Can International Investment Law Punish Investors Human Rights Violations

ICSID Review, Vol. 37, No. 1-2 (2022), pp.
359–377
doi: https://doi.org/10.1093/icsidreview/siab035
Published Advance Access 29 March 2022 WINTER/SPRING 2022
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20TH ANNIVERSARY OF ARSIWA
Can International Investment Law Punish
Investor’s Human Rights Violations?
Copper Mesa, Contributory Fault and its
Alternatives
Peter Muchlinski1
Abstract—Copper Mesa v Ecuador was the first award to assess the contribution of the
investor’s human rights violations to the loss of their investment caused by the termin-
ation of its mining concession by the Respondent State. It found that the investor’s con-
duct acted as a contributory fault reducing the amount of compensation payable by the
Respondent. It is argued that the contributory fault approach adopted in Copper Mesa is
inappropriate for dealing with allegations of investor s human rights violations. By con-
flating causation, contributory fault and the unclean hands principle, the Tribunal effect-
ively ignored the complex and unique questions of causation and responsibility involved
in cases involving human rights violations by investors. The seriousness of proven investor
human rights violations should render investor claims against resulting regulatory action
inadmissible as a matter of international public policy. The note also addresses how in-
vestor conduct is treated in certain ‘new generation’ International Investment Agreement
(IIA) provisions and concludes by considering how an IIA investor conduct clause should
approach the human rights violations of investors.
I. INTRODUCTION
International investment law seeks to protect investors and their investments against
abuses of host-State regulatory powers in return for the developmental benefits of se-
cure inward investment flows.2 More recently, concerns have been expressed over
this apparent trade-off, especially when the interests of local individuals and groups,
affected by the activities of foreign investors, are considered. In particular, given the
guarantees offered to foreign investors under international investment agreements
(IIAs), how far can host States go to protect their citizens and communities from
abusive investor conduct without breaching those guarantees?
1
Emeritus Professor of International Commercial Law, School of Law, SOAS, University of London. Email:
pm29@soas.ac.uk.
2
See David Collins, An Introduction to International Investment Law (1st edn, CUP 2017) 1–3; Rudolph Dolzer and
Christoph Schreuer, Principles of International Investment Law (2nd edn, OUP 2012) 19–27.
C The Author(s) 2022. Published by Oxford University Press on behalf of ICSID. All rights reserved.
V
For permissions, please email: journals.permissions@oup.com
360 ICSID Review VOL. 37 1-2
The leading award of Copper Mesa v Ecuador illustrates the problem.3 Copper
Mesa Mining Corporation (Copper Mesa), established in 2004 as Ascendant
Copper Corporation (Ascendant Copper), a Canadian mining corporation, held
concessions for the exploitation of large copper deposits in the Junı́n area of north-
western Ecuador. In 2005, Copper Mesa, through Barbadian and Ecuadorian sub-
sidiaries, acquired these concessions from a local company. They were located in an
environmentally sensitive area of Andean cloud forest. Ever since the deposits were
discovered in the early 1990s, local residents had become increasingly concerned
about the impacts of mining concessions and organised to oppose such activity.4
Copper Mesa made a series of expenditures in reliance on the concessions that it
held. These included
the commissioning of a technical report by a leading geological consulting firm; the ac-
quisition of the neighbouring Magdalena 1 concession; the acquisition of surface land in
and around the concession areas; the preparation and submission of an Environmental
Impact Study (EIS) for the exploration phase of mining activity; the employment and
contracting of a team of Ecuadorian geologists, environmental and community relations
experts, managers and administrative staff; and the commitment of substantial resources
to the provision of social services and community development. 5
On 18 April 2008, Ecuador’s Constituent Assembly passed legislation (the Mining
Mandate), declaring that mineral substances were ‘to be exploited to suit national
interests’ and provided for the termination ‘without economic compensation’ of
mining concessions falling into a number of categories.6 Pursuant to this law, on 7
October 2008 the Under-Secretary of Mines ordered the termination of the Junı́n
concessions, stating that ‘no prior referendum process’ with the local community
had been conducted, in breach of Ecuadorean law.7 A number of attempts were
made by the Claimant, through its subsidiaries, to overturn the decision, but to no
avail.8 Further activities were suspended pending the adoption of a new mining law.
This was passed on 29 January 2009 and effectively nationalised the Claimant’s
concessions. The Claimant then sought to sell its interest in the concessions, but
with little success, forcing it to suspend share trading on the Toronto Stock
Exchange by July 2010.9 In July 2010, Copper Mesa sent a written Notice of
Dispute to Ecuador under the Canada–Ecuador Bilateral Investment Treaty (BIT),
alleging that Ecuador had unlawfully revoked or terminated the concessions, there-
by depriving it of the entire value of its investments and causing it to suffer substan-
tial damages.10
As part of its defence, Ecuador asserted that the Claimant came to the Tribunal
with ‘unclean hands’ and so the case should not be admissible. These allegations
3
Copper Mesa Mining Corporation v The Republic of Ecuador, PCA Case No.2012-2, Award (15 March 2016), espe-
cially paras 1.70–1.123, and, for a detailed chronology, part 4. For a useful summary see also Matthew Levine,
‘Ecuador ordered by PCA tribunal to pay $24 million to Canadian mining company’ (Investment Treaty News, 12
December 2016) <https://cf.iisd.net/itn/en/2016/12/12/ecuador-ordered-by-pca-tribunal-to-pay-24-million-to-canad
ian-mining-company-copper-mesa-mining-corporation-v-republic-of-ecuador-pca-2012-2/> accessed 21 May 2021.
4
See ‘A Brief History of Resistance to Mining in Intag, Ecuador’ (Mining Watch Canada, 12 February 2005)
<https://miningwatch.ca/blog/2005/2/12/brief-history-resistance-mining-intag-ecuador?__cf_chl_jschl_tk__¼
9d3a3790ec3901e3a9b5749faf55f58b151b0e11-1610975> accessed 21 May 2021.
5
Copper Mesa (n 3) para 1.95.
6
ibid para 1.100.
7
ibid para 1.111.
8
ibid para 1.112.
9
ibid paras 1.116–1.119.
10
ibid para 1.10.
