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This is a very serious report for consideration by women’s programs that are monitoring the human rights impact of trade agreements. Indeed, in this complex world where

power and money often dominate non-transparent negotiations on trade and commerce, investment agreements, and marketing treaties as for free trade. Civil society has made efforts to protect human rights, social justice, and such issues as health, land rights, the environment; but the challenges remain. This report is highly insightful!

 

Website of the UN Independent Expert on the Promotion of a Democratic and Equitable International Order:

http://www.ohchr.org/EN/Issues/IntOrder/Pages/IEInternationalorderIndex.aspx

 

To Access Full 50-Page Report – Go to Website: http://www.ohchr.org/EN/HRBodies/HRC/RegularSessions/Session30/Pages/ListReports.aspx

and Scroll Down to A/HRC/30/44, and then Click on UN Language Translation of Choice.

 

	United Nations	A/HRC/30/44
	General Assembly		Distr.: General 14 July 2015   Original: English

 

 

 

 

 

 

 

 

 

 

 

 

Human Rights Council

Thirtieth session

Agenda item 3

Promotion and protection of all human rights, civil,
political, economic, social and cultural rights,
including the right to development

               Report of the Independent Expert on the Promotion  of a Democratic and Equitable International Order, Alfred‑Maurice de Zayas*

 

 

         I.    Introduction

1.   Pursuant to Human Rights Council resolutions 18/6, 21/9, 25/15 and 27/9, the Independent Expert has endeavoured to identify obstacles to the realization of a democratic and equitable international order, including lack of transparency and accountability (A/HRC/21/45 and A/67/277), lack of genuine democratic participation in domestic and global decision-making (A/HRC/24/38), asymmetric economic, financial and trade practices (A/68/284), military expenditures (A/HRC/27/51) and denial of self-determination (A/69/272).

2.   In this report, the Independent Expert addresses the adverse impacts of free trade and investment agreements, whether bilateral or multilateral, on the international order. The report to the General Assembly will focus on the impacts of investor–State dispute settlement arbitrations. The Independent Expert has relied on the advice of economists and given attention to the reports of other Special Procedures mandate holders, including the Special Rapporteur on the right to food (A/HRC/19/59/Add.5 and A/HRC/10/5/Add.2); the Special Rapporteur on the right of everyone to the enjoyment of the highest attainable standard of physical and mental health;[1] the Special Rapporteur on the human right to safe drinking water and sanitation;[2] the Special Rapporteur on extreme poverty and human rights;[3] the Independent Expert on the effects of foreign debt and other related international financial obligations of States on the full enjoyment of all human rights, particularly economic, social and cultural rights;[4] the Special Rapporteur on the independence of judges and lawyers; the Special Rapporteur on the rights to freedom of peaceful assembly and of association (A/HRC/29/25); the former Special Representative of the Secretary-General on human rights and transnational corporations and other business enterprises;[5] and the Working Group on the issue of human rights and transnational corporations and other business enterprises (A/HRC/29/28, paras. 30–31). He strongly endorses articles 1 to 10 of the 2011 Guiding Principles on Business and Human Rights (A/HRC/17/31, annex) and the United Nations “Protect, Respect and Remedy” Framework.[6] He relies on pertinent general comments and concluding observations of treaty bodies including the Human Rights Committee, the Committee on Economic, Social and Cultural Rights, and the Committee on the Rights of the Child. He welcomes the perceptive diagnoses, recent conferences and pertinent reform initiatives by UNCTAD.[7]

3.   Advocates of free trade and investment agreements may question the analysis in this report because of a lack of hands-on experience. Critics, however, cannot delegitimize the human rights recommendations contained herein, which correspond to the Human Rights Council’s resolutions pertaining to the mandate. An international order of sovereign and equal States under the Charter of the United Nations, committed to the rule of law, transparency and accountability must not be undermined by private attempts to replace it with an international order ruled by transnational enterprises lacking democratic legitimacy.

4.   This preliminary report on a complex and multifaceted subject does not question the axiom that, in principle, free trade is a good thing that has promoted development for centuries. A breakdown in trade can even usher economic contraction, as happened with the decline of the Roman Empire into the “dark ages”. Although bilateral investment treaties and free trade agreements may foster international exchanges, one should not be so optimistic as to equate trade with welfare or to pretend that “[o]ne could almost say that trade is human rights in practice”.[8] Given that tariffs are already low, do they need to be reduced further at the expense of domestic regulation of social policy? The focus has shifted to non-trade barriers, which many countries — both developed and developing — maintain to protect their domestic markets. Some observers contend that bilateral investment treaties and free trade agreements are geopolitical constructs having little to do with trade liberalization, while others like Professor Yash Tandon point to the history of trade as a form of imposing economic dominance.[9] In any case, a sensible compromise that allows foreign direct investment while ensuring the protection of human rights[10] is possible, as recognized by the Guiding Principles on Business and Human Rights. Such obligations are derived from customary law and treaty law, notably the International Covenant on Civil and Political Rights and the International Covenant on Economic, Social and Cultural Rights. By definition, every State’s legitimacy depends on its ability to advance the welfare of the population under its jurisdiction. Every State under the rule of law must fulfil this responsibility and cannot divest itself of human rights obligations by outsourcing or privatizing activities that are fundamentally State functions. Before and after entering into international investment agreements, States should conduct human rights, health and environmental impact assessments.[11]

