Business and Human Rights in India: Can Investors Be Held Accountable for Human Rights Abuses?

[Kruthi Venkatesh is a lawyer practising in Mumbai, India.]

In recent years, there has been a lot of debate on investor accountability for human rights abuses, especially in relation to cross-border trade and investment agreements. The UN Guiding Principles on Business and Human Rights (“UN Guiding Principles”) has been a guiding force for this discourse. With increase in foreign investments in India, there is also an increased threat of human rights abuses by investors. In order to provide certain safeguards to the affected parties, especially to the vulnerable and marginalized groups, it is imperative that the trade and investment agreements India enters into with other countries contain substantive and effective human rights clauses. In 2017, the U.N. Working Group, in the report on ‘Human Rights and Transnational Corporations And Other Business Enterprises’, suggested that “States should conduct an inclusive and transparent human rights impact assessment before concluding trade-investment agreements and insert explicit substantive human rights provisions in those agreements to preserve adequate policy space to discharge their human rights obligations.” In this respect, the Model text for the Indian Bilateral Investment Treaty (2015 draft) (“Model Indian BIT”), has taken a step forward from its previous models of 1993 and 2003, and has made a provision for investor compliance with domestic human rights laws.

Background to the Model Indian BIT

The Model Indian BIT was released in 2015 and became effective in April 2017. In 2015, India decided to review its 2003 model of the Bilateral Investment Treaty (“BIT”) after receiving multiple notices from foreign investors for an Investment Treaty Arbitration under various BITs, with the first award against India being White Industries Australia Limited v. India. The challenges brought by the foreign investors against India were mainly against certain regulatory policies. According to the Government of India, the objective of the Model Indian BIT is to “provide appropriate protection to foreign investors in India”, “in the light of the relevant international precedents and practices, while maintaining a balance between the investor’s rights and the Government obligations.” After the release of the Model Indian BIT, of the 83 BITs signed by India, India served notices to 58 countries, with whom the existing BITs had expired or was about to expire, to terminate the BITs and to re-negotiate new BITs on the basis of the Model Indian BIT. For the remaining 25 countries, with whom the BITs were still continuing and hence India could not terminate the same, India requested for a Joint Interpretive Statement (JIS) which would be used as an additional tool to interpret the existing BIT between India and these countries. However, so far, only Bangladesh and Colombia have signed a JIS with India.

The Human Rights Clause under the Model Indian BIT

Article 12 of the Model Indian BIT provides that “investors and their investments shall be subject to and comply with the Law of the Host State”. This includes, among other things, environmental law applicable to the investment and its business operations; law relating to conservation of natural resources; and law relating to human rights. Further, Article 12.2 also provides safeguards to the rights of the local communities and indigenous people. Article 12.2 states that “Investors and their Investments should recognise the rights, traditions and customs of local communities and indigenous peoples of the Host State and carry out their operations with respect and regard for such rights, traditions and customs.” Although, the usage of “should” instead of “shall” may create a confusion regarding the binding nature of the provision. An important addition is that under Article 8.3, compliance with Article 12 is mandatory to benefit from the provisions of the Model Indian BIT.

Importantly, Article 14.11 of the Model Indian BIT also allows a State party to initiate action against the investor for a breach of the obligations set out in Article 12, before a Tribunal established under Article 14. This provision gives teeth to Article 12 by allowing a State party to sue to investors for human rights abuses. Despite the inclusion of Article 12, the Model Indian BIT falls short of providing for (a) some of the most basic yet important provisions such as corporate social responsibility towards the local communities in the Host State; and (b) a substantive framework for the investors to comply with the domestic human rights laws. To strengthen the overall framework, the Model Indian BIT should mandate a human rights impact assessment by the investors; it should provide for compliance with international human rights instruments such as the Universal Declaration of Human Rights, the International Covenant on Civil and Political Rights and the International Covenant on Economic, Social and Cultural Rights; and most importantly, it should provide for mandatory consultations/public hearing with affected parties to reach an amicable solution, failing which the parties can resort to domestic legal remedies.

