The Friction Between Investor Protection and Human Rights: Lessons from Foresti v. South Africa
51 Pages Posted: 29 Mar 2015 Last revised: 1 Jun 2015
Date Written: March 27, 2015
The international investment system is suffering from a legitimacy crisis. Increasingly, states are questioning the benefit to their bargain from offering robust investor protection, and some are even reigning in investment protection by opting out of international investment regimes altogether. In particular, where investment protection conflicts with a state’s right to regulate in the realm of human rights, the legitimacy of the investment arbitration system may be called into question. In such cases, arbitrators may introduce legitimacy enhancements to ease the friction between international human rights and international investment protection. In this article, I first review criticisms of the international investment system, particularly with respect to its effect on human rights. Next, I examine the controversial case of Foresti v. South Africa, which involved South Africa’s Black Economic Empowerment policies regulating the amount of black ownership in the mining industry. I argue that the tribunal in that case allowed for further Non-Disputing Party participation and shifted costs to the Claimant as legitimacy enhancements due to the friction generated from a case in which an investor’s rights directly conflicted with a state’s right to enact positive human rights legislation.
Keywords: International investment, arbitration, human rights, BIT, Foresti v. South Africa, non-disputing parties, cost shifting, law and economics
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