The Relationship Between a Host State and a Foreign Corporate Investor: A Few Remarks Under International and the EU Law

Multinational enterprises can be defined as groups of companies, that is, as a network of companies with separate legal personalities and retraceable to different states, each lacking an effectively independent decision-making power. From the juridical point of view, this does not necessarily mean to qualify such enterprises as a unicum, but to consider both the possible aggregative relations among the different companies and the fact that these companies are all subject to the power, or at least the influence, of another separate company, that is, the parent company. See Acconci (2004), pp. 139–175. See also Solomon (1976), pp. 329–428; Morris (1976), pp. 468–478; Dubin et al. (2017).

See the ‘Declaration on the Establishment of a New International Economic Order’ and the ‘Program of Action on the Establishment of a New International Economic Order’, namely, the Resolutions of the UN General Assembly 3201 (S-VI) and 3202 (S-VI) adopted on May 1, 1974. See Sacerdoti (2015), pp. 659–668

See, among others, Horn (1980); Sacerdoti (1987), pp. 263–294; Sen (1998), pp. 419–446; Rubin (1995), pp. 1275–1289; Salacuse (2010), pp. 575–594.

See Tully (2005).

The OECD Guidelines were revised in 1979, 1984, 1991, 2000 and 2011. The last text includes guidelines on various aspects of the activities of multinational enterprises: ‘Disclosure’, ‘Human Rights’, ‘Employment and Industrial Relations’, ‘Environment’, ‘Combating Bribery’, ‘Bribe Solicitation and Extortion’, ‘Consumer Interests’, ‘Science and Technology’, ‘Competition’ and ‘Taxation’.

See Beyerlin (2013).

The Global Compact include ten principles on the safeguard of human rights, of workers and of the environment, as well as the fight against corruption. For further information, see https://​www.​unglobalcompact.​org/​about/​faq (Accessed February 15, 2022).

See Shaughnessy (2000), pp. 159–172; Khan (2011).

As to the text of the ‘Guiding Principles’, see https://​www.​ohchr.​org/​Documents/​Issues/​Business/​Intro_​Guiding_​PrinciplesBusine​ssHR.​pdf (Accessed February 15, 2022).

As to corporate ‘due diligence’ for the safeguard of human rights, see, among others, Martin-Ortega (2014), pp. 44–74; Ollino (2022), pp. 149-155, 253-262.

Resolution 26/9, September 29, 2017, A/HRC/RES/26/9.

See the ‘Zero Draft’ of the convention on ‘Legally Binding Instrument to Regulate, in International Human Rights Law, the Activities of Transnational Corporations and Other Business Enterprises’ that the Open-ended Intergovernmental Working Group on Transnational Corporations and Other Business Enterprises with respect to Human Rights (OEIWG) of the UN Human Rights Council adopted on July 16, 2018. Its Art. 2 specifies that the aim of this convention is to ‘strengthen the respect, promotion, protection and fulfilment of human rights’ and ‘ensure effective access to justice and remedy to victims of human rights violations’ in the context of transnational business activities and to ‘advance international cooperation in this regard’. Negotiations are still ongoing. For further information, https://​www.​ohchr.​org/​en/​hrbodies/​hrc/​wgtranscorp/​pages/​igwgontnc.​aspx (Accessed February 15, 2022). See, among others, Letnar Černič (2010); De Schutter (2015), pp. 41–67; Deva and Bilchitz (2017).

See, among others, Černič and van Ho (2015); de Brabandere and Hazelzet (2017), pp. 221–243; Deva and Birschall (2020); Chiussi Curzi (2020); Mares (2022).

See the UN ‘Declaration on the Rights of Peasants and Other People Working in Rural Areas’, Resolution No. A/C.3/73/L.30, Third Committee on Social, Humanitarian and Cultural Matters of the UN General Assembly. Seven states voted against, such as, among others, Australia, the United Kingdom and the United States, while 49 states including, among others, Italy, abstained. See, among others, González Núñez (2014), pp. 589–609.

Point 6 of the ‘Statement’ is about ‘responsible business conduct’. Under this Point, ‘[g]overnments should urge that multinational enterprises operate in a socially responsible manner. To this end, the European Union and the United States intend to promote responsible business conduct, in general, and adherence by third countries to the OECD Guidelines for Multinational Enterprises, in particular’.

Under ‘Principle VIII’, ‘[i]nvestment policies should promote and facilitate the observance by investors of international best practice and applicable instruments of responsible business conduct and corporate governance’.

The actions of the European Union have focused on the protection of the environment and of human rights, social inclusion, the quality of trade transactions in the internal market, namely the quality of production and consumption models, and transparency.

See Regulation (EC) No. 1221/2009 of the European Parliament and the Council, November 25 2009, on the ‘voluntary acceptance of an Eco-Management and Audit Scheme (EMAS)’, that revises Regulation (EC) No. 761/2001 and the Decisions of the Commission No. 2001/681/EC and No. 2006/193/CE’, In: EUOJ, L 342, December 22, 2009, 1-45. See also Regulation (EU) No. 2018/2026 of the Commission, 19 December 2018 that ‘modifies the Annex IV of the Regulation (EC) No. 1221/2009 of the European Parliament and of the Council on the voluntary acceptance of an Eco-Management and Audit Scheme (EMAS)’, In: EUOJ, L 325, December 20, 2018, pp. 18–24.