5.   Many observers have expressed concern about certain investor–State dispute settlement arbitrations that have effectively overridden the State’s fulfilment of its function to regulate domestic labour, health and environmental policies, and have had adverse human rights impacts, also on third parties, including a “chilling effect” with regard to the exercise of democratic governance. Arbitration tribunals are credible institutions only when they operate in a demonstrably independent, transparent and accountable manner, as required under article 14 (1) of the International Covenant on Civil and Political Rights concerning suits at law. Investor–State dispute settlement tribunals do not operate in a separate legal context, but are bound by the erga omnes obligations imposed by the international human rights regime,[12] which permeates all areas of human activity, including by non-State actors. Some observers consider certain arbitration awards frivolous and manifestly ill-founded, yet not appealable.

6.   A fundamental problem arises concerning the tension between legally binding human rights treaties and the operation of international investment agreements. As Bohoslavsky has observed: “There is a need for coherence in order to avoid the fragmentation of an international legal order that aspires to legality and, consequently, consistency.”[13]

        II.    Investment protection versus human rights protection

7.   “Corporations everywhere may well agree that getting rid of regulations would be good for corporate profits. Trade negotiators might be persuaded that these trade agreements would be good for trade and corporate profits. But there would be some big losers – namely, the rest of us.”[14]

8.   International investment agreements are not new phenomena in the international arena. Bilateral investment treaties currently number over 3,200. After years of experience with investor–State dispute settlement, the International Centre for Settlement of Investment Disputes (ICSID) and other arbitrations, it has become apparent that the regulatory function of many States and their ability to legislate in the public interest have been compromised. The problem has been aggravated by the chilling effect of certain awards that have penalized States for adopting regulations to protect the environment, food safety, access to generic medicine and reduction of smoking, as required under the WHO Framework Convention on Tobacco Control. The legality of such awards is questionable as contrary to domestic and international ordre public, and may be considered, in some cases, contra bonos mores.

9.   Observers have noted retrogression in the protection of rights including the rights to life,[15] food (A/HRC/25/57), water and sanitation,[16] health, housing, education, culture, improved labour standards, an independent judiciary, a clean environment and the right not to be subjected to forced resettlement. Moreover, there is a legitimate concern that international investment agreements might aggravate the problem of extreme poverty,[17] foreign debt renegotiation, financial regulation and the rights of indigenous peoples, minorities, persons with disabilities and older persons and other vulnerable groups.

10. The Working Group on business and human rights has stressed in its reports that the Guiding Principles on Business and Human Rights stipulate in principles 8 and 9 that “States should ensure that governmental departments, agencies and other State-based institutions that shape business practices are aware of and observe the State’s human rights obligations” and that “States should maintain adequate domestic policy space to meet their human rights obligations when pursuing business-related policy objectives with other States or business enterprises, for instance through investment treaties or contracts”. Accordingly, all international investment agreements under negotiation should include a clear provision stipulating that in case of conflict between the human rights obligations of a State and those under other treaties, human rights conventions prevail.

11. The 1994 North American Free Trade Agreement (NAFTA) is an example of an agreement that has led to relocation of manufacturing industries, resulting in loss of employment in the United States (estimated at 850,000 jobs) and the proliferation of assembly centres in Mexico, known as maquiladoras,[18] where labour costs are lower and social protection below ILO standards. NAFTA “provided investors with a unique set of guarantees designed to stimulate foreign direct investment and the movement of factories within the hemisphere … . Furthermore, no protections were contained in the core of the agreement to maintain labor or environmental standards. As a result, NAFTA tilted the economic playing field in favor of investors, and against workers and the environment”.[19] Several international investment agreements are currently being negotiated, mostly in secret, including the Transatlantic Trade and Investment Partnership (TTIP), the Trade in Services Agreement, the Trans-Pacific Partnership and the Regional Comprehensive Economic Partnership.[20]

