33. 75 Ibid at para 59. 76 See ILO website at <http://www.ilo.org/public/english/employment/multi/dispute.htm> and see too Jacques Lemoine, ‘The ILO Tripartite Declaration: Ten Years After’, The CTC Reporter No. 25, (spring 1988) 22. 77 See Procedure for Examination of Disputes Concerning the Application of the Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy by Means of Interpretation of its Provisions, adopted by the Governing Body of the International Labour Office at its 232nd Session, Geneva, March 1986, appended to the ILO Tripartite Declaration, above n 33. 78 For a summary of the main interpretations see, for cases: <http://www.ilo.org/public/english/employment/multi/case.htm> and for paragraphs: <http://www.ilo.org/public/english/employment/multi/paragraph.htm>. 79 ILO Doc.GB.232/12/15 February-March 1985, cited in Lemoine, above n 76 at 26. 80ILO Declaration, above n 33 at para 8. 81 See eg US-Uruguay BIT 2004 Arts 12, 13, 44 ILM 268 (2005) at 217, also available at <http://www.ustr.gov/assets/World_Regions?Americas/South_America/asset_upload_file440_6728.pdf>. These provisions assert that it is inappropriate for host countries to seek investment through the lowering of environmental or labour standards. 82ILO Declaration, above n 33 at para 9. 83 Ibid at para 10. 84 Ibid at para 12. 85 See James M Zimmerman, ‘International Dimension of US Fair Employment Laws: Protection or Interference?’ 131 Int'l Lab Rev 217 (1992). 86 This section draws on Muchlinski, above n 3 at ch 13. 87 On the relationship between globalization, business, and human rights, see Robert McCorquodale, ‘Human Rights and Global Business’, in Stephen Bottomley and David Kinley (eds), Commercial Law and Human Rights (Aldershot, Ashgate/Dartmouth Publishing, 2002) 89. 88 See further Peter T Muchlinski, ‘Human Rights and Multinationals—Is There a Problem?’ 77 International Affairs 31 at 33–5 (2001); UN Sub-commission on Human Rights, Working Group on the Working Methods and Activities of Transnational Corporations, Human Rights Principles and Responsibilities for Transnational Corporations and Other Business Enterprises: Introduction, UN Doc E/CN.4/Sub.2/2002/WG.2/WP.1/Add.1. (hereinafter Introduction) at 2–4. See too International Council on Human Rights Policy, Beyond Voluntarism: Human Rights and the Developing International Obligations of Companies (Versoix, 2002) at 1–2. 89 On the latter see Sheldon Leader, ‘Human Rights Risks and New Strategies for Global Investment’ 9 JIEL 657 (2006) and Amnesty International, Human Rights on the Line: The Baku-Tiblisi-Ceyhan Pipeline Project (London, Amnesty International UK, 2003) at <http://www.amnesty.org.uk/uploads/documents/doc_14538.pdf> and Contracting Out of Human Rights: The Chad-Cameroon Pipeline Project (London, Amnesty International UK, 2005) at <http://www.amnesty.org.uk/uploads/documents/doc_16423.pdf>. See further, for examples and analysis, Rory Sullivan (ed), Business and Human Rights: Dilemmas and Solutions (Sheffield, Greenleaf Publishing, 2003) parts 2–4; International Network for Economic, Social & Cultural Rights (ESCR-NET) Corporate Accountability Working Group Joint NGO Submission, Consultation on Human Rights and the Extractive Industry (Geneva, 9 December 2005) at <http://www.earthrights.org/files/Reports/escrnet9_dec_05.pdf>. Earthrights International, Earth Rights Abuses by Corporations in Burma Collective Summary and Recommendations (Submission to the Special Representative on the Issue of Human Rights and Transnational Corporations and Other Business Enterprises, 10 November 2005) at <http://www.earthrights.org/files/Reports/eri_submission.pdf>. 90 See further Muchlinski, above n 88 at 35–44. See further SR Ratner, ‘Corporations and Human Rights: A Theory of Legal Responsibility’ 111 Yale LJ 443 (2001); Phillip Alston (ed), Non-State Actors and Human Rights (Oxford, Oxford University Press, 2005) part III ‘Corporations’; Andrew Clapham, Human Rights Obligations of Non-State Actors (Oxford, Oxford University Press, 2006) ch 6. 91 See eg Simon Zadek and Maya Forstater, ‘Making Civil Regulation Work’, in Michael Addo (ed), Human Rights Standards and the Responsibility of Transnational Corporations (The Hague, Kluwer Law International, 1999) 69 who argue that consumer boycotts have little effect on share prices. However, threats of litigation do have an adverse effect on firms' share valuations, especially where very large claims are involved. 92 See further UN Special Representative, above n 27. The best example of such a reaction is that of Shell Oil, which, in response to alleged complicity in human rights abuses in the Niger Delta region, revised its social responsibility policy and included human rights impact assessment in its business planning. See further Royal Dutch Shell, Shell General Business Principles available at <http://www.shell.com/static/envirosoc-en/downloads/making_it_happen/our_commitments_and_standards/sgbp/sgbp.pdf>. see too Business Leaders Initiative on Human Rights, Human Rights Matrix at <http://www.blihr.org>. 93 See further Interim Report of the Special Representative of the Secretary-General on the Issue of Human Rights and Transnational Corporations and Other Business Enterprises, UN Doc E/CN.4/2006/97 (2006) at <http://www1.umn.edu/humanrts/business/RuggieReport2006.html> at paras 60–5. 94 Zerk, for example, suggests, ‘It is quite possible that new customary obligations could emerge from current international activities on CSR—for both multinationals and states. However, before new customary obligations can be said to exist, there needs to be much more evidence of real commitment from states on CSR-related principles.’ Above n 15 at 299–300. Zerk adds that, ‘While it is important not to confuse CSR and human rights, it is likely that any direct obligations for multinationals will emerge primarily from human rights law’. Ibid at 310. The UN Special Representative cites Zerk's book to support the proposition that, ‘preliminary research has not identified the emergence of uniform and consistent State practice establishing corporate responsibilities under customary international law’. Report of the Special Representative of the Secretary-General on the issue of human rights and transnational corporations and other business enterprises, John Ruggie, Business and Human Rights: Mapping International Standards of Responsibility and Accountability for Corporate Acts, UN Doc A/HRC/4/35, 19 February 2007, available at <http://www.business-humanrights.org/Documents/SRSG-report-Human-Rights-Council-19-Feb-2007.pdf> at para 34. 95 See eg Zerk, above n 15 at 76–93; David Kinley and Junko Tadaki, ‘From Talk to Walk: The Emergence of Human Rights Responsibilities for Corporations at International Law’ 44 Va J Int'l L 931 (2004); Nicola Jagers, Corporate Human Rights Obligations: In Search of Accountability (Antwerp, Intersentia, 2002); Beth Stephens, ‘The Amorality of Profit: Transnational Corporations and Human Rights’ 20 Berkeley J Int'l L 45 (2002); Sarah Joseph, ‘An Overview of the Human Rights Accountability of Multinational Enterprises’, in Menno Kamminga and Sam Zia-Zarifi (eds), Liability of Multinational Corporations under International Law (The Hague, Kluwer Law International, 2000) 75 and Sarah Joseph, Corporations and Transnational Human Rights Litigation (Oxford, Hart Publishing, 2004) (hereinafter Joseph 2004); Chris Avery, ‘Business and Human Rights in a Time of Change’, in Kamminga and Zia-Zarifi above 17; Menno Kamminga, ‘Holding Multinational Corporations Accountable for Human Rights Abuses: A Challenge for the EC’, in Philip Alston (ed), The EU and Human Rights (Oxford, Oxford University Press, 1999) 558; Amnesty International and Pax Christi International Dutch Sections, Multinational Enterprises and Human Rights (Utrecht, November 1998). 96Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with Regard to Human Rights (hereinafter UN Norms). (UN Doc E/CN.4/Sub.2/2003/12/Rev.2(2003) 13 August 2003, available at <http://www1.umn.edu/humanrts/links/norms-Aug2003.html>, or <http://www.business-humanrights.org>. See too Commentary on the Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with Regard to Human Rights (hereinafter Commentary) (UN Doc E/CN.4/Sub.2/2003/38.Rev.2(2003) available at <http://www1.umn.edu/humanrts/links/commentary-Aug2003.html> or <http://www.business-humanrights.org>. Other relevant documents are available at <http://www1.umn.edu/humanrts/links/omig.html>. See further David Weissbrodt and Muria Kruger, ‘Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with Regard to Human Rights’ 97 AJIL 901 (2003); David Weissbrodt, ‘The Beginning of a Sessional Working Group on Transnational Corporations within the UN Sub-Commission on Prevention of Discrimination and Protection of Minorities’ in Kamminga and Zia-Zarifi, above n 95 at 119–38; Amnesty International, The UN Human Rights Norms for Business: Towards Legal Accountability (London, Amnesty International, 2004); Rebecca MM Wallace and Olga Martin-Ortega, ‘The UN Norms: A First Step to Universal Regulation of Transnational Corporations' Responsibilities for Human Rights?’ 26 Dublin Univ LJ 304 (2004); Larry Cata Backer, ‘Multinational Corporations, Transnational Law: The United Nations Norms and the Responsibilities of Transnational Corporations as a Harbinger of Corporate Social Responsibility in International Law’ 37 Col HRLR 287 (2006). 97 See the discussion in Kinley and Tadaki, above n 95 at 948–9 and see UN Commission on Human Rights Report on the Sixtieth Session Resolution 2004/116 (UN Doc E/CN.4/2004/L.11/Add.7 22 April 2004 at 81–2) at point (c). In June 2006, the Commission was replaced by a new Human Rights Council: UNGA Resolution 60/251 ‘Human Rights Council’ 3 April 2006 at <http://www.ohchr.org/english/bodies/hrcouncil/docs/A.RES.60.251_En.pdf>. 98 On which see further John Braithwaite and Peter Drahos, Global Business Regulation (Cambridge, Cambridge University Press, 2000) at 539–43. 99 eg, the Business Leaders Initiative on Human Rights (BLIHR), Human Rights Matrix, above n 92, takes the UN Norms as part of its basic framework. The BLIHR has expressly welcomed the UN Norms in this regard: see BLIHR Report 2005, Foreword by Mary Robinson at 1–2, available at <http://www.blihr.org>; BLIHR Report 2006 at 18: ‘In our experience through these individual projects and through learning from a variety of stakeholders, there is much in the content of the draft Norms that is of practical use. They represent an example of how some of the key aspects of international human rights law might be translated into business contexts’. (See <http://www.blihr.org>.) 100UN Norms, above n 96 at para 20. 101 Cf eg the definition in the OECD Guidelines on Multinational Enterprises, above n 24: ‘3. A precise definition of multinational enterprises is not required for the purposes of the Guidelines. These usually comprise companies or other entities established in more than one country and so linked that they may co-ordinate their operations in various ways. While one or more of these entities may be able to exercise a significant influence over the activities of others, their degree of autonomy within the enterprise may vary widely from one multinational enterprise to another. Ownership may be private, state or mixed.’ 102UN Norms, above n 96 at para 21. Note the circuitous drafting which replicates the notion of ‘transnational corporation’ as a part of ‘other business entity’. 103 See Kinley and Tadaki, above n 95 at 962–6 and see the Report of the UN Commission for Human Rights, above n 97 at paras 37–9. 104UN Norms, above n 96 s B para 2. 