A Meeting of the Two Worlds: The Human Rights Regime and International Investment Law – A Critique of Urbaser v. Argentina

Priya Garg*

A plethora of cases have been filed before investment tribunals regarding the issue of interaction or conflict between human rights obligations of investor or State and his or its, as the case may be, duties under international investment law (hereinafter, IIL).[1] The recent case of Urbaser v. Argentina only joins this already long queue. Critique of the case has been made before as well on this blog and it can be accessed here. There have been several other write ups as well analysing this verdict. The present post presents a fresh analysis on certain aspects or furthers the already made analysis of this judgement.

In this case, Claimants are two Spanish shareholders in the company which secured from the Argentinean government the contract for providing water and sewage services to the country’s low-income regions. When the agreement was entered into, only a limited percentage of the Argentinean inhabitants had access to drinking water and sewage services. Therefore, the primary objective behind the agreement was to expand these services in the concerned regions. Subsequently, Argentina faced financial emergency due to which its government began imposing restrictions and conditions upon the foreign investor at hand for securing benefits for its own residents. One of them was the restraint against cutting water and sewage supply of the households which have not paid their dues to the company. This pushed the company into losses, eventually resulting into its insolvency.

Therefore, the Claimant approached the investment tribunal contending the violation by Argentina of its Spain-Argentina BIT obligations. Argentina (Respondent) defended itself by arguing that its IIL obligation did not stand breached because it had acted in the manner which its human rights obligations under its domestic as well as international law required. Additionally, it counterclaimed that the Claimant’s failure to finish in time its pipe laying and other kind of work promised under its contract with Argentina amounted to the violation of the former’s obligations under contract law and the obligations of pact sunt servanda and good faith under international law. Moreover, it argued that since this non-performance of the contractual obligations by the investor denied the Argentinean residents of their basic right to water and sanitation, therefore the Claimant’s contractual breach simultaneously resulted in its violation of its human rights obligations under international law.

It is crucial to note, as will be made clear later as to why, that under the applicable law clause of their BIT, Spain and Argentina agreed that the investment tribunal shall arrive at its decision on the basis of the BIT Agreement and, where appropriate, on the basis of the other treaties between the Parties, the host nation’s domestic law and general principles of international law (Article IX(5), Argentina-Spain BIT (1991)). Hence, the presence of this applicable law clause, which allows the application of international law principles, ultimately made the Respondent take support of its international human rights obligations to defend itself as well as to develop a counterclaim against the Claimant.

Finally, the investment tribunal identified ‘Right to Water’ as a ‘human right’ under international law. It accepted the Respondent’s defence resting on its international human right obligations to conclude that the Respondent’s conduct did not amount to the breach of its IIL obligations. It however denied that the Claimant’s non-adherence to the contractual terms of expanding water and sewage network in the Argentinean regions has amounted to violation of its human rights obligations under international law. Very interestingly, the Tribunal nevertheless went on to state that the international human rights obligations can be ‘imposed’ ‘directly’ on private corporations (i.e. non-state actors) in relation to their conduct with the residents of the host nations. It relied on conventions and international documents such as the UDHR and International Covenant on Economic, Social and Cultural Rights (ICESCR) among others to substantiate its assertion.

Firstly, this case contributes by allowing the host nation to successfully raise the defence of its international human rights obligations against the investor’s allegation of breach of the BIT obligations by the former. In earlier cases, in the similar context, such a defence was either not allowed or was not discussed or it did not influence the tribunal’s final verdict despite its acceptance as a principle.[2]

Secondly, it would be fascinating to notice that the tribunal at one place remarked that Argentina’s constitutional law obligations (which also contain its international law obligations because under the Argentinean Constitution, international law obligations override the country’s constitutional law provisions as well) will ride over its BIT obligations because the investor while undertaking its investment decision could have discovered by conducting its due diligence the existence of these prior obligations of the State of Argentina under its domestic law.[3] Making this kind of observation is also no mean feat for an investment tribunal.