Copper Mesa, Contributory Fault and its Alternatives 361
pertained to its conduct towards anti-mining opponents in the years after the con-
cessions were in place, which will be described in Section III. The Tribunal held,
first, that this argument could not be entertained by the Tribunal as it had been
introduced too late in the proceedings. The Government was well aware of the
Claimant’s conduct but ‘not a single complaint was made by the Respondent
against the Claimant at the time. Such a complaint surfaced for the first time after
the commencement of this arbitration’.11 Accordingly, questions surrounding the
Claimant’s conduct would not be considered under any ‘unclean hands’ doctrine
but rather,
under analogous doctrines of causation and contributory fault applying to the merits of
the Claimant’s claims arising from events subsequent to the acquisition of its investment.
That result, based on the Respondent’s case on the merits, strikes the Tribunal as more
legally appropriate to this case than an outright dismissal of the Claimant’s claims (in re-
gard to the Junı́n concessions) on the ground of inadmissibility. 12
In the event, the Tribunal found that Ecuador had violated the expropriation, fair
and equitable treatment (FET) and full protection and security standards under the
Canada–Ecuador BIT, and it reduced the amount of compensation by 30 percent
owing to the contributory fault of Copper Mesa.13
This Award is notable for its innovative approach to investor responsibilities under
IIAs. Although the Award is based on a first-generation BIT, containing no express
investor obligations, the Tribunal applied a degree of arbitral discretion to craft a de-
cision in which the investor’s conduct was taken into account. Specifically, the
Tribunal applied article 39 of the International Law Commission (ILC) Articles on
State Responsibility14 and found that Copper Mesa had, through its unlawful actions
against opponents of the concessions, contributed to its losses.
The issues raised by Copper Mesa are the focus of this note. Section II will con-
sider the wider treatment of investor conduct in arbitral decisions and introduce the
human rights context of the Copper Mesa case. Section III will discuss the applica-
tion of the contributory fault principle to investor conduct in Copper Mesa and other
awards. Section IV will examine whether the contributory fault approach adopted
in Copper Mesa is appropriate for dealing with allegations of corporate human rights
violations. Section V will address how investor conduct is treated in certain ‘new-
generation’ IIA provisions, while Section VI will conclude by considering how an
IIA investor conduct clause should approach the human rights violations of
investors.
II. INVESTOR CONDUCT AS A FACTOR IN ARBITRAL

AWARDS
Numerous awards show that investors can expect their conduct to be examined
where this is relevant to the outcome of their claim. For example, there is a clear
trend to take account of various forms of unconscionable conduct when considering
11
ibid para 5.64.
12
ibid para 5.65.
13
ibid paras 7.30–7.32.
14
International Law Commission (ILC), ‘Articles on Responsibility of States for Internationally Wrongful Acts’, UN
Doc A/56/83 (2001) (ARSIWA).
a claim based on a breach of the FET standard.15 This includes misrepresentations

made to induce the granting of an investment contract, improper contacts with pub-
lic officials and overt corruption in obtaining an investment contract.16 In addition,
several awards have required investors to act with reasonable care and diligence when
ascertaining the effects of local laws on their investments.17 Furthermore, the mis-
management of an investment can bar a claim of expropriation arising out of a regu-
latory intervention in the business where this is a legitimate exercise of economic and
social regulation.18
The wider context in which Copper Mesa arose should be noted. It belongs to a line
of cases arising out of the activities of mining multinationals in Latin America that
raise serious questions concerning corporate social responsibility (CSR) including
observance of human rights.19 In recent years key mining countries in the region
have introduced laws increasing the protection of the environment and the rights of
local communities, especially indigenous peoples. For example, the right of prior
consultation of indigenous communities has been introduced in line with inter-
national standards such as the International Labour Organization’s (ILO)
Indigenous and Tribal Peoples Convention No 169 of 1989,20 or the United
Nations’ Declaration on the Rights of Indigenous Peoples of 2007.21 In the case of
Ecuador, the 2008 Constitution grants indigenous communities certain rights in re-
lation to natural resource projects. According to article 57(7):
Indigenous communes, communities, peoples and nations are recognized and guaran-
teed, in conformity with the Constitution and human rights agreements, conventions,
declarations and other international instruments, the following collective rights:
...
7. To free prior informed consultation, within a reasonable period of time, on the
plans and programs for prospecting, producing and marketing non-renewable resources
located on their lands and which could have an environmental or cultural impact on
them; to participate in the profits earned from these projects and to receive compensa-
tion for social, cultural and environmental damages caused to them. The consultation
that must be conducted by the competent authorities shall be mandatory and in due
15
Peter Muchlinski, ‘“Caveat Investor”? The Relevance of the Conduct of the Investor under the Fair and Equitable
Treatment Standard’ (2006) 55 ICLQ 527. See, too, Jorge E Vi~ nuales, ‘Investor Diligence in Investment Arbitration:
Sources and Arguments’(2017) 32(2) ICSID Rev—FILJ 346.
16
A matter that is regarded as contrary to international public policy: see World Duty Free v Republic of Kenya, ICSID
Case No ARB/00/07, Award (4 October 2006). See, too, Metal-Tech v Republic of Uzbekistan, ICSID Case No ARB/10/
3,Award (4 October 2013) paras 372–3.
17
See MTD Equity Sdn Bhd and MTD Chile SA v Republic of Chile, ICSID Case No ARB/01/7, Award (25 May
2004); (2005) 44 ILM 91, in which the Tribunal reduced the amount of compensation by 50% to reflect the Claimant’s
failure to take care in ensuring that its investment complied with local zoning laws; Alasdair Ross Anderson and others v
Republic of Costa Rica, ICSID Case No ARB(AF)/07/3, Award (19 May 2010) para 58, in which the Tribunal held that
failure to use due diligence in ensuring compliance of the investment with local law rendered the claim inadmissible.
18
See Noble Ventures, Inc v Romania, ICSID Case No. ARB/01/11, Award (12 October 2005), in which the Tribunal
held that the Claimant’s investment in a privatised steel works had not been expropriated, when the State intervened to
restructure the debts of the enterprise, as the Claimant had failed to pay its workforce due to its mismanagement of the
works’ finances. See, in a similar vein, Case Concerning Elettronica Sicula SpA (ELSI) (United States v Italy)
Judgment [1989] ICJ Rep15. See, too, for a conceptual analysis of investor mismanagement, Martin Jarrett,
Contributory Fault and Investor Misconduct in Investment Arbitration (CUP 2019) ch 4.