Roadblocks Regarding Implementation of the Model Indian BIT

Owning to India’s decision to terminate 58 BITs and sign JIS with the remaining 25 countries, there are a few issues that India needs to resolve in order to implement the Model India BIT. First, India’s decision to terminate all 58 BITs until re-negotiation implies that in the interim, there is no BIT in force between India and these countries. For the investments made prior to the date of termination of the BIT, there exists a sunset clause allowing the application of the existing BIT for a period of fifteen years. However, for new investments, there will be a gap in the regime. Second, as is evident from the JIS signed between India and Bangladesh, and between India and Colombia, the interpretative note is only for provisions relating to the definition of investor, definition of investment, exclusion of taxation measures, Fair and Equitable Treatment, National Treatment and Most Favoured Nation treatment, expropriation, essential security interests and Settlement of Disputes between an Investor-and a Contracting Party. There is no mention of a provision like Article 12 imposing obligations on the investors. Assuming that subsequent JIS signed with the remaining 23 countries will be modelled on Bangladesh and Colombia, there is no clarity regarding the application of Article 12 and Article 14.11 for the interpretation of the existing BITs with the 25 countries. In such a scenario, does the existing domestic framework in India help, until these agreements can be terminated and re-negotiated?

India’s National Voluntary Guidelines on Social, Environmental & Economic Responsibilities of Business, 2018

Following on from the UN Guiding Principles, India has implemented the National Voluntary Guidelines on Social, Environmental & Economic Responsibilities of Business (“NGVs”) (which were recently amended in 2018), which provides 9 guiding principles to govern investor actions in India. Principle 4 requires businesses to respect the interests of and be responsive to all its stakeholders, including that of the vulnerable and marginalized. ‘Vulnerable and marginalised group’ is defined as a “group of individuals who are unable to realize their rights or enjoy opportunities due to adverse physical, mental, social, economic, cultural, political, geographic or health circumstances.” This principle has a weak implementation as it only demands “respect” and “responsiveness” from the businesses. Principle 5 of the NGVs requires businesses to respect and promote human rights. Both these principles are not effective tools to govern the actions of the investors and given the voluntary nature of the NGVs, they are all the more ineffective. India’s inaction in formulating a binding legal framework on business and human rights can be explained as a part of a general lack of political will of many countries to hold investors accountable for human rights abuses.

Steps taken by the International Community towards Strengthening the Business and Human Rights Movement

The Morocco-Nigeria BIT has been hailed for providing substantive human rights obligations such as conducting an environmental impact assessment (Art. 14(1)), conducting a social impact assessment (Art. 14(2)), maintaining consistency with international human rights agreements (Art. 15(6)) and participating corporate social responsibility contributions towards the sustainable development of the host state and the local community (Art. 24), among others. While these may not be novel provisions, it is commendable to see that countries have taken a step towards developing a stricter regime of investor accountability. Civil society groups and human rights organisations are pushing for a binding treaty on Business and Human Rights. The Intergovernmental Working Group on Transnational Corporations and Other Business Enterprises with respect to Human Rights, in its fourth session held in October 2018, negotiated on the provisions of “Zero Draft” of the proposed treaty on Business and Human Rights. Civil society groups and human rights organisations are demanding establishing direct obligations on companies and criminal liability on corporations and individuals. The Chair-Rapporteur of the Intergovernmental Working Group, in the report on the fourth session, recommended that the “Zero Draft” be amended based on the discussions and inputs provided by various delegates by June 2019. The international community should ensure that the momentum of these negotiations doesn’t die down.

Conclusion

Going forward, India has three important tasks. First, overhauling its own domestic regime as well as the Model Indian BIT towards achieving greater accountability of investors for human rights abuses. The steps taken by the international community should be an important push for India in this respect. Many critics believe that the Model Indian BIT cannot be implemented in its current form and India should perhaps consider revising the Model Indian BIT before re-negotiating the new BITs. Second, in the event that India continues on the road to implement the Model Indian BIT, re-negotiating all 58 BITs. This is a monumental task, one that may take a few years to achieve, but one that is an absolute priority for India. Third, India needs to also clarify the application of Article 12 and Article 14.11 for countries with whom a JIS will be signed.

Being a developing country more susceptible to human rights abuses by big investors from developed countries, India should act speedily. India should also be a frontrunner in the negotiations of the Intergovernmental Working Group on the proposed treaty for Business and Human Rights, and actively propagate for a treaty on Business and Human Rights.