Bridging the Gap Between Investor Rights and Obligations: How academics can contribute to a fairer international law on foreign investment

The academic discussion on international investment law has been marked by the division of international law on foreign investment into two subfields, where one specializes in investor rights and ISDS while the other focuses on investor guidelines or vague obligations (business and human rights). This division is consistent with the legal imaginations of those who promoted ISDS in the 1950s and 1960s.[1] These financiers and lawyers promoted a “politics of decoupling” investor rights from investor obligations.[2] The politics of decoupling have implications for how we think about or imagine international society, especially the relationship between the private and the public. It also limits alternative or evolutionary paths whereby international investment law could become more attuned to the needs of sustainable development, among others, by ensuring that foreign private investment is better aligned with the 2030 UN Sustainable Development Goals.

The absence of investor obligations in international investment law has shaped both international investment law and ISDS. The decoupling of investor rights from investor obligations has a long history and was the main focus of critiques made by scholars such as Schwarzenberger.[3] In the 1970s, capital-importing countries insisted on the importance of international corporate obligations and the creation of institutions to govern multinational corporations. However, business associations and capital-exporting countries insisted corporations should not have international binding obligations. At the United Nations, the question was debated for more than 15 years until the negotiation of the Code of Conduct was discontinued in the early 1990s. Meanwhile, most countries signed international investment agreements containing only investor rights and ISDS.

The unbalance was not inconsequential. The actions of some foreign investors were connected to human rights violations. One of the first cases to attract the attention of activists and academics involved Western oil companies in Nigeria, in particular Royal Dutch Shell, which since the 1970s had polluted the Niger Delta and severely affected the livelihood of the Ogoni people. The case gained worldwide notoriety in the mid-1990s after the execution of Nigerian playwright and activist Ken Saro-Wiwa. The role of multinational corporations in apartheid South Africa also garnered global attention. Scholars regarded this situation as an essential business and human rights issue, as the companies operated in collusion with the government violating human rights simply by complying with its laws and policy.[4] Another paradigmatic case was the Bhopal gas disaster of 1984, which also made a strong impact on political and academic debates and opened a discussion on how to hold multinationals accountable for their conduct.

A significant effort in this regard was the elaboration of the United Nations’ “Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises With Respect to Human Rights” (known as “The Norms”) in 2003.[5] The Norms implied a paradigm shift by imposing international human rights obligations on multinational corporations and creating a global regime of public responsibility. However, those actors who supported international investment treaties and ISDS resisted this initiative and recommended instead that the United Nations explore a non-binding model based on CSR.

ISDS defenders generally oppose the incorporation of direct obligations into investment treaties and support arbitration as an appropriate means of resolving disputes; meanwhile, many of those who demand obligations from international investors do not favour CSR standards and advocate the termination of ISDS. Some states have introduced direct investment obligations into their treaties, but capital-exporting countries have resisted this reform strategy.[6]

Various actors have insisted on their demands for binding human rights obligations for investors and a global enforcement mechanism for human rights. At the behest of Ecuador, the United Nations created a group in charge of drafting a legally binding instrument.[7] This process has enjoyed the support of South Africa and numerous civil society organizations, leading to some progress despite strong resistance from business associations and capital-exporting countries.[8]

In current ISDS practice, the relationship between investor rights and obligations continues to be dominated by the politics of decoupling. Rights and duties exist at different levels, even if this separation inevitably shows cracks. Many ISDS cases involving Latin American countries illustrate these tensions. In the case of Suez v. Argentina, the arbitral tribunal decided in 2010 that states are rarely in a situation where the only way to protect human rights is to violate investor rights; for the arbitrators, there are always means of complying with their investment and human rights obligations.[9] The majority in the Eco Oro v. Colombia tribunal found in that treaty exceptions ensure that states can take steps to protect the environment (restitution is not required), but these provisions do not waive the requirement to pay compensation.[10]

This legal imagination strengthens investor rights. ISDS tribunals have insisted that investors must carry out due diligence,[11] and states are not required to pay compensation for general and non-discriminatory public measures that address regulatory or human rights risks. In Eco Oro v. Colombia, however, the majority decided that the investor had legitimate expectations despite the lack of due diligence[12]—providing no reason for this outcome, as noted by the dissenting arbitrator.[13] Similarly, the awards in Copper Mesa v. Ecuador, Bear Creek v. Peru and SAS v. Bolivia show that investor misconduct or lack of due diligence does not make a significant difference to some arbitrators.[14] In fact, these three awards illustrate how difficult it is for ISDS tribunals to balance the lack of due diligence or investor misconduct with the obligation of states to pay compensation.

Some arbitrators have recognized that investors have certain obligations under international law.[15] The Urbaser v. Argentina award was the first decision to affirm that investors have certain international law obligations; however, the arbitrators defined these obligations quite broadly and generally. It remains to be seen what “not engage in activity aimed at destroying” human rights could imply in future cases.[16]

The dissenting opinion in Bear Creek v. Peru remains one of the few cases in which an arbitrator required a foreign investor to comply with a specific international human rights obligation. This obligation focused on obtaining free, prior, and informed consent under ILO Convention 169.[17] But the majority did not agree, pointing out that international law does not create obligations for investors.[18] Another relevant case was David Aven v. Costa Rica, in which the tribunal accepted that the obligations of investors may arise from international erga omnes regulations or from national laws; however, the arbitrators did not discuss the matter further because Costa Rica made only general references to environmental damage.[19]

The politics of decoupling remains a central pillar of international investment law and, arguably, a severe design imbalance or asymmetry. Some of the legal strategies followed by states, local communities, and some arbitrators to address this decoupling include a demand for consistency of international investment and human rights treaties, the obligation of investors to carry out due diligence, or the recognition that investors have some broad human rights obligations or are responsible for certain duties such as free, prior, and informed consent. The problem is that these corporate obligations or standards of conduct remain embedded in a legal imagination shaped by the politics of decoupling. The outcome is not different if arbitrators are applying a so-called “modern” investment treaty (See Bear Creek v. Peru or Eco Oro v. Colombia).