19
See further Arif H Ali and others, ‘Mining Arbitration in Latin America: Social and Environmental Issues in
Investment Arbitration Cases’ (Global Arbitration Review 18 June 2019) <https://globalarbitrationreview.com/guide/the-
guide-mining-arbitrations/1st-edition/article/mining-arbitration-in-latin-america-social-and-environmental-issues-in-in
vestment-arbitration-cases> accessed 21 May 2021.
20
International Labour Organization (ILO), Indigenous and Tribal Peoples Convention, C169 (adopted 27 June
1989, entered into force 5 September 1991) 1650 UNTS 383 <https://www.ilo.org/dyn/normlex/en/f?p¼
NORMLEXPUB:12100:0::NO::P12100_INSTRUMENT_ID:312314> accessed 24 May 2021.
21
United Nations Declaration on the Rights of Indigenous Peoples, UNGA Res 61/295 (13 September 2007).
time. If consent of the consulted community is not obtained, steps provided for by the
Constitution and the law shall be taken.22
Copper Mesa tested the manner in which Ecuador applied these principles in the con-
text of the applicable BIT. The case pitched investors’ human rights responsibilities
into the mix of economic policy issues more normally associated with BITs – how to
balance the investor’s expectation of a reasonable return on their investment against
the State’s right to regulate. To date, much of the concern with investor conduct has
focused on commercial probity and competence, emphasising candour and honesty
in commercial dealings and the avoidance of commercial mismanagement. As a com-
mercial matter it is accepted that legal remedies are not to be used to escape the con-
sequences of commercial malpractice and negligence. However, CSR responsibilities
create a different level of concern. In particular, where fundamental questions of in-
dividual human rights and collective rights of indigenous peoples and communities
come into play, should the investor still be able to rely on protection under the treaty?
As noted in the Introduction, the Tribunal in Copper Mesa opted to treat the issue
of investor misconduct as a question going to the merits and, specifically, to the
quantum of compensation. Investor conduct may be relevant at all stages of a claim.
As Vi~nuales points out, investor conduct—in his words ‘investor diligence’—
can, in turn, operate in an investment dispute by virtue of several legal concepts inter-
vening at different stages of investment proceedings: jurisdiction (illegality arguments);
admissibility (illegality arguments, unclean hands doctrine, and transnational public pol-
icy); merits/liability (causation, contributory fault, making expectations unreasonable, or
providing the basis for a counterclaim); and quantum (causation/contributory fault or
the duty to mitigate damages).23
The precise methods by which a tribunal considers investor conduct will be condi-
tioned by the boundaries of tribunal jurisdiction, especially subject-matter jurisdic-
tion. Given that very few IIAs cover investor responsibilities, tribunals are left to fend
for themselves to a great degree. Thus, it is hardly surprising that the approach of tri-
bunals to questions of investor conduct, including contributory fault, is said to lack
coherence.24
III. INVESTOR’S CONTRIBUTORY FAULT

In Copper Mesa, the Claimant was found to have adopted practices for the protection
of its investment against anti-mining protesters that involved violations of fundamen-
tal rights. In early December 2006, at the Intag concession site in Junı́n, more than
50 heavily armed paramilitary security guards were hired by the Claimant to protect
the investment. Local residents had been tipped off and gathered along the dirt road
on which the men would have to pass in company-hired trucks. When the security
guards arrived, the residents urged them to turn around. In response, the security
guards sprayed tear gas into the residents’ faces and fired their weapons into the air,
injuring one man. However, the residents continued their resistance and the guards
22
Constitution of Ecuador (2008) <https://www.constituteproject.org/constitution/Ecuador_2008.pdf> accessed 21
May 2021.
23
See Vi~
nuales (n 15) 347.
24
See Jean-Michel Marcoux and Andrea Bjorklund, ‘Foreign Investors’ Responsibilities and Contributory Fault in
Investment Arbitration’ (2020) 69(4) ICLQ 877, 880.
finally retreated.25 The incident was filmed by a European student and was used as
part of the documentary Under Rich Earth by director Malcolm Rogge, which was
treated as a source of evidence by the Tribunal.26
Subsequently, some of the paramilitaries were captured by anti-miners and were
held until government officials intervened. They obtained their release by informing
the protesters that the Environmental Impact Study (EIS) submitted by the
Claimant had not met the required standards.27 Reviewing the facts as a whole, the
Tribunal concluded that the Claimant had failed to effect meaningful conciliation
and instead had initiated a
reckless escalation of violence . . . particularly with the employment of organised armed
men in uniform using tear gas canisters and firing weapons at local villagers and offi-
cials. It was miraculous that no-one had been killed during one or more of these violent
incidents. Certain of the anti-miners were certainly not angels, as already noted; but Mr
Pérez [the President of the Council for the Development of the Community] appears to
have done his best to restrain his supporters during these incidents. That could not be
said of Ascendant Ecuador [AE, the claimant’s local subsidiary]. As a result, AE and
Ascendant Copper had now acquired, irrevocably, a malign reputation for intimidation,
threats, deception, mendacity and violence amongst members of the local communities
in the Junı́n area. It was a place from which there could be no easy return; and there
was soon to be an important change in the country’s political administration in Quito,
unfavourable to mining concessions. 28
Crucial to the further development of the project was the need for the EIS to be
approved but without further local consultations the Junı́n concessions could not
move forward.29 It is also notable that local residents had been protesting mining by
Copper Mesa’s predecessors since the 1990s, years before Copper Mesa acquired its
rights.30 In other words, Copper Mesa knew what it was getting into, strengthening
claims regarding its culpability. Ultimately, the Claimant made out its case against
Ecuador. However, as noted, the Tribunal reduced the damages by 30 percent.
This finding contrasts with earlier awards involving claimant mining companies.
For example, in Gold Reserve Inc v Venezuela, another case involving a Canadian min-
ing multinational, the Tribunal was not persuaded that the Claimant’s apparent fail-
ure to provide adequate environmental and sociocultural impact studies could
mitigate the violation of the FET standard by Venezuela through its revocation of a
construction permit on environmental and sociocultural grounds that led, alongside
the Claimant’s failure to meet the three-year term for bringing the concession into
operation, to the termination of the Claimant’s concession.31 Arguably this case can
be distinguished from Copper Mesa as there was no comparable civil unrest surround-
ing the investment.