See the Green Paper on ‘[p]romoting a European framework for corporate social responsibility’, COM (2001), July 18, 2001, 366 final, para. 20.

See the Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions, ‘[a] renewed EU strategy 2011-14 for corporate social responsibility’, COM (2011), October 25, 2011, 681 final, para. 3.1. See Acconci (2009); See also, among others, Leyens (2018).

Most of international treaties on investment are bilateral. Germany and Pakistan concluded the first bilateral investment treaty in 1957. See, among others, Sacerdoti (1997), pp. 251–460; Alvarez et al. (2011); Subedi (2016); Sornarajah (2017).

See, among others, Shihata (1991), p. 484; Juillard (1994), pp. 9–215; Sacerdoti (1997); Weil (2000), pp. 401–416; Kahn (2007), pp. 3–41.

See Feldman (2016), pp. 176–225; Marcoux (2019), pp. 23–60.

For an overview, see Juillard (2009), pp. 273–281; Acconci (2014), pp. 165–193. See also Tanzi (2012), pp. 73–76; Kulick (2017).

A ‘non-relaxation commitment’ is in the preamble of the 2012 Model BIT of the United States. This runs as follows ‘[d]esiring to achieve these objectives in a manner consistent with the protection of health, safety, and the environment, and the promotion of internationally recognized labor rights’. Over the last decades the reference to ‘necessity’ has also become recurrent. For example, Art. 33 of the 2012 Canada-China BIT is a relevant example. This reads as follows: ‘2. [p]rovided that such measures are not applied in an arbitrary or unjustifiable manner, or do not constitute a disguised restriction on international trade or investment, nothing in this Agreement shall be construed to prevent a Contracting Party from adopting or maintaining measures, including environmental measures: (a) necessary to ensure compliance with laws and regulations that are not inconsistent with the provisions of this Agreement; (b) necessary to protect human, animal or plant life or health; or (c) relating to the conservation of living or non-living exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption’.

The preamble of the 2007 Draft Model BIT of Norway underlines ‘the importance of corporate social responsibility’. Its Art. 32 on ‘corporate social responsibility’ provides that ‘[t]he Parties agree to encourage investors to conduct their investment activities in compliance with the OECD Guidelines for Multinational Enterprises and to participate in the United Nations Global Compact’.

Art. 12 on ‘corporate social responsibility’ of the 2015 Model BIT of India provides that ‘[i]nvestors and their enterprises operating within its territory of each Party shall endeavour to voluntarily incorporate internationally recognized standards of corporate social responsibility in their practices and internal policies, such as statements of principle that have been endorsed or are supported by the Parties. These principles may address issues such as labour, the environment, human rights, community relations and anti-corruption’.

Art. 16 on ‘corporate social responsibility’ of the Canada – Benin BIT provides that ‘[e]ach Party should encourage enterprises operating within its territory or subject to its jurisdiction to voluntarily incorporate internationally recognised standards of corporate social responsibility in their practices and internal policies, such as statements of principle that have been endorsed or are supported by the Parties. These principles address issues such as labour, the environment, human rights, community relations and anti-corruption’.

The text of Art. 16 on ‘corporate social responsibility’ of the Canada – Serbia BIT is the same as that of the Canada – Benin BIT.

Art. 14.17 on ‘corporate social responsibility’ of the Chapter on investments of the USMCA Treaty provides that ‘[t]he Parties reaffirm the importance of each Party encouraging enterprises operating within its territory or subject to its jurisdiction to voluntarily incorporate into their internal policies those internationally recognized standards, guidelines, and principles of corporate social responsibility that have been endorsed or are supported by that Party, which may include the OECD Guidelines for Multinational Enterprises. These standards, guidelines, and principles may address areas such as labor, environment, gender equality, human rights, indigenous and aboriginal peoples’ rights, and corruption’.

Under Principle 9, ‘[i]nvestment policies should promote and facilitate the adoption of and compliance with best international practices of corporate social responsibility and good corporate governance’. The proposals of the UNCTAD for the revision of the typical regulatory structure of international treaties on investment include the enhancement of the relevance of corporate social responsibility and of international cooperation.

The preamble of the 2016 consolidated text of the CETA provides that ‘[encouraging] enterprises operating within their territory or subject to their jurisdiction to respect internationally recognized guidelines and principles of corporate social responsibility, including the OECD Guidelines for Multinational Enterprises, and to pursue best practices of responsible business conduct’. A similar provision is included in the preamble of the 2020 Italian Model BIT.

For an overview of the approach to international investment law of African states, see Kane (2017), pp. 231–246.