105 Ibid s C para 3. 106 Ibid s D para 5. 107 Ibid s D para 6. 108 Ibid s D para 9. 109 Ibid s E para 12. 110ILO Tripartite Declaration on Multinational Enterprises and Social Policy, above n 33. 111UN Norms, above n 96 s D para 7. 112 Ibid at para 8. 113 Ibid at para 9. 114 Ibid s E para 10. These include transparency, accountability, and prohibition of corruption. 115 Ibid at para 12. 116 Ibid Preamble, Recital 13. 117 Ibid s E para 12. 118 Ibid s A para 1 and s E para 10 as explained in the Commentary at s E para 10 comment (c), above n 96. The UN Norms have dropped any explicit reference to self-determination, which was present in earlier drafts: see Draft Universal Human Rights Guidelines for Companies (UN Doc E/CN.4/Sub.2/2001/WG.2/WP.1/Add.I (2001)) s E para 11. This reference was dropped in 2002. On the issue of indigenous peoples rights and TNC obligations, see further the discussion in Kinley and Tadaki, above n 95 at 987–93 and Jagers, above n 95 at 157–60. 119UN Norms, above n 96 s C para 4. See further Amnesty International UK Business Group, Human Rights Guidelines for Companies (London, Amnesty International, 1998) at 8-11. 120 Commentary, above n 96 s C para 3 comments (a)–(d). 121UN Norms, above n 96 s E para 10. This principle is echoed in the OECD Guidelines and the ILO Tripartite Declaration. 122 Ibid s H para 19. 123 On which, see Draft Universal Human Rights Guidelines for Companies with Source Materials, UN Doc E/CN.4/Sub.2/2001/WG.2/WP.1/Add.2 (2001) available on <http://www1.umn.edu/humanrts/links/omig.html>. See too ch 1 above at 16–19. 124UN Norms, above n 96 s F para 13. 125 Ibid s E para 11. 126 Ibid s G para 14. 127 See generally M Fitzmaurice, ‘The Contribution of Environmental Law to the Development of Modern International Law’, in J Makarczyk (ed), The Theory of International Law at the Threshold of the 21st Century (The Hague, Kluwer Law International, 1996) 909 at 909–14. 128 On the issue of corruption and bribery, see further Raeschke-Kessler and Gottwald, ‘Corruption’, ch 15 above; UNCTAD, Illicit Payments, Series on Issues in International Investment Agreements (New York and Geneva, United Nations, 2001), S Rose-Ackerman, ‘Corruption and the global Corporation: Ethical Obligations and Workable Strategies’, in Michael Likosky (ed), Transnational Legal Processes: Globalisation and Power Disparities (London, Butterworths Lexis-Nexis, 2002) 148. The bribery of foreign officials was made a crime under the UK Anti-Terrorism, Crime and Security Act 2001 (2001 Chapter 24) ss 108–10 at <http://www.opsi.gov.uk/acts/en2001/01en24-d.htm>. 129 See further Kinley and Tadaki, above n 95 at 966–93; Jagers, above n 95 at 51–74; Janet Dine, Companies, International Trade and Human Rights (Cambridge, Cambridge University Press, 2005) at 178–87. 130 Kinley and Tadaki, above n 95 at 967. 131 This section draws on Muchlinski, above n 3 at ch 14. 132 See UNCTAD, Environment, Series on Issues in International Investment Agreements (New York and Geneva, United Nations, 2001) at 9–10. 133 See further Muchlinski, above n 3 at 546–56. 134 See UN Transnational Corporations and Management Division (TCMD), International Environmental Law: Emerging Trends and Implications for Transnational Corporations (New York, United Nations, 1993). See further, for a survey of the main MEAs, Patricia Birnie and Alan Boyle, International Law and the Environment (Oxford, Oxford University Press, 2nd edn, 2002) and Philippe Sands, Principles of International Environmental Law (Cambridge, Cambridge University Press, 2nd edn, 2003). 135 See generally Ian H Rowlands, ‘Transnational Corporations and Global Environmental Politics’, in Daphne Josselin and William Wallace (eds), Non-state Actors in World Politics (Basingstoke, Palgrave Publishers, 2001) 133. 136UNCED, Rio Declaration on Environment and Development 1992 (United Nations, 1992) at 9 or at <http://www.un.org/documents/ga/conf151/aconf15126-1annex1.htm>. UNCED, Agenda 21: Programme of Action for Sustainable Development, available at <http://www.un.org/esa/sustdev/documents/agenda21/english/agenda21toc.htm>. The results of the WSSD can be found in the United Nations Report on the World Summit on Sustainable Development Johannesburg, South Africa, 26 August-4 September 2002 (UN Doc A/CONF.199/20) (New York, United Nations, 2002). See especially: Annex: Resolution 2: The Plan of Implementation of the WSSD at paras 18 at p 15 (encouragement of corporate environmental and social responsibility); 49 at p 38 (promotion of corporate responsibility based on the Rio Principles); 84 at p 51 (encouragement of greater flows of FDI to developing countries to support sustainable development) 105 at p 58 (promotion of environmentally sound technology transfer as agreed in chapter 34 of Agenda 21). 137 See above n 24. Art 19 of the Energy Charter Treaty can also be mentioned in this regard (33 ILM 360 (1995)). See further Clare Shine, ‘Environmental Protection Under the Energy Charter Treaty’, in T. W?lde (ed), The Energy Charter Treaty (The Hague, Kluwer Law International, 1996) 520. The Draft UN Code of Conduct on Transnational Corporations also contained provisions on environmental protection in paras 41–3: see UNCTAD, Environment, above n 132 at 19–20. 138 The most widely quoted definition of sustainable development is that of the Brundtland Commission, which called for development that, ‘meets the needs of the present without compromising the ability of future generations to meet their own needs’, World Commission on Environment and Development, Our Common Future (Oxford, Oxford University Press, 1987) at 43. The Rio Declaration asserts, as Principle 1, that ‘[h]uman beings are at the centre of concerns for sustainable development. They are entitled to a healthy and productive life in harmony with nature’ (above n 136). 