12. Numerous scholars and Nobel prize laureates in economics have already signalled the dangers to democratic governance and human rights. Stiglitz states: “These agreements go well beyond trade, governing investment and intellectual property as well, imposing fundamental changes to countries’ legal, judicial, and regulatory frameworks, without input or accountability through democratic institutions. Perhaps the most invidious — and most dishonest — part of such agreements concerns investor protection. Of course, investors have to be protected against the risk that rogue governments will seize their property. But that is not what these provisions are about. There have been very few expropriations in recent decades, and investors who want to protect themselves can buy insurance from the Multilateral Investment Guarantee Agency, a World Bank affiliate (the US and other governments provide similar insurance). … The real intent of these provisions is to impede health, environmental, safety, and, yes, even financial regulations.”[21] With regard to developing countries, the 2014 report of the United Nations Conference on Trade and Development (UNCTAD) further notes: “Foreign capital flows to developing and transition economies may support investment, economic diversification and growth, or generate macroeconomic instability, external imbalances and boom-and-bust-credit episodes. … For macroprudential and developmental reasons, governments need sufficient policy space to be able to manage foreign capital flows, influence their amount and composition, and channel them to productive uses.”[22] This correctly points out that foreign direct investment and other capital flows can generate problems in areas beyond human rights.

13. Observers have noted grave democratic deficits with international investment agreements and investor–State dispute settlement tribunals and wondered why States continue to engage in negotiations, based on partisan studies and overly optimistic forecasts about gross domestic product (GDP) growth and employment. Not only is there a failure of States to proactively disclose information about the agreements, but key stakeholders are excluded from the negotiating table, where mostly corporate lawyers and lobbyists[23] participate. There is even an attempt to circumvent parliaments by “fast-tracking” the adoption of these agreements, manifesting a gross absence of due process and hence of democratic legitimacy.

14. There is no lack of good diagnoses about the challenge. The problem lies in part in an anachronistic and uncritical commitment to the philosophy of market fundamentalism. Joseph writes perceptively: “Free trade is not an end in itself. … The fervour with which free trade advocates continue to promote their cause is astonishing.”[24] Stiglitz notes the lack of empirical evidence that trade liberalization has significantly increased GDP and employment, notwithstanding dogmatic assertions to that effect and amazingly optimistic forecasts for agreements currently under consideration.[25] As Joseph observes, because trade law spills over into other areas of law, the desire for certainty cannot legitimately quarantine trade rules from allegedly non-trade considerations such as human rights and labour standards.[26] With regard to ongoing negotiations on the TTIP, Capaldo questions current assumptions and the projections: “Projections by different institutions have been shown to rely on the same Computable General Equilibrium Model that has proven inadequate as a tool for trade policy analysis. … [W]e assess the effects of TTIP using the United Nations Global Policy Model, which incorporates more sensible assumptions on macroeconomic adjustment, employment dynamics, and global trade. We project that TTIP will lead to a contraction of GDP, personal incomes and employment. We also project an increase in financial instability and a continuing downward trend in the labor share of GDP.”[27]

……………………………………………………………………

 

Guiding Principles on business and human rights: Implementing the United Nations ‘Protect, Respect and Remedy’ Framework – excerpts

20. The Human Rights Council endorsed the Guiding Principles in its resolution 17/4 of 16 June 2011.

                         Guiding principle 9

States should maintain adequate domestic policy space to meet their human rights obligations when pursuing business-related policy objectives with other States or business enterprises, for instance through investment treaties or contracts.

                         Commentary

Economic agreements concluded by States, either with other States or with business enterprises — such as bilateral investment treaties, free trade agreements or contracts for investment projects — create economic opportunities for States. But they can also affect the domestic policy space of Governments. For example, the terms of international investment agreements may constrain States from fully implementing new human rights legislation, or put them at risk of binding international arbitration if they do so. Therefore, States should ensure that they retain adequate policy and regulatory ability to protect human rights under the terms of such agreements, while providing the necessary investor protection.

                         Guiding principle 25

As part of their duty to protect against business-related human rights abuse, States must take appropriate steps to ensure, through judicial, administrative, legislative or other appropriate means, that when such abuses occur within their territory and/or jurisdiction those affected have access to effective remedy.

                   Report of the Working Group on the issue of human rights and transnational corporations and other business enterprises, A/HRC/29/28 – excerpts

                         Transparency in investment arbitration

21. A significant opportunity for increasing transparency in the area of investor-State arbitration has arisen from work of the Working Group on Arbitration and Conciliation of the United Nations Commission on International Trade Law (UNCITRAL). The UNCITRAL Working Group started working on transparency in 2010, with a mandate that stressed the importance of ensuring transparency in investor-State dispute settlements (A/6317, para. 314). In a written submission in support of that mandate, a Member State observed that the lack of transparency in investor-State arbitration was contrary to the fundamental principles of good governance and human rights upon which the United Nations is founded (see A/CN.9/662, para. 20). That work has culminated in two major texts: (a) the rules on transparency in treaty-based investor-State arbitration, which came into effect on 1 April 2014; and (b) a convention on transparency[28] (the United Nations Convention on Transparency), which was finalized by the Commission in July 2014 and opened for signature on 17 March 2015. The Working Group on the issue of human rights and transnational corporations and other business enterprises welcomes these new transparency rules.