This legal imagination is not only the result of treaty texts or investment awards. It is also regularly reproduced in classrooms, international conferences, and expert meetings. There is no reason to approach international investment protection and business and human rights as two different legal fields. The UN report Human Rights-Compatible International Investment Agreements provides an excellent example of how to bring the two together.[20]Academics can contribute in this respect. They can teach investor rights together with investment obligations. They can also discuss ISDS and international corporate responsibility for human rights violations in the same papers or conferences. One should not forget that the politics of decoupling started or was consolidated precisely by private efforts to disentangle investor rights from obligations.


Nicolás M. Perrone, Professor of Economic Law, School of Law, Universidad de Valparaíso, Chile. Ignacio Vásquez Torreblanca, Research Assistant in International Law, Sustainability and Global Economy, School of Law, Universidad de Valparaíso, Chile.


[1] Perrone, N. M. (2022). Bridging the gap between foreign investor rights and obligations: Towards reimagining the international law on foreign investment. Business and Human Rights Journal, 7(3), 375–396.

[2] Ibid.

[3] Schwarzenberger, G. (1960). The Abs-Shawcross Draft Convention on Investments Abroad: A

critical commentary. Journal of Public Law, 9 (1960) 147–171.

[4] Wettstein, F. (2020). The history of “business and human rights” and its relationship with corporate social responsibility. In S. Deva & D. Birchall (Eds.), Research handbook on human rights and business, p. 23–45. Edward Elgar Publishing.

[5] UN Economic and Social Council. (2003). Norms on the responsibilities of transnational corporations and other business enterprises with regard to human rights E/CN.4/Sub.2/2003/12/Rev.2, August 26, 2003.

[6] Steininger, S. (2021). Investment and human rights in the shadow of the pandemic: Recent developments in 2020. In L. Sachs, L. Johnson, & J. Coleman (Eds.), Yearbook on international investment law & policy 2020, p. 224–225. Oxford University Press

[7] Cantú, H. (2016). ¿Hacia un tratado internacional sobre la responsabilidad de las empresas en el ámbito de los derechos humanos? Reflexiones sobre la primera sesión del grupo de trabajo intergubernamental de composición abierta. Anuario mexicano de derecho internacional, 16, 425.

[8] UN General Assembly. (2021) Human rights-compatible international investment agreements. Note by the Secretary-General’ (Report of the Working Group on the issue of human rights and transnational corporations and other business enterprises), A/76/238, 27 July 2021.

[9] Suez and others v. Argentina (ICSID Case No. ARB/03/17) Decision on Liability, 30 July 2010, paras. 238–240.

[10] Eco Oro v. Colombia (ICSID Case No. ARB/16/41), Decision on jurisdiction, liability and directions on quantum, 9 September 2021, para. 829.

[11] For example, Novenergia II and others v. Spain (SCC Case No. 2015/063), Award, 15 February 2018; Antin Infrastructure Services v. Spain (ICSID Case No. ARB/13/31), 15 June 2018; Masdar Solar v. Spain (ICSID Case No. ARB/14/1), 16 May 2018; Greentech and others v. Spain (SCC Case No. 2015/150), Award, 14 November 2018.

[12] Eco Oro v. Colombia (ICSID Case No. ARB/16/41), Decision on jurisdiction, liability and directions on quantum, 9 September 2021. p. 805–805.

[13] Eco Oro v. Colombia (ICSID Case No. ARB/16/41), Partial dissent of Philippe Sands, 9 September 2021.

[14] Copper Mesa Mining Corporation v. Ecuador (Caso PCA No. 2012-02), Award, 15 March 2016; Bear Creek Mining Corporation v. Perú (Caso CIADI No. ARB/14/2), Award, 30 November 2017; South American Silver ( SAS ) v. Bolivia (Caso PCA No. 2013-15), Award, 22 November 2018.

[15] Krajewski, M. (2020). A nightmare or a noble dream? Establishing investor obligations through treaty-making and treaty-application. Business and Human Rights Journal, 5, p. 121–128.

[16] Urbaser and others v. Argentina (ICSID Case No. ARB/07/26), Award, 8 December 2016, paras. 1199–1210.

[17] Partial Dissenting Opinion of Philippe Sands in Bear Creek v. Peru (ICSID Case No. ARB/14/2), 12 September 2017, para. 10.

[18] Bear Creek Mining Corporation v. Peru (ICSID Case No. ARB/14/2), Award, 30 November 2017, paras. 664–666. Decision available at

[19] David R Aven and others v. Costa Rica (ICSID Case No. UNCT/15/3), Award, 18 September 2018, paras. 738–739.

[20] UN Working Group on the Issue of Human Rights and Transnational Corporations, and Other Business Enterprises. (2021). Report on human rights-compatible international investment agreements (UN Doc. A/76/238).