This case is also significant because it stated that the international human rights obligations can be imposed directly on private corporations/investors. I begin with critiquing this stance of the investment tribunal.

Under international law, an entity can be a subject or an object of international law wherein objects are relatively more passive players than subjects. Though objects can be beneficiaries of or adherers to the international law provisions, nevertheless unlike subjects, they can neither directly bring an action nor can they be directly sued in relation to these provisions. Conventionally and as a matter of rule, States and international organisations are considered as subjects while non-state entities such as private corporations or individuals are not. On the basis of the distinction that exists between subjects and objects, obligations and rights under international law can be classified as primary/direct and secondary/indirect.  While obligations can be ‘imposed’ on objects directly, they can be ‘enforced’ only through the State governing these objects and not by directly suing the objects.

However, direct enforcement is possible by a State against the objects belonging to some another State if both of they agree upon creating a legal mechanism (such as constituting a tribunal) for this purpose. Unless this happens, direct enforcement of rights against objects is not legally correct. This is because creation of such an arrangement otherwise would undermine the States autonomy as they would then lose a share of their autonomy and power vis-à-vis their own objects if direct claims against the objects come to be permitted.

In the present case, Tribunal cited international documents and advanced other arguments based on logic[4] to state that human rights obligations such as the Right to Water can be ‘imposed’ directly on private corporations.[5] Even if this assertion and the approach behind arriving at it is considered to be correct, then also this does not ipso facto imply that such obligations can even be directly ‘enforced’ against private corporation by the host nation. As explained above, this direct ‘enforcement’ (and not mere direct ‘imposition’ of obligations) under international law against non-state actors can only happen when the concerned states have agreed to creating an international forum for such direct enforcement. Clearly and for obvious reasons, the states’ consent under their BIT to submit the disputes ‘relating to the BIT’ to the investment tribunal could not be reasonably read as their consent to vest this tribunal with the power to allow direct ‘enforcement’ of international law obligations against the ‘objects’ of international law. Hence, any attempt by the Tribunal, if undertaken at all, to directly ‘enforce’ international law obligations against the non-state actors (here, investor) would infringe upon the sovereignty of the State to which the investor belongs. Hence, this would be inappropriate under international law.

In the present case, though ultimately the Tribunal did not allow the direct ‘enforcement’ of any human right obligation[6] against the private entities and hence did not commit the error of law of the nature just highlighted above; nevertheless, its failure to clarify the difference that exists between direct ‘imposition’ and ‘enforcement’ of obligations existing under international law could lead to a misunderstood interpretation of the tribunal’s stance in this case, in future. Hence this clarification I just brought into notice becomes significant.

There were some loopholes even in the reasoning of the tribunal behind direct imposition of international law obligations on investor. The Tribunal explained that international law obligations, such as human rights obligations, can be directly imposed on investors (in addition to States) because under IIL, investors have the ‘right’ to directly obtain benefits out of the BIT provisions and that hence, it would be unjust to assert that no ‘duty’ can be directly fastened on them under the same regime.[7]

This is fallacious because under a BIT both the party nations ‘mutually’ share the rights and duties. Further, they simultaneously consent to allowing the investors of each other’s nation to carry out investment in the foreign soil on favourable terms. Hence, at very juncture itself, there is no prima facie or blatant asymmetry between the negotiating States and there is an element of consent with respect to the terms of a BIT. Infact, as a matter of fact, this is how BITs have been drafted since their inception. And it is an altogether different ‘policy’ question if we wish to make amendments in the pattern and the format of the BITs so as to impose substantive ‘obligations’ directly on private investors as well instead of imposing them only on the party nations while leaving the investors with only substantive ‘rights’ under BIT. Hence, if any country wishes to impose such direct obligations on private foreign investors they can incorporate a provision to that effect under their BITs. Resultantly, it is not in the realm of an adjudicatory body to suo moto extend the substantive law obligations to private investors when BIT is silent on this point as in the case in the present fact scenario.

