How the international investment law regime undermines access to justice for investment-affected stakeholders

CCSI | January 2024

How the international investment law regime undermines access to justice for investment-affected stakeholders

by Ladan Mehranvar

For over a decade now, the international investment law regime, which includes investment
treaties and their central pillar, the investor-state dispute settlement (ISDS) mechanism,
has been facing sustained calls for reform. These have largely centered on the concerns
regarding the high costs of ISDS, the restrictions placed by the investment treaty regime on
the right—or duty—of states to regulate in the public interest, and the questionable benefits
arising from these treaties in the first place. Several states have taken proactive measures:
some have revised investment treaty standards to better protect their regulatory powers;1
others have introduced new approaches to investment promotion, protection, and dispute
settlement that more closely align with their sustainable development objectives;2 and
some states have withdrawn from the investment treaty regime altogether.3 In addition,
reforms to the regime are taking place at the multilateral level within the United Nations
Commission on International Trade Law (UNCITRAL),4 the Organization for Economic
Cooperation and Development (OECD),5 the World Trade Organization (WTO),6 and through
other regional fora.7

Despite being the subject of extensive and prolonged public debate for several years, these
reforms have continued to reinforce the binary structure of the regime. This structure
restricts the focus of investment relations solely to investors and host states, disregarding
the actual or potential impacts of investment projects, relations, disputes and awards on the
rights and interests of other impacted stakeholders. In particular, large-scale, land-based
investment projects involve a broad network of people and relations, and often intersect
with local communities whose social identity, way of life, and livelihoods are intimately
connected to the land and natural resources at stake.8 It is this category of investments,
which result in the creation of a new “project” with a large land footprint, that is the topic
of this paper. The consequences of these types of investments can be significant, as they
often lead to land expropriations, negative human health consequences, water pollution,
air contamination, deforestation, or shifts in migration patterns within the area,9 thereby
impacting the rights and interests of people in these communities and the environment
more broadly.

From the perspective of investment-affected communities,10 foreign investments arise
out of a partnership between the investor and the state.11 After all, it is the government
that facilitates the establishment and development of these very projects. Meanwhile,
these impacted people are often not consulted or involved in project establishment or
development, and many may not even know that a project has been approved until after it
has been approved or once it is operational. According to scholarship in this area,12 these
affected individuals and communities often find themselves in a situation where they must
assert their rights against the negative impacts of such projects, or resist these projects by
mobilizing, protesting, or resorting to legal (and non-legal) measures against the investor
and/or the state. This dynamic is frequently reflected in investment disputes, in which
foreign investors challenge measures that state agencies have taken in response to, inter
alia, local opposition to investments, in an attempt to safeguard their economic interests.13

However, even though the underlying investments, government measures, ISDS disputes,
and any resulting awards often implicate local people and communities in profound ways,
these stakeholders find it difficult, if not impossible, to assert their rights and have their
concerns addressed in investment policy making, in the establishment or continuation
of investment projects, and in any ensuing investor-state disputes that may arise under
investment treaties (or investment contracts). In fact, the voices of investment-affected
people are effectively, and in most cases, actually excluded from the “institutional logic” of
the investment treaty regime.14 This is because of the narrow scope of the applicable treaties
and the limited consideration given to human rights and domestic legal frameworks in ISDS
proceedings. In addition, these communities often encounter legal and practical obstacles
when seeking to protect their rights and interests under other instruments and fora, like
international human rights law, or domestic and regional judicial systems. This is because
victories won by investment-affected communities at these other fora are often pyrrhic
since they may ultimately be undermined by the investment treaty regime if or when the
investor succeeds in its ISDS claim.

It is this local dimension, which has received little attention in public debate and action on
reform at the global, regional, and national levels, that is the focus of this paper. We draw
on a group of 13 investor-state claims (and two potential claims)15 that relate to the rights
and interests of impacted communities and identify ways in which their access to justice is
undermined, hampered or denied entirely by the ISDS mechanism.16 Before describing the
ways that access to justice is undermined or denied in these ISDS cases, we first define the
term “access to justice” below.