139Agenda 21, above n 136 paras 30.1–30.4. 140 Ibid, paras 30.7–30.16. 141 Ibid, paras 30.19–30.29. 142 Ibid para 34.11. On ‘best efforts’ provisions urging parties to encourage MNEs to transfer environmentally sound technology, see eg the Vienna Convention for the Protection of the Ozone Layer 1985 Art 4 and Annex II: 26 ILM 1529 (1987); Basel Convention on the Control of Transboundary Movement of Hazardous Wastes and their Disposal 1989 Art 10(2): UNTS vol 1673 p 57 (1992); Biodiversity Convention 1992 Art 16(1): 31 ILM 818 (1992). See further UNCTAD, Environment, above n 132 at 44–50; Gaetan Verhoosel, ‘Beyond the Unsustainable Rhetoric of Sustainable Development: Transferring Environmentally Sound Technology’, The Georgetown Int'l Envtl L Rev 49 (1998). See too the United States—Import Prohibition of Certain Shrimp and Shrimp Products (Shrimp Turtle) WT/DS 58/AB/R, 12 October 1998, adopted 6 November 1998 at para 175, where the WTO Appellate Body noted that the failure of the USA to transfer relevant environmental technology equally to all countries covered by the US ban on imports of shrimps caught using prohibited methods, amounted to ‘unjustifiable discrimination’ contrary to Art XX GATT. 143 Agenda 21, above n 136 para 34.18(iv). Following this principle, the 1992 Biodiversity Convention (above n 136) asserts, in Art 22, that rights granted under another international convention shall not be affected by this convention ‘except where the exercise of those rights and obligations would cause a serious damage or threat to biological diversity’. Thus, any intellectual property rights granted under the TRIPS Agreement may be subordinated to the obligations in the Biodiversity Convention, where they may give rise to such damage. However, such a clash is unlikely given the general framework nature of the Convention: see Sands, above n 134 at 1046 and 1052 and see too Re Legal Protection of Biotechnological Inventions: Netherlands v European Parliament and EU Council (Case C-377/98) [2001] 3 CMLR 1173, where the ECJ held that EC Directive 98/44 on the legal protection of biotechnological inventions was compatible with the TRIPS Agreement and with the Convention on Biological Diversity, even though it authorized Member States to patent certain biotechnological inventions. 144Agenda 21, above n 136 para 8.28. According to the Rio Declaration, Principle 16: ‘National authorities should endeavour to promote the internalization of environmental costs and the use of economic instruments, taking into account the approach that the polluter should, in principle, bear the cost of pollution, with due regard to the public interest and without distorting international trade and investment’ (above n 136). 145Agenda 21, above n 136 para 8.37. 146 Ibid para 8.41. On environmental accounting, see further Muchlinski, above n 3 at 378–82. 147 Ibid chs 19, 20. 148 Agenda 21, above n 136 para 20.29. 149The OECD Declaration and Decisions on International Investment and Multinational Enterprises 1991 Review (OECD, Paris, 1992) at 52–54. See now the 2000 version, above n 24 Chapter V ‘Environment’ on which the following text draws. 150 See Convention on Access to Information, Public Participation in the Decision-Making Process and Access to Justice in Environmental Matters, the Aarhus Convention, 25 June 1998: 38 ILM 517 (1999). 151 See Commentary on the OECD Guidelines for Multinational Enterprises (OECD, Paris, 2000) at para 30 available at <http://www.oecd.org/dataoecd/56/36/1922428.pdf>. On the ISO 14000 Standard Series, see further Muchlinski, above n 3 at 548–9. 152Kyoto Protocol to the United Nations Framework Convention on Climate Change, 10 December 1997 FCCP/CP/1997/L.7/Add.1 available on <http://www.unfcc.org/resource/convkp.htm> or 37 ILM 22 (1998). For a full discussion, see Sands, above n 134 at 357–81; PG Davies, ‘Global Warming and the Kyoto Protocol’ 47 ICLQ 446 (1998). 153 See Sands, above n 134 at 924–6. 154 See The Brussels International Convention on Civil Liability for Oil Pollution Damage 1992; Brussels International Convention on the Establishment of an International Fund for Compensation of Oil Pollution Damage 1992, both available on <http://www.iopcfund.org/engtextoc.pdf>. For analysis see Sands, above n 134 at 912–23. 155 Of these only the Oil Companies Offshore Pollution Liability Agreement 1974 remains active: see Sands, ibid at 922–3. 156 For examples such as the Montreal Protocol Multilateral Fund and the Global Environment Facility, see Sands ibid ch 20. See further Jutta Brunnee, ‘Of Sense and Sensibility: Reflections on International Liability Regimes as Tools for Environmental Protection’ 53 ICLQ 351 (2004). 157 See Sands, above n 134, who writes at 254, ‘[t]here can be little doubt that the concept of “sustainable development” has entered the corpus of international customary law …’, citing the ICJ judgment in the Gabcikovo-Nagymaros Case (1997) ICJ Reports 78 para 140 and the Separate Opinion of Judge Weeramantry at 92; see too the opinion of Justice Kuldip Singh in the Supreme Court of India in Vellore Citizen's Welfare Forum v Union of India AIR 1996 2715. 158 See eg MA Fitzmaurice, ‘International Protection of the Environment’ 293 Hague Receuil 13 (2002) at 47–64. 159 The precautionary principle is defined in the Rio Declaration Principle 15: ‘In order to protect the environment, the precautionary approach shall be widely applied by States according to their capabilities. Where there are threats of serious or irreversible damage, lack of full scientific certainty shall not be used as a reason for postponing cost-effective measures to prevent environmental degradation’ (above n 136). On the polluter pays principle see above n 144. 