Another fallacy in the tribunal’s reasoning is that it has stated its stance on several such issues relating to international human rights law regarding which serious and never-ending debates already exist. For instance, it is debatable if a) right to water is a standalone international human right, b) direct human right obligations have indeed been fastened on private corporations under different human right documents such as UDHR, ICESCR and if so, then what is the extent of such obligations, or c) the UDHR provision(s) imposing obligations on non-state actors fall under customary international law and is hence binding.

The latter point is crucial because UDHR by virtue of being a declaration and not a treaty would be otherwise not binding. Similarly, at another place, while explaining its stance that international human rights obligations can be imposed directly on private corporations, the tribunal reasoned that since as per the documents dealing with obligations of this kind human rights are for everyone, this implies that the obligation to not destroy them ought to be discharged by all, including non-state actors.[8] This kind of reasoning by the Tribunal has been termed beforehand as the ‘natural rights approach’ to understanding the human rights obligations. However the correctness of this approach is itself a matter of debate. Despite this, the tribunal did not delve into the discussion about the arguments and counter-arguments that already exist on each of these contentious matters. Instead, it only outrightly adopted one side of the argument(s) that already has been advanced in each of the debates without explaining why the other side of argument was not endorsed by it.[9] This lack of elaborate reasoning and discussion would make its analysis and verdict prone to being departed from.

Additionally, another problem in the tribunal’s reasoning is that certain portions of its judgement[10] may give an impression that it was trying to use the applicable law clause of the Spain-Argentina BIT, wherein it has been mentioned that the BIT dispute could be decided in accordance with international law provisions as well, to ‘create’ obligations for the private investor which the BIT did not even contain in the first place. This is because unlike in case of Morocco-Nigeria BIT, under the Spain-Argentina BIT, no human right obligation of any kind has been imposed on the investors.

Therefore, the phrase in the applicable law clause of the Spain-Argentina BIT allowing the use of international law provisions by the Tribunal implied that in cases of ambiguity in relation to the BIT provisions, other related areas of law such as the international law can be used to arrive at the correct interpretation by the Tribunal. Hence, the permission given under the applicable law clause to the Tribunal to resort to the international law provisions did not imply that the international law provisions can be used to create a completely new and standalone obligation without it being mentioned in the BIT.

However, I also acknowledge the concern that may exist when I state that a new human right obligation can be imposed by an investment tribunal on investor only when the obligation finds a mention in the BIT. It is that amidst the pressure to attract greater foreign investment, specifically so in case of underdeveloped and developing nations, countries can do away with insisting on incorporating such non-investment related provisions under their BIT. Nevertheless, existence of this concern does not ipso facto imply that investment tribunal begins utilizing its powers to ‘create’ human rights obligations for investors having their existence only under international law while the BIT is completely silent on this point. Therefore, this understanding of the Tribunal of the impact of the applicable law clause under the BIT allowing the reference to international law provisions requires correction.

As corollary to this concern, I have another reservation against the tribunal’s discussing in detail that if in the present case the investor had indeed violated the Argentinian residents’ human rights.[11] This was done to address the Respondent’s counterclaim that the Claimant has violated its international human rights obligations. However, it was not even required of the Tribunal to discuss the merits of this contention of the Respondent. This is because in the Spain-Argentina BIT, there is no umbrella clause. Hence, mere violation of any international human rights obligations without involving the contravention of a BIT provisions would not confer the jurisdiction on the investment tribunal to decide the issue of such contravention.

Finally, I discuss if the verdict actually marks a significant shift in the position of law under the IIL regime so far the interface between human rights and IIL obligations is concerned.

Upon reading this verdict there is likely to be a temptation to overestimate its contribution. Its selective reading is likely to make one believe that this case at least states, if not anything else as being significant, that international human rights obligations can be directly ‘imposed’ on private corporations.[12] This inference, if arrived at, would not be correct as this proposition comes alive only against a specific backdrop.