25
Copper Mesa (n 3) paras 4.241–4.247.
26
See Jennifer Moore, ‘Canadian Mining Firm Financed Violence in Ecuador: Lawsuit’ (The Tyee 3 March 2009)
<https://thetyee.ca/News/2009/03/03/CanMining/> accessed 21 May 2021; Under Rich Earth (Malcolm Rogge dir
2008) <https://www.imdb.com/title/tt1286773/>; and <http://underrichearth.ryecinema.com/?page_id¼3> accessed
21 May 2021.
27
28
ibid para 4.265.
29
ibid para 4.264.
30
ibid paras 4.32–4.35.
31
Gold Reserve Inc v Bolivarian Republic of Venezuela, ICSID Case No. ARB(AF)/09/1, Award (22 September 2014).
On the other hand, similar opposition to the investment did arise in Quiborax SA
and Non Metallic Minerals SA v Bolivia.32 The Claimant, a Chilean mining company,
had obtained a number of concessions in the Salar de Uyuni, the world’s largest dry
salt lake, and an area in which concessions could only be granted through special pro-
cedures. In 1998 a new law offered further concessions in previously protected parts
of this area and the Claimant obtained 11 of these. In June 2004 hostility towards the
Claimant’s local subsidiary escalated after it had been issued a further concession in
the previously protected area. This included mass protests by local communities,
involving riots, hunger strikes and the blockade of roads and railways. In response to
allegations that the Claimant had been specifically targeted due to its Chilean nation-
ality, the Bolivian Government argued that the subsequent revocation of this conces-
sion was not discriminatory and had been done to further the public interests of the
community. The Tribunal held that the taking had indeed been discriminatory and
did not comment on the issue of local community interests.33
The Copper Mesa Award shows greater sensitivity to local community impacts of
corporate operations. Equally, the level of corporate misfeasance in the case was con-
siderable and so could not be reasonably ignored. As noted, the Tribunal viewed the
Claimant’s behaviour as a form of contributory fault under article 39 of the ILC
Articles on State Responsibility,34 going to the level of damages. The Tribunal held
that Ecuador had not done enough to supervise effective local consultation required
for the EIS but chose instead to terminate the concession. Ecuador had acted in an
arbitrary manner and could have avoided the outright cessation of the investment.35
In these circumstances, the Claimant’s inflammatory behaviour towards the local
community could be seen as being only partly to blame for its losses with the bulk of
responsibility falling on the State due to its over-reaction to events.
The Tribunal’s application of article 39 requires some detailed analysis. According
to article 39,
[i]n the determination of reparation, account shall be taken of the contribution to the in-
jury by wilful or negligent action or omission of the injured State or any person or entity
in relation to whom reparation is sought.36
This provision qualifies article 31 of the ILC Articles on State Responsibility (ILC
Articles),37 which states:
(1) The responsible State is under an obligation to make full reparation for the injury
caused by the internationally wrongful act.
(2) Injury includes any damage, whether material or moral, caused by the internationally
wrongful act of a State.
The first, and obvious, thing to note is that the ILC Articles concern State responsi-
bility in inter-State disputes. They are not specifically designed to cover investor–
32
Quiborax SA and Non Metallic Minerals SA v Plurinational State of Bolivia, ICSID Case No ARB/06/2. Award (16
September 2015) .
33
ibid paras 246–54.
34
ARSIWA (n 14).
35
Copper Mesa (n 3) paras 6.82–6.85.
36
ARSIWA (n 14) art 39.
37
ARSIWA (n 14) art 31.
State disputes.38 This is clear from the wording of article 39, which refers to ‘any per-
son or entity in relation to whom reparation is sought’, connoting diplomatic protec-
tion rather than investor–State arbitration. That said, the ILC Articles offer
arbitrators answers to quite significant doctrinal issues upon which IIAs are silent. As
Crawford notes, sometimes the ILC Articles are seized upon as a ‘plank in a
shipwreck’.39
The Tribunal’s reasoning followed a number of cumulative steps.40 First, it noted
that article 39 was ‘declaratory of international law’. In accordance with article
31(3)(c) of the Vienna Convention on the Law of Treaties,41 a tribunal may refer to
‘relevant rules of international law applicable in the relations between the parties’.
This requirement ensures that BITs are interpreted in accordance with principles of
international law on questions that the treaty does not answer and that there is con-
sistency between BIT obligations and other international law obligations.42 The ILC
Articles contain secondary rules concerning the determination of State liability,
including contributory fault. They are generally accepted as an authoritative state-
ment of international law in the field of State responsibility.43 It is thus legitimate for
the Tribunal to treat them as a source of guidance on questions implicit in the effect-
ive application of a BIT. Clearly, the apportionment of fault between the parties to a
claim, before determining the quantum of damages, is one such question.
Secondly, the Tribunal cited paragraph 5 of the ILC Commentary. This restricts
consideration to wilful or negligent acts or omissions that manifest ‘a lack of due care
on the part of the victim of the breach for his or her own property or rights’ and
asserts that ‘the relevance of any negligence to reparation will depend upon the de-
gree to which it has contributed to the damage as well as the other circumstances of
the case’.44 This raises questions of causation and subject-matter relevant to alleged
investor violations of human rights that will be further discussed in Section IV.
Thirdly, the Tribunal tackled the relationship between causation, contributory
fault and the ‘unclean hands’ principle. Citing the Yukos cases, MTD v Chile and
Occidental v Ecuador, the Tribunal held that
the general approach taken in all these decisions, whether treated as causation, contribu-
tory fault (based on wilful or negligent act or omission) or unclean hands, is materially
the same, deriving from a consistent line of international legal materials. The Tribunal
decides to apply that general approach in this case.45
38
There is some disagreement among practitioners on this issue. See Danilo Ruggero Di Bella, ‘A Debate About the
Not So Straightforward Applicability of the Articles on State Responsibility to Investor–State Arbitrations’ (Kluwer
Arbitration Blog 10 October 2018) <http://arbitrationblog.kluwerarbitration.com/2018/10/10/a-debate-about-the-not-
so-straightforward-applicability-of-the-articles-on-state-responsibility-to-investor-state-arbitrations/> accessed 21 May
2021. See, too, James Crawford, ‘Investment Arbitration and the ILC Articles on State Responsibility’ (2010) 25(1)
ICSID Rev—FILJ 127, 130, ‘the ILC Articles make no attempt to regulate questions of breach between a state and a
private party such as a foreign investor. Those rules must be found elsewhere in the corpus of international law, to the
extent that they exist at all’.
