[Andrea K. Bjorklund is the L. Yves Fortier Chair in International Arbitration and International Commercial Law at McGill University Faculty of Law, Canada]
Mr. Alschner and Ms. Tuerk’s contribution very usefully highlights three areas where international investment law and sustainable development principles may intersect: climate change, industrial policy, and corporate social responsibility. This precision is particularly valuable given the less-than-concrete nature of the idea of “sustainable development”.
Two common threads running through each section are the essential participation of the host state in fostering sustainable development and the tension between the pursuit of short-term goals (such as rapid economic development and the influx of capital and immediate returns in investment) and long-term goals (such as fostering sustainable economic development). Investment agreements, either individually or in the guise of a multilateral instrument establishing shared principles, can contribute only a limited amount to the furtherance of sustainable development goals unless their reach expands drastically. That point is well illustrated in the area of climate change. Investment agreements themselves do not require
that states legislate in environmentally friendly ways, or that states prioritize fighting climate change over promoting robust short-term industrial growth. Thus, amendments to existing investment agreements, or carefully drafted new agreements, can satisfy one side of the equation – they can eliminate whatever constraints investment agreements might impose on states’ desire regulate to combat climate change or to promote certain industrial policy goals. Yet states must still want to enact those laws.
States also must be the primary architects of their industrial policy, and certainly should strive to ensure that their investment agreements do not interfere with their pursuit of those goals. Yet, as Mr. Alschner and Ms. Tuerk note, many policies designed to foster municipal economic development can also lead to unjustified investment protectionism. For example, the “infant industries” argument often offered by states (and by industries) seeking to facilitate the establishment of a national entrant into a competitive industry. In the short term such policies are possibly beneficial. In the long run, however, a state might be left with elderly infants who do not want to leave the shelter provided by policies, often somewhat costly, that insulate them from competition, particularly in the home market.
Insofar as fostering responsible investor behavior is concerned, again the host state’s laws are, at least in principle, the best vehicles for regulating and monitoring the activities of investors. Host states can impose conditions on investors prior to granting concessions, ensure compliance with local laws prior to granting licenses, and generally police investors’ behavior. Some states might lack the capacity effectively to ensure that investors follow those laws, but their strong commitment to requiring responsible corporate behavior is the ideal situation and without host states’ engagement and cooperation fostering that behavior will be very difficult.
The authors recognize potential impediments to active host-state regulation, and suggest a few alternatives. One is to amend international investment agreements to include references to corporate social responsibility and to encourage their interpretation in a manner that gives effect to those principles; another is encourage states themselves to engage in their best endeavors to promote companies’ adoption of corporate social responsibility principles. A third is to ensure that incoming investors, prior to their admission, be subject to a screening procedure identifying their corporate social responsibility practices. The fourth, and most ambitious, would be to include corporate-social-responsibility obligations in international investment agreements themselves – in other words, ensuring that investors have rights as well as responsibilities.
Given my suggestion that host states are in the best position to impose and enforce obligations on corporations doing business in them, I query whether the recommended alternatives are adequate to compensate for deficiencies in regulation by host states.