This is because first of all, in the verdict it has been explicitly stated that international human right obligations cannot be directly imposed on investors where their act does not amount to ‘destruction’ of existing human rights. Hence, ‘omission’ in stopping the ongoing destruction of human rights by someone else or taking positive steps for promotion of human rights of the host nation’s inhabitants would not attract claims of international human rights directly against investor by host nation. Therefore, where host state seeks to compel its foreign investor to perform its contractual obligation to expand water supply and sanitation network and to continue providing water supply and sanitation services to its inhabitants despite their non payment of bill by arguing that international human rights requires this, this judgement would be of no practical utility to the host nation.

Second, very interestingly, this case destroys its own contribution of stating that international law obligations can be imposed directly on corporations (i.e. non-State actors). This is because while awarding the final relief, the tribunal said that even if the investor was found to have been violating its human right obligation to provide water supply nevertheless this cannot allow the host nation to claim damages from him.[13] This is because such duty of reparation by way of damages against the investor (i.e. the aspect of the possibility of direct ‘enforcement’) does not exist under the Spain-Argentina BIT which is often the case with the BITs. Hence the practically useful aspect for the host nation of the tribunal’s stance that international human rights obligations can be directly ‘imposed’ on private corporations is only that this proposition can be used by any tribunal as a mitigating factor thereby reducing the quantum of damages that it was otherwise going to grant to private investor against the host State’s violation of its BIT obligations.

Alternatively, sometime in future this proposition may prod a host State to plead in cases of breach of international human rights obligations by private investor that the investor cannot approach the investment tribunal to claim remedy against the host State for its alleged violation of its BIT obligation. The application of the ‘clean hands doctrine’ should prevent the guilty foreign investor from seeking the tribunal’s assistance in getting its grievance resolved under BIT.

And it is only to this limited extent and for this narrow purpose, the Tribunal’s proposition imposing international human rights obligations directly on investors can be useful to the host nation.

Further, as a matter of conclusion I would also like to state given the several loopholes that exist in the approach of the tribunal in arriving at its verdict, there is uncertainty if this verdict, given all its flaws as highlighted by me in this paper, would at all be followed by investment tribunals ‘as it is’ in the future.


Priya Garg, Student at West Bengal National University of Juridical Sciences, Kolkata.


[1] Marc Jacob, International Investment Agreements and Human Rights, INEF Research Paper Series Human Rights, Corporate Responsibility and Sustainable Development, 14, 03/2010, Institute for Development and Peace (2010).

[2] Tamar Meshel, Human Rights in Investor-State Arbitration: The Human Right to Water and Beyond, 6:2 Journal of International Dispute Settlement 9-17 (2015); Azurix Corp. v. Argentine Republic, ICSID Case No. ARB/01/12; Compañia de Aguas del Aconquija S.A. and Vivendi Universal S.A. v. Argentine Republic, ICSID Case No. ARB/97/3; Biwater v. Tanzania, ICSID Case No. ARB/05/22; ICSID Case No. ARB/04/4; Técnicas Medioambientales Tecmed S.A. v. United Mexican States, ICSID Case No. ARB (AF)/00/2; Marc Jacob, supra 1, at 16 (Another example of this conservative stand can be found in the Metalclad case where the tribunal did not view the public purpose exceptions favourably. According to the conventional view, only the effect of the impugned state measure on the property rights of an investor is relevant, the purpose of the state’s actions is not relevant. Hence, State’s obligations to pay compensation for expropriation can arise irrespective of the benefits that the measure could carry for the society).

[3] Urbaser S.A. and Consorcio de Aguas Bilbao Bizkaia, Bilbao Biskaia Ur Partzuergoa v. The Argentine Republic (Respondent), ICSID Case No. ARB/07/26, ¶514 & 515.

[4] See Urbaser S.A. and Consorcio de Aguas Bilbao Bizkaia, Bilbao Biskaia Ur Partzuergoa v. The Argentine Republic (Respondent), ICSID Case No. ARB/07/26, ¶1193 and 1994.

[5] Urbaser S.A. and Consorcio de Aguas Bilbao Bizkaia, Bilbao Biskaia Ur Partzuergoa v. The Argentine Republic (Respondent), ICSID Case No. ARB/07/26, ¶1193-1205.

