Integrating Human Rights into the Extractive Industries: How Investment Contracts Can Achieve Protection

Abstract

States are in a unique position to regulate each and every activity of business enterprises operating in the extractive industries. International law recognizes that states have permanent sovereignty over the natural resources located within their territories. As a result of this, businesses generally cannot operate in the extractives sector without obtaining permits and authorizations from the host state and are required to operate within the parameters of the terms of their investment contracts and the laws applicable to their activities. This gives host states ample opportunity to structure the legal framework applicable to the investments in the extractives sector in a manner that realizes their duty to protect human rights. However, states are often encouraged to make their regulatory framework as attractive as possible to outside investors. Laws applicable to foreign investments are often designed with the sole purpose of promoting foreign investments, without placing any obligations over investors, in order to increase global economic growth and act as a tool for development. This paper considers how states can integrate their human rights obligations into investment contracts as a means of minimizing the adverse effects of business activities related to the extractives sector on human rights. This paper further aims to contribute to the discussion on the implementation of the state duty to protect in the extractive industries in light of the 2011 UN Guiding Principles on business and human rights.

Keywords: Investment law, investment, human rights, extractive industries, permanent sovereignty, UN Guiding Principles on Business and Human Rights