39
Crawford (n 38) 135.
40
See Copper Mesa (n 3) paras 6.91–6.102.
41
Vienna Convention on the Law of Treaties (opened for signature 23 May 1969, entered into force 27 January
1980) 1155 UNTS 331 (VCLT).
42
See Campbell McLachlan QC, ‘Investment Treaties and General International Law’ (2008) 57 ICLQ 361, 373.
See also Tarcisio Gazzini, Interpretation of International Investment Treaties (Hart Publishing 2016) ch 8.
43
While there is some debate on whether the ILC Articles on State Responsibility (n 14) ought to be given full legal
force through a multilateral treaty, their status as an authoritative expression of customary law in the field is not open to
doubt. See James Crawford, Brownlie’s Principles of Public International Law (9th edn, OUP 2019) 524.
44
ARSIWA (n 14) art 39, commentary para 5.
45
In particular the Tribunal noted that in the Yukos and Occidental cases the contribu-
tion of the Claimant to their loss was held at 25 percent, while this was held at 50 per-
cent in MTD v Chile.46 Whether it is correct to conflate these principles in cases
involving human rights violations by investors will be also be discussed in Section IV.
Fourthly, the Tribunal noted that there was a wide margin of discretion in deter-
mining the percentage of contributory fault and that this was a question of fact. On
the facts the Claimant had clearly made its situation worse by committing, in the
words of the Tribunal, ‘a sustained act of folly’.47 This was further worsened by the
active direction of violent acts, in violation of Ecuadorean law, by senior managers at
AE, who also resorted to ‘subterfuge and mendacity’ by denying any knowledge of
the paramilitary guards sent to Intag.48 The Tribunal added that senior management
in Canada was found not to have had any role in these events, but that evidence of
such involvement would have been graver for the Claimant’s case.49
These facts led the Tribunal to conclude that the Claimant had contributed 30
percent to their losses and to adjust the Award accordingly.50 The Tribunal’s ap-
proach on this point is somewhat unclear. Why should the acts involved attract only
30 percent rather than, say, 50 percent, 25 percent or even 100 percent fault? No
guidance is offered either in Copper Mesa, or in the cases cited therein, as to the fac-
tors that tip the percentage up or down. Though some degree of case-specific analysis
is inevitable, a clearer explanation of the reasons why a particular percentage is con-
vincing to the Tribunal ought to be given.51 This issue will be discussed further in
Section IV.
Some guidance on factors leading to a reduction of damages due to contributory
fault may be gleaned from the partially dissenting opinion of Professor Philippe
Sands QC in Bear Creek Mining Corporation v Peru.52 The Tribunal, having rejected
jurisdictional objections based on an allegedly illegal procurement of investment
authorisations by the Claimant, again a Canadian mining multinational, held that
the Peruvian authorities had indirectly expropriated the Claimant’s mining invest-
ment. The Claimant’s conduct had aggravated local opposition and the Respondent
felt obliged to terminate the investment authorisation, in the exercise of its police
powers, due to ensuing social unrest. Professor Sands agreed with the majority that
Peru had indirectly expropriated the investment as it could have achieved its regula-
tory objective without terminating the authorisation, but noted that the Claimant
had contributed to social unrest through inadequate local consultations.
46
See Hulley Enterprises Limited (Cyprus) v The Russian Federation, UNCITRAL, PCA Case No AA 226, Final
Award (18 July 2014) paras 1633–7; Yukos Universal Limited (Isle of Man) v The Russian Federation, UNCITRAL, PCA
Case No AA 227, Final Award (18 July 2014) paras 1633–7; Veteran Petroleum Limited (Cyprus) v The Russian
Federation, UNCITRAL, PCA Case No AA 228, Final Award (18 July 2014) paras 1633–7; MTD Equity v Chile (n 17)
paras 242–6; Occidental Petroleum Corporation and Occidental Exploration and Production Company v Ecuador, ICSID Case
No ARB/06/11, Award (5 October 2012) paras 664–87.
47
Whether it is reasonable to characterise investor violations of human rights as an ‘act of folly’ rather than a violation
of international law is open to debate. See Jean Ho, ‘The Creation of Elusive Investor Responsibility’ (2019) 113 AJIL
Unbound 10, 11–12.
48
Copper Mesa (n 3) paras 6.99–6.100 and 4.254.
49
The Ontario Court of Appeal also found no evidence of direct involvement by parent-company managers and
held, in addition, that there was no duty of care on Canadian senior management to consider the interests of local resi-
dents: Piedra v Copper Mesa Mining Corporation 2011 ONCA 191.
50
Copper Mesa (n 3) paras 6.102, 7.30 and 7.32.
51
See further Marcoux and Bjorklund (n 24) 896–900.
52
Bear Creek Mining Corporation v Republic of Peru, ICSID Case No ARB/14/21, Award (30 November 2017). See,
for analysis, Farouk El-Hosseny and Patrick Devine, ‘Contributory Fault under International Law: A Gateway for
Human Rights in ISDS?’ (2020) 35(1) ICSID Rev—FILJ 105.
Accordingly, the measure of compensation should be lower than the amount

awarded by the majority ($18.2 million).53
In the course of his opinion Professor Sands applied a detailed analysis of ILO
Convention 169, which was applicable to the territory of Peru after it became a Party
on 2 February 1994. Though it was not directly applicable to corporations, but only
to States, Professor Sands felt that it offered a source of principles that could guide
the Tribunal in determining the seriousness of the Claimant’s failure to undertake an
effective local consultation and thus to obtain the ‘social licence’ necessary to operate
its investment in a harmonious and environmentally sensitive manner.54
He justified this approach by invoking the Award in Urbaser v Argentina, which
noted that human rights relating to dignity and adequate housing and living condi-
tions ‘are complemented by an obligation on all parts, public and private parties, not
to engage in activity aimed at destroying such rights’, that the BIT being applied in
that case ‘has to be construed in harmony with other rules of international law of
which it forms part, including those relating to human rights’ and that article 42(1)
of the ICSID Convention,55 together with the governing law clause of that BIT (art-
icle X(5,)) provided that that ‘Tribunal shall apply the law of the host State and such
rules of international law as may be applicable’.56 These considerations led Professor
Sands to conclude that, on the basis of the principles in ILO Convention 169, the
Claimant’s conduct was responsible for 50 percent of their loss and so damages
should be adjusted down to US$9,118,796.