[6] Even if it is ‘imposed’ these obligations existing under international law directly on private companies.

[7] Urbaser S.A. and Consorcio de Aguas Bilbao Bizkaia, Bilbao Biskaia Ur Partzuergoa v. The Argentine Republic (Respondent), ICSID Case No. ARB/07/26, ¶1194.

[8] Urbaser S.A. and Consorcio de Aguas Bilbao Bizkaia, Bilbao Biskaia Ur Partzuergoa v. The Argentine Republic (Respondent), ICSID Case No. ARB/07/26, ¶1199.

[9] See Urbaser S.A. and Consorcio de Aguas Bilbao Bizkaia, Bilbao Biskaia Ur Partzuergoa v. The Argentine Republic (Respondent), ICSID Case No. ARB/07/26, ¶1182-1210.

[10] Urbaser S.A. and Consorcio de Aguas Bilbao Bizkaia, Bilbao Biskaia Ur Partzuergoa v. The Argentine Republic (Respondent), ICSID Case No. ARB/07/26, ¶1210 (For instance, when the Tribunal remarked that international human rights law might have been resorted to by it for abstaining the investor corporation from committing the act amounting to the destruction of the existing human rights under international law).

[11] Urbaser S.A. and Consorcio de Aguas Bilbao Bizkaia, Bilbao Biskaia Ur Partzuergoa v. The Argentine Republic (Respondent), ICSID Case No. ARB/07/26, ¶1193-1221.

[12] E.g., Urbaser S.A. and Consorcio de Aguas Bilbao Bizkaia, Bilbao Biskaia Ur Partzuergoa v. The Argentine Republic (Respondent), ICSID Case No. ARB/07/26, ¶1193-1210.

[13] Urbaser S.A. and Consorcio de Aguas Bilbao Bizkaia, Bilbao Biskaia Ur Partzuergoa v. The Argentine Republic (Respondent), ICSID Case No. ARB/07/26, ¶1220.

Urbaser v. Argentina: Analysing the Expanding Scope of Investment Arbitration in light of Human Rights Obligations

by Sujoy Sur

While allowing investors the right to directly bring a claim against the States has said to be the single most progressive development in International Law in the 20th century, they also have gained recognition as ‘subjects’ of international law. It is this recognition which puts a corollary duty on the investor to regard human rights while carrying out activities in the host state. Over the past couple of decades, there has been a growth in, both, international human rights jurisprudence and investment arbitration claims by investors against States. With both procedural and substantive matters of importance coming to the fore, it has led to the convergence of both the areas and raised a valid concern of the importance of erga omnes obligations of human rights in investment arbitration. A human rights concern is a two-way street, with States being concerned about human rights violations by the investor in their territory and the investor being careful that his/her human rights are not unjustly violated by the State.

The recent award in the case of Urbaser v. Argentina brought to the fore the aspect of increasing convergence of human rights with investment law. This case cements the strengthening position being given to non-treaty international obligations in investment arbitration cases, besides mercantile obligations, as also seen previously in the Phillip Morris cases last year. The Panel, besides deciding on other questions on merit of the case, successfully allowed the State to make a human rights counter-claim against the Spanish corporation, Urbaser. A first of its kind, as the treaty allowed for filing of claims from either of the parties, thus, allowing for the possibility of counter-claims.

The dispute arose under the Spain-Argentina BIT. The claimant investor was a shareholder in a concessionaire which provided water and sewerage services in the Province of Buenos Aires, Argentina. This was granted to the claimant’s subsidiary, AGBA, in early 2000s. Argentina faced a financial emergency in 2001-02. It took emergency measures in January 2002, in the process of which the Claimant’s concession was also terminated in 2006 by Buenos Aires, leading to Claimant’s financial loss and insolvency. Citing obstruction and persistent neglect of AGBA’s shareholders’ interests, the Claimants alleged violations of the BIT, namely:

  • Article III.1, on the prohibition to adopt unjustified or discriminatory measures;
  • Article IV.1, on the obligation to afford fair and equitable treatment to the referred investments; and
  • Article V, which forbids any illegal and discriminatory expropriation of foreign investments, imposing obligations to compensate.