160 See Beneal v Freeport-McMoran 969 F Supp 362 (EDLA 1997) aff'd 197 F 3d 161 (USCA, Fifth Cir, 1999). On the Alien Tort Claims Act and its application to MNEs generally, see Muchlinski, above n 3 at 527–31 and Joseph 2004, above n 95 at ch 2 and see the discussion of the Unocal case below. 161 This finding is confirmed in other ATCA cases, see Flores v Southern Peru Copper 343 F 3d 140 (2d Cir 2003), 43 ILM 196 (2004); Sarei v Rio Tinto 221 F Supp 2d 1116 (CD Cal, 2002) overturned on other grounds; Sarei v Rio Tinto Case No. 02-56256 DC No. CV-00-11695-MMM. Filed 7 August 2006 (US CA 9th Cir). See further Joseph 2004, above n 95 at 28–30 and Zerk, above n 15 at ch 5. 162European Communities—Measures Concerning Meat and Meat Products WT/DS 48/AB/R adopted 13 February 1998 paras 120–5. The approach of the Appellate Body in the Hormones case was followed by the WTO Panel in the GMO case. See EC—Measures Affecting the Approval and Marketing of Biotech Products WT/DS291, 292 and 293 Panel Report circulated 29 September 2006 at paras 7.71–7.89. However, under WTO law it is possible to ban the importation of a dangerous substance in an appropriate case. Thus in European Communities—Measures Affecting Asbestos and Asbestos Containing Products WT/DS 135/AB/R adopted 12 March 2001, 40 ILM 1193 (2001), the Appellate Body held that France was entitled to ban the importation of asbestos-containing products from Canada on the basis that they were not ‘like products’, as compared to domestic substitute products that were asbestos free, for the purposes of the national treatment provision in Art III:4 of the GATT, as they were dangerous to health. 163 See the Trail Smelter Arbitration (1938, 1941) 3 RIAA 1905. The same company that operated the trail smelter in the 1930s Teck Cominco (Cominco at the time of the arbitration) is again involved in a dispute over cross-border pollution from the smelter, this time water-borne pollution in the Columbia River basin. This had led to litigation with Native American tribes on the US side of the river who claim their lands have been harmed by the discharges into the river. See further Austen A Parrish, ‘Trail Smelter D?j? vu: Extraterritoriality, International Environmental Law, and the Search for Solutions to Canadian-US Transboundary Water Pollution Disputes’ 85 Boston Univ LR 364 (2005) and see Pakootas v Teck Cominco Metals 452 F 3d 1066; 2006 US App LEXIS 16684; 62 ERC (BNA) 1705 (US CA 9th Cir).The Court of Appeals for the Ninth Circuit held that CERCLA could apply to the facts of the case as the release of hazardous substances was a domestic, rather than an extraterritorial, application of CERCLA, even though the original source of the hazardous substances was located in Canada. 164 See David Hunter and Stephen Porter, ‘International Environmental Law and Foreign Direct Investment’, in Daniel D Bradlow and Alfred Escher (eds), Legal Aspects of Foreign Direct Investment (The Hague, Kluwer Law International, 1999) 161 at 170. 165 See further International Law Commission, Draft Articles on the Prevention of Transboundary Harm from Hazardous Activities (2001) in ILC, Report of the International Law Commission 53rd Session 2001 GA Off Recs, 56th Sess Suppl No 10 (A/56/10), reproduced in I Brownlie Principles of Public International Law (Oxford, Oxford University Press, 6th edn, 2003) at 278–81. 166 Agreements that only apply to post-entry treatment will require the application of general standards of treatment to regulation after entry. At the point of entry, the host country is free to apply whatever environmental measures it wishes, though such measures could fall foul of WTO rules if they involve a trade-distorting element. 167 In this connection, Art 19 of the Energy Charter Treaty (33 ILM 360 (1995)) contains an extensive list of matters that the contracting parties should do in pursuit of sustainable development. Inter alia they should ‘promote the transparent assessment at an early stage and prior to decision, and subsequent monitoring, of Environmental Impacts of environmentally significant energy investment projects’ (Art 19(1)(i)). This accepts a degree of screening and monitoring of foreign investment for environmental purposes, where this is used to set up such a project. However, such screening should conform to the principles of fairness and non-discrimination laid down in Art 10 of the Charter Treaty. In addition, FDI insurance agencies of home countries and the Multilateral Investment Guarantee Agency (MIGA) may also require an environmental impact assessment before offering cover. Thus MNEs will be obliged to submit a full assessment to these authorities as a condition of cover, which will of necessity be done at the pre-entry stage: World Investment Report 1999 (New York and Geneva, United Nations, 1999) at 307 and UNCTAD, Environment, above n 132 at 61. See too Maffezini v Spain ICSID Case No ARB/97/7 award of 13 November 2000: 16 ICSID Rev-FILJ 248 (2001), where the tribunal held that Spain could not be held liable for loss resulting to the investor arising out of the latter's deliberate failure to undertake an environmental impact assessment of its investment in a chemical works, required under Spanish and EC law as a condition for the establishment of the investment. 168 See eg the US-Uruguay BIT, 25 October 2004, Art 8(3)(c): above n 81. 169 Given the virtually identical language this seems highly likely. On the effect of Art XX GATT in environmental cases, see further WTO Committee on Trade and Environment, ‘GATT/WTO Dispute Settlement Practice Relating to GATT Article XX, Paragraphs (b), (d) and (g)’, WTO Doc WT/CTE/W/203 8 March 2002, available at <http://www.docsonline.wto.org/gen_search_asp?searchmode=simple>. 