See Art. 15 on ‘minimum standards for human rights, environment and labour’, stressing that ‘15.1. [i]nvestors and their investments have a duty to respect human rights in the workplace and in the community and State in which they are located. Investors and their investments shall not undertake or cause to be undertaken acts that breach such human rights. Investors and their investments shall not assist in, or be complicit in, the violation of the human rights by others in the Host State, including by public authorities or during civil strife. 15.2. Investors and their investments shall act in accordance with core labour standards as required by the ILO Declaration on Fundamental Principles and Rights of Work, 1998. 15.3. Investors and their investments shall not [establish,] manage or operate Investments in a manner inconsistent with international environmental, labour, and human rights obligations binding on the Host State or the Home State, whichever obligations are higher’. See also Art. 17 on ‘investor liability’, underlining that ‘17.1. [i]nvestors and [i]nvestments shall be subject to civil actions for liability in the judicial process of their Home State for the acts, decisions or omissions made in the Home State in relation to the Investment where such acts, decisions or omissions lead to significant damage, personal injuries or loss of life in the Host State. 17.2. Home States shall ensure that their legal systems and rules allow for, or do not prevent or unduly restrict, the bringing of court actions on their merits before domestic courts relating to the civil liability of Investors and Investments for damages resulting from alleged acts, decisions or omissions made by Investors in relation to their Investments in the territory of the Host State’.

See Art. 11 of Part Two on ‘rights and obligations’, specifying that the goals of this Part are ‘[…] to provide COMESA investors with certain rights in the conduct of their business within an overall balance of rights and obligations between investors and Member States’. See also Art. 13 of the same Part, underlining that ‘COMESA investors and their investments shall comply with all applicable domestic measures of the Member State in which their investment is made’. Finally, Art. 20, para. 2, provides that, if a taking occurs, ‘[c]ompensation may be adjusted to reflect the aggravating conduct by a COMESA investor or such conduct that does not seek to mitigate damages’.

A few arbitral tribunals referred to the need of a balance between the alleged ‘legitimate expectations’ of investors and their diligent conduct within the interpretation and implementation of the treaty clauses on the fair and equitable treatment. See Mamidoil Jetoil Greek Petroleum Products Societe S.A. v. Albania, ICSID Case No. ARB/11/24, Award, March 30, 2015, especially para. 634; and Charanne and Construction Investments v. Spain, SCC Rules of Arbitration, Case No. 062/2012, Award, January 21, 2016, especially para. 505.

The bilateral treaty on investments between Nigeria and Morocco is an important example. See its Art. 21—‘access to investor information’ – providing that ‘1) [h]ost States have the right to seek information from a potential Investor or its home state about its corporate governance history and its practices as an Investor, including in its home state. 2) Host States shall protect confidential business information they receive in this regard. 3) Host States may make the information provided available to the public in the community where the investment may be located, subject to the protection of confidential business information and to other applicable domestic laws’. See also Art. 24 on ‘corporate social responsibility’ clarifying that ‘1) [i]n addition to the obligation to comply with all applicable laws and regulations of the Host State and the obligations in this Agreement, and in accordance with the size, capacities and nature of an investments, and taking into account the development plans and priorities of the Host State and the Sustainable Development Goals of the United Nations, investors and their investments should strive to make the maximum feasible contributions to the sustainable development of the Host State and local community through high levels of socially responsible practices. 2) Investors should apply the ILO Tripartite Declaration on Multinational Investments and Social Policy as well as specific or sectorial standards of responsible practice where these exist. 3) Where standards of corporate social responsibility increase, investors should strive to apply and achieve the higher-level standards’.

See Art. 22 on ‘corporate social responsibility’, stressing that ‘1. [i]nvestors shall abide by the laws, regulations, administrative guidelines and policies of the host State. 2. Investors shall, in pursuit of their economic objectives, ensure that they do not conflict with the social and economic development objectives of host States and shall be sensitive to such objectives. 3. Investors shall contribute to the economic, social and environmental progress with a view to achieving sustainable development of the host State’. See also Art. 23 – ‘obligations as to the use of natural resources’ – providing that ‘1. [i]nvestors shall not exploit or use local natural resources to the detriment of the rights and interests of the host State. 2. Investors shall respect rights of local populations, and avoid land grabbing practices vis-à-vis local communities’. Finally, see Art. 24 on ‘business ethics and human rights’, clarifying that ‘[t]he following principles should govern compliance by investors with business ethics and human rights: 1. support and respect the protection of internationally recognized human rights; 2. ensure that they are not complicit in human rights abuses; 3. eliminate all forms of forced and compulsory labor, including the effective abolition of child labor; 4. eliminate discrimination in respect of employment and occupation; and 5. ensure equitable sharing of wealth derived from investments’.

See Footer (2009), pp. 33–64, especially pp. 61–63; Zhu (2017), pp. 91–119, especially pp. 111–119; Levashova (2018), pp. 40–55, especially pp. 45–47 and 49–55.

For further information on my idea of multilateralism in international and EU investment law, see, in particular, Acconci (2014), pp. 187–189; Idem (2018), pp. 315–319.