IV. CONTRIBUTORY FAULT AND INVESTORS’

HUMAN RIGHTS VIOLATIONS
The approach of the Tribunal in Copper Mesa, and its development by Professor
Sands in Bear Creek, is open to wider questions concerning the suitability of contribu-
tory fault principles when dealing with investors’ human rights violations. In particu-
lar, was it correct for the Copper Mesa Tribunal to bundle ‘causation, contributory
fault (based on wilful or negligent act or omission) or unclean hands’ together and,
more generally, should human rights-based claims be treated as issues of contribu-
tory fault concerning the level of damages?
53
Bear Creek Mining Corporation v Republic of Peru, ICSID Case No ARB/14/21, Partial Dissenting Opinion of
Professor Philippe Sands QC (12 September 2017).
54
ibid para7ff citing ILO. In particular, the following provisions were important: art 13(1) (‘In applying the provi-
sions of this Part of the Convention governments shall respect the special importance for the cultures and spiritual val-
ues of the peoples concerned of their relationship with the lands or territories, or both as applicable, which they occupy
or otherwise use, and in particular the collective aspects of this relationship.’); article 15 (‘1. The rights of the peoples
concerned to the natural resources pertaining to their lands shall be specially safeguarded. These rights include the right
of these peoples to participate in the use, management and conservation of these resources. 2. In cases in which the
State retains the ownership of mineral or sub-surface resources or rights to other resources pertaining to lands, govern-
ments shall establish or maintain procedures through which they shall consult these peoples, with a view to ascertaining
whether and to what degree their interests would be prejudiced, before undertaking or permitting any programmes for
the exploration or exploitation of such resources pertaining to their lands. The peoples concerned shall wherever pos-
sible participate in the benefits of such activities and shall receive fair compensation for any damages which they may
sustain as a result of such activities.’ )
55
Convention on the Settlement of Investment Disputes between States and Nationals of Other States (opened for
signature 18 March 1965, entered into force 14 October 1966) (ICSID Convention).
56
Urbaser SA and Consorcio de Aguas Bilbao Bizkaia, Bilbao Biskaia Ur Partzuergoa v Argentine Republic, ICSID Case
No ARB/07/26, Award (8 December 2016) paras 199–202, cited in Sands (n 53) para 10. For the view that the Urbaser
Tribunal’s reasoning does not reflect the current state of human rights law, leading to an incorrect interpretation of the
human rights obligations of corporations, see Markus Krajewski, ‘A Nightmare or a Noble Dream? Establishing
Investor Obligations Through Treaty-Making and Treaty Application’ 5 (2020) BHRJ 105, 122–5.
In Copper Mesa and Bear Creek, the chain of causation appears to run as follows:
the investor obtains a concession; it then encounters local opposition to the invest-
ment which, as in Copper Mesa, may even pre-date the concession; the investor acts
in a way that inflames local opposition and this, in turn, leads to disorder; in the
course of countering this threat to the investment the investor may deny the local
community its legal rights to consultation and, more egregiously, resort to unlawful
methods to weaken opposition; the State then intervenes to seek a resolution but pol-
itical factors, including the need to restore social peace, may lead it to terminate the
investment rather than find a less final solution. The State is then found to have
caused a violation of the BIT, but the investor will be held to have contributed to the
loss of its investment by X percent.
When applying contributory fault, the tribunal needs to make a preliminary find-
ing that the claimant’s negligence or other misconduct is causally connected to the
harm.57 Also, the negligence or other misconduct must be legally relevant as a cause
of loss.58 To date, investor–State tribunals have not evolved a developed body of prin-
ciples to cover legal causation.59 Rather, tribunals tend to list—often in some detail,
as in the above cases—the relevant facts, and then a conclusion as to contributory
fault is presented without a clear explanation of the relationship between the legally
relevant causes and the percentage of the claimant’s contribution to its loss. The arbi-
trators in Copper Mesa fudged the issue by saying that the distinctive analytical steps
of first finding causation and then attributing contributory fault are the same thing. It
opens the door to arbitrariness and to an underestimation of the causal impact of
alleged violations of human rights by the investor. Equally, while Professor Sands
finds a causal link between the investor’s disregard of local peoples’ and commun-
ities’ rights and the loss caused by the termination of its investment, he is no clearer
on why that requires 50 percent contributory fault rather than, say, 80 percent or
even 100 percent.
In cases in which the investor has had its investment terminated because it violated
the human rights of local individuals and communities, the tribunal needs to con-
sider not only the causal impact of the acts or omissions of the claimant and respond-
ent State on each other but also the causal impacts of their acts or omissions in
relation to the third-party victims of the corporation’s misconduct. In effect, the rea-
soning adopted under the contributory fault principle has largely ignored the impact
of investor’s human rights violations on the victims and focuses, instead, on the im-
pact of the States’ actions, and those of the investor, on the economic viability of the
investment.60
Equally, as noted, the percentage of the contribution appears to be somewhat arbi-
trary as no reasoned method of valuation is given. In cases of commercial misconduct
or negligence certain more rigorous economic measures of contribution to loss could
be used. For example, in relation to the facts of the Yukos cases, Irmgard Marboe
posits that abuses based on tax havens leading to tax reassessments ‘could be quanti-
fied by comparing the extraordinary tax advantages with more normal tax-paying
57
See HLA Hart and Tony Honoré, Causation in the Law (2nd edn, OUP 1985) 207–8.
58
See Jarrett (n 18) 45.
59
ibid 52.
60
See further Nicolás M Perrone, ‘The ‘Invisible’ Local Communities: Foreign Investor Obligations Inclusiveness,
and the International Investment Regime’ (2019) 113 AJIL Unbound 16 .
regimes’.61 However, such economic measures will be of little use in relation to harm
caused by investors’ human rights violations. Human rights violations can be hard to
quantify in monetary terms given that they do not always result in material loss to vic-
tims. For example, in Copper Mesa, the main effect of the investor’s conduct was to
create fear and inhibition in the exercise of its legitimate rights by local citizens and
communities rather than quantifiable harm to the person or property.