170 See United States—Section 337 of the Tariff Act 1930, GATT Panel Report adopted 7 November 1983 36th Supp BISD 345 (1990) para 5.26; Korea—Measures Affecting Imports of Fresh, Chilled and Frozen Beef, WT/DS 161 and 169/AB/R Appellate Body Report, adopted 10 January 2001, para 166. The NAFTA Tribunal in SD Myers v Canada stated that the NAFTA, and its accompanying Side Agreement on Environmental Protection, required the parties to apply high levels of environmental protection but to adopt the measures that were most consistent with open trade: see 40 ILM 1408 at p 1431 paras 220–1 (2001). 171Canada—Measures Affecting Exports of Unprocessed Herring and Salmon, GATT Panel Report adopted 22 March 1988, 35th Supp BISD 98 (1989) at 114; Shrimp Turtle, above n 142 at paras 135–42. 172Shrimp Turtle, ibid at paras 1589. 173 Ibid at para 160. 174 This has been criticized as a weak response but one which may recognize the real limits of trying to apply a stronger scheme: see further UNCTAD, Environment, above n 132 at 38–9 and see further Pierre Marc Johnson and Andre Beaulieu, The Environment and NAFTA: Understanding and Implementing the New Continental Law (Washington, Island Press, 1996) at 112–13. A similar approach is taken in the pre- and post-2004 US BITs: see eg the US-Uruguay BIT, 25 October 2004, above n 81 Art 12(1). 175 Thus the MAI Negotiating Text stated, ‘A Contracting Party [shall] [should] not waive or otherwise derogate from, or offer to waive or otherwise derogate from, its [domestic] health, safety, environmental [measures] [standards], or [domestic] [core] labour standards, as an encouragement for the establishment, acquisition, expansion, operation, management, maintenance, use, enjoyment and sale or other disposition of an investment of an investor’. OECD, MAI Negotiating Text (OECD, Paris, 24 April 1998) at 54 (Alternative 2). 176 UNCTAD, Environment, above n 132 at 39. 177North American Agreement on Environmental Cooperation, 32 ILM 1480 (1993). See further Johnson and Beaulieu, above n 172 Part III. 178OECD Guidelines for Multinational Enterprises, above n 24 Chapter V para 5. 179 See eg NAFTA Art 1114(1): US-Uruguay BIT Art 12(2). 180 See further UNCTAD, Environment, above n 132 at 24–5. 181 See eg the US-Uruguay BIT above n 81 Annex B para 4. 182 But see SD Myers Inc v Canada (NAFTA Arbitration, 12 November 2000) 40 ILM 1408 (2001) where Canada was found to have discriminated against a US investor contrary to Art 1102 (national treatment) by imposing a temporary trade ban on certain chemical waste products. This favoured Canadian waste-processing firms in competition with the US claimant, who was unable to export the waste in question to its US waste-processing facility during the ban. The tribunal held that Canada could have taken a less investment-restrictive approach to achieve its environmental protection goals: para 255. 183 In this connection, the UN Norms state, ‘States should establish and reinforce the necessary legal and administrative framework for ensuring that the Norms and other relevant national and international laws are implemented by transnational corporations and other business enterprises’: UN Norms above n 96 s H para 17. 184 On the UK, see further <http://www.ethicaltrade.org>. For the US and EU position, see M Trebilcock and R Howse, The Regulation of International Trade (London, Routledge, 3rd edn, 2005) at 575–6. 185Corporate Code of Conduct Bill 2000 , The Parliament of the Commonwealth of Australia draft of 28 August 2000 clause 10. See Zerk, above n 15 at 165–7. 186 USA: Corporate Code of Conduct Act, HR 4596, 106th Cong (2000), Corporate Code of Conduct Act HR 2782, 107th Cong (2001). See Zerk, above n 15 at 167-8; UK: Corporate Responsibility Bill 2003, available at <http://www.parliament.the-stationery-office.co.uk/pa/cm200102/cmbills/145/2002145.pdf>. See Zerk, above n 15 at 168–70. It should be noted that the UK Bill, introduced as a private member's bill and not as a governmental initiative, concerns only civil liability and does not create specific human rights obligations on companies. 187 For a full discussion, see Joseph 2004, above n 95 ch 2. See too Jagers, above n 95 at 179–203. 188 963 F Supp. 880 US Dist Ct, CD Cal, 25 March 1997, noted in 92 AJIL 309 (1998). See too Wiwa v Royal Dutch Petroleum Company 96 Civ 8389 (SDNY). 18928 USC s 1350. ATCA states: ‘The district courts shall have original jurisdiction of any civil action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States’. 190 For discussion of human-rights-based claims in England, Australia, and Canada, see Joseph 2004, above n 95 ch 6, and for the Netherlands and England, see Kamminga and Zia-Zarifi, above n 94 part III chs 9-12. 191 See too in this regard, Kadic v Karadzic 70 F 3d 232 (2d Cir 1995) where it was held that the Alien Tort Statute reaches the conduct of private parties provided that their conduct is undertaken under the colour of state authority or violates a norm of international law that is recognized as extending to the conduct of private parties. 192Doe v Unocal Corp Judgment of 18 September 2002: 2002 US App LEXIS 19263 (9th Cir 2002); 41 ILM 1367 (2002). This decision was in turn vacated on 14 February 2003 to be re-heard by the en banc Court of Appeal for the Ninth Circuit: John Doe v Unocal 395 F 3d 978; 2003 US App. LEXIS 2716. The case settled in December 2004: ‘Unocal Settles Burma Abuse Case’, Financial Times, 14 December 2004 at 12. Since then, the District Court opinion of 2000 has also been vacated by the USCA Ninth Circuit: John Doe v Unocal 403 F 3d 708; 2005 US App LEXIS 6070 (filed 13 April 2005). 193 For this purpose, the USCA held that the distinction between the aiding and abetting of a crime and a tort was not significant, in that similar principles applied in each situation: ibid at ILM p 1376. 