After analyzing Article X(5) of the BIT, which states that, “The arbitral tribunal shall make its decision on the basis of… norms of private international law, and the general principles of international law”, the tribunal held that it is permitted by the BIT to incorporate principles of international law to adjudicate the claim, thus, the BIT was not a ‘closed system strictly preserving investors’ right under the BIT. On the basis of this the Tribunal rejected the Claimant’s contention that guaranteeing the human right to water is a duty that may be born solely by the State, and never borne also by private companies like themselves. The Tribunal referred to the Universal Declaration of Human Rights (“UDHR”) and the International Covenant on Economic, Social and Cultural Rights (“ICESCR”) while reasoning its stance on making private companies liable for human rights violations in investment disputes. Article 30 of the UDHR imposes the duty on any group or person to maintain rights under the Declaration, while General Comment 15 (Art. 11 and 12) by the Committee on Economic, Social and Cultural Rights stresses the importance of the supply and the economic accessibility of water, which will be the duty of States to ensure, in case it is being provided by third parties. Corroborating its finding, the Tribunal further held that ‘international law accepts corporate social responsibility as a standard of crucial importance for companies operating in the field of international commerce’, which includes the duty to comply with human rights obligations in countries other than the seat of their incorporation. Further, the Tribunal relied on Article 31(3)(c) of the Vienna Convention on Law of Treaties (“VCLT”) and Tulip Real Estate v. Republic of Turkey to conclusively hold that rules of international law, of which human rights are also a part of, cannot be ignored when adjudicating a claim arising out of a BIT, especially when the treaty provides for it.

 

The decision reached by the Panel is of consequential importance for two reasons. Firstly, investment treaty arbitration is in a precarious situation as many countries are either signing out of it or have already rescinded their treaties, owing to the regulatory chill they have been facing because of multitudes of investment claims. Secondly, the decision reaffirms the greater scope which States are being given off late by arbitral tribunals to regulate, to assert their sovereignty in a bona fide manner, and to make sure the rights of their citizens are not violated in fear of protecting the treaty rights of alien investors. In Philip Morris v. Uruguay last year in the investor was not allowed to subvert the national policy adopted for the purposes of public health. The intention of the State, it being bona fide, to take a public policy measure was given a higher legal ground against the claims of it being unreasonable, discriminatory and disproportionate which were analysed and rejected by the tribunal. The tribunal had also imported the human rights doctrine of “margin of appreciation” from the jurisprudence of European Court of Human Rights to grant Uruguay a regulatory space to take such a measure for its national needs. The ruling in Urbaser also squarely goes against the ruling in cases of Biloune v. Ghana Investments Centre and Tradex Hellas S.A. v. Albania, where the tribunals expressly dismissed human rights argument stating that its competence is limited only to the commercial merits in the dispute.

The ruling in Urbaser can also be held to be controversial for the purposes of imposing a human rights liability on investors, but this goes well with the prevailing trend of, I) Investors having a legal personality as transnational in international law, therefore, II) having the duty to uphold international law, including human rights. Back in August 2003 itself, the Sub-Commission on the Promotion of Human Rights of the United Nations Commission on Human Rights (CHR) approved the Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with Regard to Human Rights which defines human rights as one in the UN multilateral and customary system, being in consonance with Articles 1, 2, 55 and 56 of the UN Charter. The Norms on Transnational Corporations reinforce how corporations must pay heed to international human rights law. Similarly, the UN issued another document in June 2011, titled ‘Guiding Principles of Business and Human Rights’ which lays down principles of human rights which Corporations must follow, in recognition of the State’s obligation to protect human rights in its territory and the duty on Corporations, as specialised organs performing specific functions, to respect human rights while doing so. Although these obligations might be obligatory in nature, they are a restatement of the will of the international community and act as a guiding mechanism for international courts/panels to adjudicate upon disputes. These are obligations besides the more binding ones which the Panel cited, such as the UDHR, ICESCR, which have attained peremptory status in International Law.

