International Arbitration: An Impediment for Human Rights and Environmental Law

By Devan Braun

water-is-a-rightThe Center for International Environmental Law  (“CIEL”) is an organization that advocates using the law to protect the environment, promote human rights, and support indigenous communities. During the course of my co-op there as a PHRGE fellow, I focused mainly on corporate accountability, and was drawn to research investor-state dispute settlements (“ISDS”), a little-known area of international law that has disastrous consequences for human rights and the environment.

Bilateral investment treaties are trade agreements between two States that often include international arbitration provisions, allowing corporations to sue States for enacting legislation designed to protect the public interest. ISDS often comes up in cases of mining investments and access to water services, after corporations have invested resources in development projects or extracting natural resources. When such projects face limitations due to the State’s environmental and social safeguards, corporations often resort to the arbitration mechanisms present in bilateral investment agreements as a means of recovering what they consider to be lost profits.

These international arbitration provisions were initially built into trade agreements in an attempt to attract foreign investment to States where the judicial systems were perceived as corrupt. Without such provisions, corporations worried about having a lack of legal recourse if they were wronged. Providing the option to go to an international tribunal, such as the World Bank’s International Centre for Settlement of Investment Disputes (“ICSID”), instead of domestic courts, gave corporations the protections and guarantees they sought in order to commit to investing in less-developed States. Notably, however, governments are consistently losing cases in these fora, or are forced into unfavorable settlements with corporations using the international arbitration system.

mineria-en-el-paramoA case example helps to illustrate this concept. Eco Oro, a Canadian mining company, filed a request for ICSID arbitration in the case of the Angostura gold mining project in the fragile, high-altitude wetland – known as the páramo – in Santurbán, Colombia. The páramo provides clean water to over one and a half million Colombians, and is a huge carbon sink, rich in endangered biodiversity. Eco Oro invested in a mining initiative in the páramo that has damaging environmental and social consequences through the use of cyanide to extract gold there. However, the Constitutional Court of Colombia recently affirmed that mining in the páramo violates the country’s constitution, stating that the protection of water sources takes precedence over any extractive project in these ecosystems. This ruling brought the Eco Oro project to a standstill.

Because of this action by the Colombian court to protect its citizens’ right to clean water and environmental preservation, Eco Oro has expressed its intent to sue the government of Colombia. Equally disturbing is the fact that, the International Finance Corporation, the private-lending arm of the World Bank with the mission to alleviate poverty and promote inclusive development, invested in Eco Oro’s mining project; a project that is now merely an arbitration-based investment.

ifc-divestMy work at CIEL confirmed that such cases are, unfortunately, quite common. The projects that resort to international arbitration often affect indigenous peoples’ right to free, prior, and informed consent concerning projects undertaken on their land, the human right to clean water, and other environmental obligations. The Eco Oro case is only one example of the way corporations use arbitration mechanisms to evade environmental and human rights accountability for their mining operations. Just this year, Venezuela was ordered to pay US$1.4 billion in taxpayer money to Canadian mining company Crystallex. These cases illustrate a systemic problem that impedes environmental and human rights defenders’ capacity to advocate on behalf of communities and ecosystems most vulnerable from development projects. We cannot expect to meaningfully address climate justice and human rights obligations, as well as harms against indigenous peoples, if investors can sue our governments for millions and billions of dollars for trying to do just that.

Devan Braun is a student at Northeastern University School of Law and served as a PHRGE Fellow at the Center for International Environmental Law

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5 Responses to International Arbitration: An Impediment for Human Rights and Environmental Law

  1. Pingback: International Arbitration: An Impediment for Human Rights and Environmental Law — RIGHTSCAPES | Shamiso Zinzombe's Blog

  2. A very interesting article. The Colombian constitutional court judgment in the Eco Oro case you mentioned is most interesting. It is good to read about constitutional courts taking such an important stand in support of human rights and climate justice. Now it has gone to this rather opaque body even after the constitutional courts judgment. I wonder though as the World Bank is involved, what are the possibilities of the community/state securing a panel and well getting the bank to investigate is there no way to intervene?

  3. Devan Braun says:

    Hi Shamiso,

    Thanks for the comment, and I agree about the great stance by the Constitutional Court. I’m not sure if this responds to your question adequately with respect to the World Bank’s involvement, but it is interesting to note that there was actually an investigation by the Compliance Advisor Ombudsman (CAO) over this project. The CAO investigates complaints from IFC project-affected communities, and reports directly to the President of the World Bank Group. They released a report recently in response to a complaint over this project, ultimately finding that the IFC failed to comply with its own investment standards for conducting proper environmental and social impact assessments on this project. The IFC, however, acknowledged no wrongdoing in its response to the report. This may be a good place for community involvement and civil society activism moving forward, and it will be interesting to monitor the progression of any potential arbitration over the project!

    You can see the CAO’s investigation report here: http://www.cao-ombudsman.org/cases/document-links/documents/CAOComplianceInvestigationReportonIFCinvestmentinEcoOroMinerals-English.pdf.

  4. Pingback: International Arbitration: An Impediment for Human Rights and Environmental Law — RIGHTSCAPES | NUSL BLOGS

  5. Hi Devan

    Thank you for your reply and a copy of the CAO report. It does make for interesting reading!! Elements of the IFC policy on environment and sustainability are encouraging indeed. As you point out, IFC implementation falters, if they don’t acknowledge wrong doing, they won’t employ a remedy. It is certainly one of the useful points for civil society to engage in activism. I understood from the report, CAO may keep its investigation open until there is compliance. Monitoring the potential outcome of the arbitration will no doubt be relevant too. Although, I am still wondering if arbitration (Canada-Colombia) should affect IFC requirements and how? Is it a good idea and why might that not be? How do we distinguish this from other contexts? A very hopeful part of me, is wondering if it may also help that the (maybe no longer not so new) Canadian government which is on record as a proponent of the environment in contrast to its predecessor. is in power. Plus, the role for civil society in Canada on this likely strengthened? A very important case, I shall follow and share your journey on this as widely as I can.

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