194 On the issue of corporate complicity in human rights violations see further Anita Ramasastry, ‘Secrets and Lies? Swiss Banks and International Human Rights’ 31 Vand Jo Transnat'l Law 325 (1998) and ‘Corporate Complicity from Nuremberg to Rangoon: An Examination of Forced Labor Cases and their Impact on the Liability of Multinational Corporations’ 20 Berkeley Jo. Int'l L 91 (2002); Andrew Clapham and Scott Jebri, ‘Categories of Corporate Complicity in Human Rights Abuses’ 24 Hastings Int’l & Comp LR 339 (2001). 195 See further Muchlinski, above n 3 ch 9. The ensuing paragraphs are taken from ibid at 337–40. 196 See: Lee H Radebaugh, Sidney J Gray, and Ervin L Black, International Accounting and Multinational Enterprises (New York, John Wiley, 6th edn, 2006) at 22–3. 197 See UN Group of Experts Report, International Standards of Accounting and Reporting for Transnational Corporations (UN Doc E/C.10/33 18 October 1977) paras 9–12 at p 28 and pp 53–79. See too Draft UN Code of Conduct on Transnational Corporations, text of 24 May 1990 (UN Doc E/1990/94 12 June 1990) paras 44–6 at pp 12–14. For a more recent reiteration of this position, see UNCTAD International Working Group of Experts on International Standards of Accounting and Reporting (hereinafter ISAR), Guidance on Good Practices in Corporate Governance Disclosure (UN Doc. TD/B/COM.2/ISAR/30 26 September 2005) at paras 19–20. 198 OECD Guidelines, above n 24 at 20. 199OECD, Principles of Corporate Governance (Paris, OECD, 2004), available at <http://www.oecd.org/dataoecd/32/18/31557724.pdf> at 22–3 and 49–57. See further Alan Dignam and Michael Galanis, ‘Governing the World: The Development of the OECD's Corporate Governance Principles’ 10 EBLR 96 (1999). 200 Ibid at 22. 201 Ibid at 50. 202 Ibid at 50–1. 203 Ibid at 51. 204 Ibid. 205 Ibid at 53. On Enron, see further Peter T Muchlinski, ‘Enron and Beyond: Multinational Corporate Groups and the Internationalization of Governance and Disclosure Regimes’ 37 Conn LR 725 (2005). The main facts of the Enron collapse are summarized at 726’35. See further for discussion of wider influences upon the series of corporate scandals of recent years, John Coffee, ‘What Caused Enron? A Capsule Social and Economic History of the 1990s’ 89 Cornell LR 302 (2004). 206 Ibid at 53–4. 207 The following paragraphs are taken from Muchlinski, above n 3 at 532–4. 208UN Norms, above n 96 s H para 15. 209 See UN Doc E/CN.4/Sub.2/2001/WG.2/WP.1/Add.1 (2001) s H para 17 Commentary at (c). 210UN Norms, above n 96 s H para 16. 211 Ibid. 212Commentary, above n 96 s H para 16 comments (a)–(c). 213 Ibid comments (d)–(e). 214 See UN Doc E/CN.4/Sub.2/2002/WG.2/WP.1 29 May 2002 at p 6 para 17. 215UN Norms, above n 96 s H para 18. 216 See further ‘In the Matter of the Draft Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with regard to Human Rights’, Opinion of Professor Emeritus Maurice Mendelson QC (4 April 2004). 217 See Working Group of the UN Sub-commission on Human Rights Report for 2002 (UN Doc E/CN.4/Sub.2/2002/13 15 August 2002) at p 7 para 17 (views of Mr Alfonso Martinez, member of the Working Group). 218 See further John Ruggie, Interim Report of the Special Representative of the Secretary-General on the Issue of Human Rights and Transnational Corporations and Other Business Enterprises, UN Doc E/CN.4/2006/97 (2006) at <http://www1.umn.edu/humanrts/business/RuggieReport2006.html>. The Special Representative states: ‘Indeed, in the SRSG's view the divisive debate over the Norms obscures rather than illuminates promising areas of consensus and cooperation among business, civil society, governments, and international institutions with respect to human rights’: para 69. 219 See ICSID News Release, 16 May 2007: ‘On May 2, 2007, the World Bank received a written notice of denunciation of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the ICSID Convention) from the Republic of Bolivia. In accordance with Article 71 of the ICSID Convention, the denunciation will take effect six months after the receipt of Bolivia’s notice, i.e., on November 3, 2007. In its capacity as the depository of the ICSID Convention, and as required by Article 75 of the ICSID Convention, the World Bank has notified all ICSID signatory States of the Republic of Bolivia's denunciation of the ICSID Convention.’ (See ICSID Highlights ‘3.Denunciation of ICSID Convention’ at <http://www.worldbank.org/icsid>). 220 See further UNCTAD, Investment Provisions in Economic Integration Agreements (New York and Geneva, United Nations, 2006) at 76 and UNCTAD, Bilateral Investment Treaties 1995-2006: Trends in Investment Rulemaking (New York and Geneva, United Nations, 2007) at pp xiii–xiv. 221 On which see further Ch 1 above at 37–9. 222 In this regard, the fair and equitable treatment standard may be interpreted as including consideration of investor conduct where relevant, as does the question whether a regulatory taking has occurred or whether the investor's own conduct has caused or contributed to their loss. See further Peter Muchlinski, ‘“Caveat Investor”? The Relevance of the Conduct of the Investor under the Fair and Equitable Treatment Standard’ 55 ICLQ 527 (2006). 223 On which see further Gus Van Harten, Investment Treaty Arbitration and Public Law (Oxford, Oxford University Press, 2007). Authors: August Reinisch, Loretta Malintoppi Keywords: Arbitral rules & institutions – Specialized treaty frameworks – Iran-US Claims Tribunal – Enforcement – Enforcement in domestic courts – Enforcement through home state action This chapter reviews the different options available for the settlement of investment disputes, describing their main advantages and disadvantages. Topics discussed include national courts, the ICSID system, institutionally supported arbitration other than ICSID or Additional Facility, the Permanent Court of Arbitration, diplomatic protection, and international courts and tribunals.