From the point of view non-investment treaty obligations, the incorporation of it was also done by an arbitral panel in the case of SPP v. Egypt, where on the basis of the wordings of the treaty, the Panel interpreted that these obligations exist as far as the dispute is concerned when seen through Article 42 of the ICSID Convention. Though Egypt was not allowed the defence as the cancellation of the contract took place before it ratified the UNESCO Convention under which the contract would be illegal, SPP findings laid down that a) Investment obligation can be held to be against the State’s general international obligations, b) International obligations can be given precedence over investment promises. However, in the Urbaser case, Article X of the BIT specifically provided for adherence to international law and obligations besides contractual and investment law obligations, thus providing the tribunal a scope to directly adjudicate the case through the parameters of non-treaty obligations.

The Urbaser case has many far reaching implications. Besides the jurisdictional implication as far as counter-claims are concerned, it sets a path for greater allowance for conflict of other international law norms with that of international investment law, thus, a greater scope for regulation and assertion of sovereignty for the host States.

It is not that this is first case where the defence of human rights has been acknowledged. In Suez v. Argentina the tribunal did acknowledge the validity of State’s action in accordance with international law, by virtue of Article 42 of ICSID, but it held the concern to be mutually exclusive from that of the State’s obligations for the investor. In SAUR International v Argentine Republic the tribunal had also acknowledged the need for the State to regulate for human rights concerns as a part of its ‘governmental powers’, but said it has to be balanced out against the investors interests, thus, holding Argentina’s actions as one eligible for compensable expropriation to the investor. The tribunal in this case not only acknowledged the importance of human rights obligations in the role they play as a part of international law in a consent based mechanism such as investment arbitration, which in earlier cases was disregarded, but also stated the value of both the norms when seen from a wider aperture of international law. Although one can say that human rights obligations, here that of water, trumped the BIT obligations but a hierarchical nature of obligations was not stated explicitly. This position might become clearer with similar disputes in the future.

By directly adjudicating that a human rights issue and an investment dispute are not mutually exclusive, the tribunal’s decision can be ascertained to hold that different aspects of international law are under the ambit of one legal system which is how a dispute must be seen. Investment claims cannot be allowed to fragment international law by making them an exception to inherent obligations which every subject of international law is expected to follow. Such an inclusion and interpretation by ad-hoc tribunals is another way how investment law can converge and is seen to be converging with other branches of international law, rather than fragmenting it, besides multilateralization of investment treaty law as another way. This, thus, is the great comeback which the bilateral investment treaty regime can build upon.

What this dispute also inspires is how a treaty should be worded to allow the arbitral panel a greater scope to assess the action of the host State in light of its domestic and international obligations. Many States which are backing out of the investment treaty regime should and will come up with treaties which expressly state that tribunal should adjudicate a claim on the basis of principles of private and public international law, as seen in Article X of the Spain-Argentina BIT. Article 14(9) of the India’s new Model BIT, Article 9.23 of the TPP are a couple of examples.

It will be pertinent to see whether human rights as a whole will be put on a pedestal which might act as the looking glass through which investor duties and violations will be analysed or will it be graded so that only the most important rights which are peremptory in nature are allowed as a defence. This will also to an extent satiate the concerns raised by the tribunal in the SAUR case of there being an asymmetrical power relationship between the investor and the State. However, as far as right to water is concerned, it has always been acknowledged by international law as one of the most important human rights guarantee but it got disregarded owing to myriad of technical and jurisdictional reasons.

Lastly, such a decision by the tribunal also changes the scenario as far as the liability of investors is concerned and as to how investors must pay regard to other international obligations, particularly to that of human rights. This makes the investors more accountable to the kind of investments they make, forcing them to foresee the repercussions of their actions. This will surely bring a positive change to the investment climate in the world and allow States to take confidence in the investment treaty regime with renewed vigor.


* Sujoy Sur, BA/LLB, Gujarat National Law University.