Moreover, causation plays distinctive roles in relation to negligence claims and
human rights violation claims.62 In a negligence claim there has to be a direct causal
link between the negligence and the infliction of harm. By contrast, in a human rights
claim, no actual harm needs to have occurred—only the risk of harm. For example,
in a case such as Copper Mesa, the violation of a local resident’s right to life through
the actions of paramilitary guards hired by the Claimant does not need anyone to be
injured or killed in order to establish a breach. The risk of serious personal injury or
death, and the fear and inhibition that this causes, are enough for a breach to have
occurred. This more tenuous link, in a human rights context, between the impugned
conduct and the ensuing harm may lead tribunals to underestimate the percentage of
investor contribution if they apply the negligence standard required under article 39.
Turning to the conflation of ‘unclean hands’ with causation and contributory fault,
this appears to downgrade the seriousness of investor misconduct involving violations
of human rights. The malfeasance of an investor may be serious enough to negate the
right to compensation in certain egregious cases under the contributory negligence
principle.63 However, neither the Tribunal in Copper Mesa, nor Professor Sands in
Bear Creek, considered the investor to be more than 50 percent, let alone 100 per-
cent, responsible for their loss as a result of their reprehensible conduct towards the
local community. This may be inherent in the very construction and function of art-
icle 39 of the ILC Articles, which covers only the reduction of reparations for the un-
lawful act of the State. It is not a principle that can readily exclude State liability
altogether.64
The key here is that breaches of human rights raise not merely questions of com-
pensation but also questions of upholding respect for those rights.65 Human rights
violations are a particularly serious form of misconduct requiring a distinct form of
redress. That may include reparation through monetary compensation, but it must
also involve vindication for the victim by bringing the perpetrator to justice. In this
regard, the State is under a legal duty to protect the human rights of its citizens
against violations by other non-State actors.66 According to Vi~ nuales, it is perplexing
61
Irmgard Marboe, ‘Yukos Universal Limited (Isle of Man) v The Russian Federation: Calculation of Damages in the
Yukos Award: Highlighting the Valuation Date, Contributory Fault and Interest’ (2015) 30(2) ICSID Rev—FILJ 326,
332–3.
62
See further Gemma Turton, ‘Causation and risk in negligence and human rights law’ (2020) 79(1) CLJ 148.
63
In Ioan Micula, Viorel Micula and others v Romania, ICSID Case No ARB/05/20, Award (11 December 2013) para
926 the Tribunal held that ‘an intervening event will only release the State from liability when that intervening event is
(i) the cause of a specific, severable part of the damage, or (ii) makes the original wrongful conduct of the State become
too remote. Unless they fall under either of these categories, cases of contributory fault by the injured party appear to
warrant solely a reduction in the amount of compensation’.
64
See Marcoux and Bjorklund (n 24) 888–9.
65
Turton (n 62) 155–6.
66
Eg in Velásquez Rodrı́guez v Honduras, Judgment, Inter-American Court of Human Rights Series C No 4 (29 July
1988) para 172. The Inter-American Court of Human Rights stated that ‘An illegal act which violates human rights and
which is initially not directly imputable to a State (for example, because it is the act of a private person or because the
person responsible has not been identified) can lead to international responsibility of the State, not because of the act it-
self, but because of the lack of due diligence to prevent the violation or to respond to it as required by the Convention.’
that the Tribunal in Copper Mesa viewed the Claimant’s misuse of private security
forces as a question of contributory fault. He asserts:
A State is not only entitled, but it also has a duty to act, under international human
rights law, to cease such deliberate misuse of private security forces by a foreign investor.
The resort by an investor to such abusive and illegal practices is totally unacceptable,
and a claim based on the consequences of such action is clearly inadmissible.67
Perhaps the reason lies in the Tribunal’s reliance on other awards in which contribu-
tory fault was found without considering the key factual difference that none of them
concerned investor violations of human rights. The Yukos cases involved a contribu-
tion to loss caused by the Claimant’s unlawful tax dealings that led to a regulatory re-
action by Russian authorities; MTD v Chile involved contributory loss through the
Claimant’s failure properly to assess the lawfulness of a proposed property develop-
ment and its reliance on unfounded claims that the relevant legal authorisations
would be granted; and Occidental v Ecuador involved contributory loss caused by the
Claimant’s failure to obtain the required regulatory authorisation for the transfer of
its contractual rights in the investment to a third party. It may be asked whether com-
mercial losses caused by misconduct or negligence are a useful precedent for cases
involving investor human rights abuses. It is arguable that the Tribunal in Copper
Mesa, and, indeed, Professor Sands in Bear Creek, were clinging to the proverbial
‘plank in a shipwreck’ and applying contributory fault to cases of fundamental rights
violations because there was nothing better at hand.
Indeed, article 39 does not fit with recently developed notions of business respon-
sibility for human rights. As noted above, paragraph 5 of the ILC Commentary to
article 39 restricts consideration to wilful or negligent acts or omissions that manifest
‘a lack of due care on the part of the victim of the breach for his or her own property
or rights’. This requires considering the impact of the investor’s conduct on its own
investment or rights. By contrast, the notion of human rights due diligence, the
cornerstone of the business responsibility to respect human rights in the United
Nations (UN) Guiding Principles on Business and Human Rights, requires the busi-
ness to assess the impact of possible human rights violations arising from its own
operations, or those of subcontractors in its supply chain, on third-party victims.68
By stressing negligent harm to the investor’s property or rights, reliance on article 39
leads a tribunal to focus not on the impact of the investor’s conduct on third-party
victims but on the investor’s rights to its property and the extent to which it brought
on itself the economic loss caused by the host State’s regulatory reaction to its viola-
tions of human rights. This in turn leads to a reduction of damages by a certain per-
centage. Investors who violate the rights of local people stand to get something under
the IIA if they can show that the State’s actions in response to such violations
infringed its provisions. This is surely inconsistent with the developing business re-
sponsibility to respect human rights.
Finally, the difficulties of applying a contributory fault principle in cases involving
multinational corporate groups should be highlighted. It was noted above that the
Tribunal in Copper Mesa focused on misconduct at the level of the Ecuadorian sub-
sidiary and found that the management at the Canadian parent company was not
67
Vi~
nuales (n 15) 359–60.