0subscriber_article?script=yes&id=%2Fic%2FMonograph%2Flaw-iic-9780199231386&recno=62&searchType=browse Chapter 18 Methods of Dispute Resolution

(1)National Courts694

(2)The ICSID System698

(a) ICSID Arbitration 698

(b) ICSID Conciliation 702

(c) ICSID Additional Facility 704

(3)Other Institutional and Ad hoc Arbitration707

(a) Institutionally Supported Arbitration other than ICSID or Additional Facility 708

(b) The Permanent Court of Arbitration 709

(c) Ad hoc Arbitration 710

(4)Diplomatic Protection712

(5)International Courts and Tribunals714

(a) The International Court of Justice 715

(b) Iran-US Claims Tribunal 717

(c) Inter-State Investment Arbitration 718

Concluding Remarks719

WHILE commercial disputes between private parties are usually settled before national courts or arbitral panels, contentious matters between States may fall under the jurisdiction of the International Court of Justice or other (specialized or regional) judicial dispute settlement systems. As to mixed disputes, that is, disputes between States and private parties, in particular those relating to investments, in the past, these were mostly settled either before national courts or through ad hoc arbitration. Individual claimants had very little chance of success if they intended to bring claims against States or State entities. A State could espouse a claim of one of its nationals, but—short of this right of diplomatic protection—there was no direct right of recourse by foreign nationals against States for violations of their rights and no appropriate forum seemed to be generally available for this type of disputes.

Matters changed significantly with the adoption of the ICSID Convention in 1965. 1 Through the system created by the ICSID Convention, private investors can now escape the traditional scheme of diplomatic protection, avoid national jurisdictions, and act directly against a State where an investment was made. It was one of the main purposes of the ICSID Convention to close this gap in available procedures.

Dispute settlement through ICSID arbitration may well be the most appropriate method for investment disputes. The system has known tremendous success, particularly over the last ten years, and is likely to grow further due to the increase in the number of Bilateral Investment Treaties (‘BITs’) all over the world. However, in spite of ICSID's achievements, it would be inaccurate to disregard other methods of settlement of investment disputes, including national and international courts and other (non-ICSID) arbitration or conciliation. In fact, a substantial jurisdictional overlap between these competing jurisdictions potentially exists, that is, situations where one and the same dispute may be settled by different fora.

With such a variety of dispute settlement mechanisms potentially available to claimants in the case of investment disputes, it is not surprising that confusions may arise in practice. The situation is not improved by the fact that States can be deliberately vague in consenting to dispute settlement. It is indeed quite common for national investment legislation or BITs—through which States can make a valid offer to consent to ICSID arbitration under Article 25 of the ICSID Convention—contemplate domestic courts, ICC, UNCITRAL, or ad hoc arbitration as alternatives to ICSID dispute settlement, without making a clear choice.

The wide range of different dispute settlement methods is reflected in the so-called multi-tiered dispute settlement clauses, that is, provisions that refer to ICSID as only one of several dispute resolution possibilities, and which may require

end p.692

the agreement of the parties to select a particular procedure. This is the case with the most recent model BIT adopted by the USA which provides for a period of six months before a claim can be submitted to arbitration and states that the claimant can submit its claim to arbitration under the ICSID Convention or under the UNCITRAL Arbitration Rules 2 or to any other institution, provided that both parties agree. Article 24 paragraph 3 of the US Model BIT provides:

Provided that six months have elapsed since the events giving rise to the claim, a claimant may submit a claim referred to in paragraph 1:

(a) under the ICSID Convention and the ICSID Rules of Procedure for Arbitration Proceedings, provided that both the respondent and the non-disputing Party are parties to the ICSID Convention;

(b) under the ICSID Additional Facility Rules, provided that either the respondent or the non-disputing Party is a party to the ICSID Convention;

(c) under the UNCITRAL Arbitration Rules; or

(d) if the claimant and respondent agree, to any other arbitration institution or under any other arbitration rules. 3