22. Both the Guiding Principles and the UNCITRAL work on transparency back procedural and legal transparency and take a practical approach to achieving that aim. The new UNCITRAL rules on transparency seek to address a regular concern with investor-State dispute settlement cases – namely that their typically confidential and non-participatory nature does not allow for involvement by affected stakeholders, or for an adequate balance between the need for States to ensure that they retain adequate policy and regulatory ability to protect human rights and provide investor protection, as clarified in Guiding Principle 9. With the new UNCITRAL rules and the United Nations Convention on Transparency in Treaty-based Investor-State Arbitration, States have a practical means to promote good governance and respect for human rights with a broader policy framework that is aligned with the Guiding Principles.[29]

23. These rules, when they apply, provide a transparent procedural regime under which investment treaty arbitrations are conducted. They can be used in investor-State arbitrations initiated under UNCITRAL arbitration rules, as well as under other institutional arbitration rules or in ad hoc proceedings. States can now incorporate them into investment treaties concluded on or after 1 April 2014, but for the rules to apply to disputes arising under the more than 3,000 investment treaties concluded before that date, the States parties to a treaty, or disputing parties in an investor-State arbitration, would need to agree to apply the rules under that treaty or to that dispute. This highlights the importance of the Convention on Transparency, which provides an efficient, multilateral mechanism by which States can agree, subject to relevant reservations, to apply the rules to all arbitrations arising under their investment treaties concluded before 1 April 2014. The Working Group welcomes the rules and considers that an obvious step for States to remedy incoherence between current modes of investment with norms for good governance and human rights considerations, including those set out in the Guiding Principles, would be to sign and ratify the Convention.

24. The Working Group is pleased to have had the opportunity to engage with UNCITRAL, including at its forty-seventh session in July 2014, and to note that in the report of that session the Commission agreed that the UNCITRAL secretariat should monitor developments in the area of business and human rights, in cooperation with relevant bodies within the United Nations and beyond and inform the Commission about developments of relevance to UNCITRAL work (see A/69/17, para. 204).

                   Guiding principles on human rights impact assessments of trade and investment agreements, A/HRC/19/59/Add.5 – excerpts

25. All States should prepare human rights impact assessments prior to the conclusion of trade and investment agreements.

26. States must ensure that the conclusion of any trade or investment agreement does not impose obligations inconsistent with their pre-existing international treaty obligations, including those to respect, protect and fulfil human rights.

27. Human rights impact assessments of trade and investment agreements should be prepared prior to the conclusion of the agreements and in time to influence the outcomes of the negotiations and, if necessary, should be completed by ex post impact assessments. Based on the results of the human rights impact assessment, a range of responses exist where an incompatibility is found, including but not limited to the following:

(a)     Termination of the agreement;

(b)     Amendment of the agreement;

(c)     Insertion of safeguards in the agreement;

(d)     Provision of compensation by third-State parties;

(e)     Adoption of mitigation measures.

28. Each State should define how to prepare human rights impact assessments of trade and investment agreements it intends to conclude or has entered into. The procedure, however, should be guided by a human rights-based approach, and its credibility and effectiveness depend on the fulfilment of the following minimum conditions:

(a)     Independence;

(b)     Transparency;

(c)     Inclusive participation;

(d)     Expertise and funding; and

(e)     Status.

29. While each State may decide on the methodology by which human rights impact assessments of trade and investment agreements will be prepared, a number of elements should be considered:

(a)     Making explicit reference to the normative content of human rights obligations;

(b)     Incorporating human rights indicators into the assessment; and

(c)     Ensuring that decisions on trade-offs are subject to adequate consultation (through a participatory, inclusive and transparent process), comport with the principles of equality and non-discrimination, and do not result in retrogression.

30. States should use human rights impact assessments, which aid in identifying both the positive and negative impacts on human rights of the trade or investment agreement, to ensure that the agreement contributes to the overall protection of human rights.

31. To ensure that the process of preparing a human rights impact assessment of a trade or investment agreement is manageable, the task should be broken down into a number of key steps that ensure both that the full range of human rights impacts will be considered, and that the assessment will be detailed enough on the impacts that seem to matter the most:

(a)     Screening;

(b)     Scoping;

(c)     Evidence gathering;

(d)     Analysis;

(e)     Conclusions and recommendations; and

(f)      Evaluation mechanism.