68
UN Guiding Principles on Business and Human Rights (United Nations 2011), especially Principle 17 <https://
www.ohchr.org/documents/publications/guidingprinciplesbusinesshr_en.pdf> accessed 24 May 2021.
actively involved, but that, if this had been shown, it would have been a factor aggra-
vating the misconduct. This suggests that cases of management misconduct at both
subsidiary and parent company level, leading to human rights violations, ought to at-
tract a higher degree of contributory fault. That seems reasonable but may be hard to
establish in practice. Tribunals, including that in Copper Mesa, have been reluctant to
attribute responsibility up the ladder for the purposes of contributory fault in the ab-
sence of direct involvement by parent company actors, often relying on separate cor-
porate legal personality and negligence principles. It is noteworthy, however, that,
under the applicable investment treaty rules, the parent was able to claim full com-
pensation for all the losses of the subsidiaries.69 This imbalance points to the need
for a different approach.
In the light of the above discussion, a different legal principle should inform the as-
sessment of serious investor human rights violations committed during the operation
of an investment and, following Vi~ nuales, that principle should apply to the admissi-
bility stage.70 An adaptation of the principle of international public policy would be
one appropriate method.71 This is exemplified by awards in which international pub-
lic policy was invoked as a bar to admissibility. In World Duty Free v Republic of Kenya
the Kenyan Government successfully opposed a claim made under the investment
contract between the Claimant, a company that ran the duty-free concessions at
Nairobi and Mombasa airports, and the relevant government agency, where it was
shown that the concessions had been procured by the bribery of the then President of
Kenya.72 After an extensive examination of national and international legal sources
the Tribunal held:
In light of domestic laws and international conventions relating to corruption, and in
light of the decisions taken in this matter by courts and arbitral tribunals, this Tribunal
is convinced that bribery is contrary to the international public policy of most, if not all,
States or, to use another formula, to transnational public policy. Thus, claims based on
contracts of corruption or on contracts obtained by corruption cannot be upheld by this
Arbitral Tribunal.73
Such public policy-based reasoning could be extended to claims tainted by evidence
that the claimant has failed to respect the human rights of persons and communities
affected by its investment, as where investments are made ‘in pursuance of torture or
genocide or in support of slavery or trafficking of human organs’.74 The hiring of
69
I am grateful to the anonymous peer reviewer for raising this point.
70
Cases such as Copper Mesa (n 3) are factually distinct from cases in which the applicable BIT defines a covered in-
vestment as one made ‘in accordance with the law’ of the host State. Such cases go to subject-matter jurisdiction and
not to admissibility. See eg Fraport AG Frankfurt Airport Services Worldwide v Republic of the Philippines, ICSID Case No
ARB/11/12, Award (10 December 2014) para 328.
71
See also Krajewski (n 56), who favours the development of human rights obligations for investors in the domestic
law of the host State that are then incorporated into the applicable IIA, thus allowing the host State to raise non-
compliance by the investor as a counterclaim or use non-compliance to reduce the level of damages. Another approach
is illustrated by the Tribunal Award in South American Silver v Bolivia, PCA Case No 2013-15. Award (22 November
2018).The majority of the Tribunal held that Bolivia’s termination of the Claimant’s concession was undertaken to en-
sure public peace in response to the widespread and, at times, violent and disorderly opposition to the Claimant’s min-
ing project, which the Claimant had done much to stoke. This did not constitute an unlawful expropriation as it was
undertaken for a legitimate public purpose and was not disproportionate to its purpose (paras 543–78). The Claimant
succeeded in showing that the compensation promised under the expropriation decree had not been paid but, as the
project was in its infancy, compensation was restricted to sunk costs only and excluded loss of projected profits (para
857).
72
World Duty Free v Republic of Kenya (n 16). See also Metal-Tech v Uzbekistan (n 16).
73
World Duty Free (n 16) para 157.
74
See Phoenix Action Ltd v Czech Republic, ICSID Case No ARB/06/5, Award (15 April 2009) para 78.
paramilitary security forces who go on to commit crimes in violation of human rights

surely belongs to this list as well. Following Professor Sands, violations of the rights
of local communities and indigenous peoples to effective consultation in the course
of an investment should also be added. These are important legal and policy require-
ments designed to ensure the compatibility of the investment with the environmental
and social interests of community in which it is based. They may be better observed
by investors if IIA protection will be unavailable in cases in which the investor is
shown to have infringed them.
The application of an admissibility principle based on investor compliance with
international public policy, including observance of fundamental human rights, is
not problem free. A number of obstacles to effective application need to be borne in
mind, as these will determine the scope of such a development.75 On the procedural
level the disqualifying effect of Ecuador’s delay in introducing the ‘unclean hands’ ar-
gument in Copper Mesa highlights the point that host States can be unreliable protec-
tors of the human rights of their citizens and that delays by host States in raising
human rights concerns—perhaps prompted by worries that they might be breaching
their investment treaty obligations—can undermine the prospects for States success-
fully to rely on the admissibility approach.
In addition, the admissibility approach may not catch all human rights violations
by investors. A threshold of seriousness may be required so as to avoid a finding that
any violation of human rights, however minor, will render an otherwise meritorious
claim inadmissible. Where to draw the line requires case-specific factual analysis and
judgment by the tribunal. This will no doubt lead to complex argument and disagree-
ments about whether the tribunal has correctly assessed the facts before it. As a re-
sult, many human rights abuses may not be addressed, nor remedied, through
admissibility. Consequently, the alternatives discussed in Section V of this note,
which include counterclaims in investor–State dispute settlement (ISDS), domestic
litigation in both home and host States, alternative dispute resolution (ADR) and an
independent right to initiate treaty-based arbitration against investors, are essential.
V. DEALING WITH INVESTORS’ HUMAN RIGHTS

RESPONSIBILITES IN INVESTMENT AGREEMENTS
The argument presented in this note is that contributory fault, though an essential
component in the quantification of damages in commercially focused investment dis-
putes, is inappropriate for dealing with the impact of investors’ human rights viola-
tions where the respondent State applies its duty to protect the human rights of its
citizens and this leads to a substantial reduction, or elimination, of the value of the in-
vestment. Of course, States may act in bad faith and use concocted stories of investor
human rights violations as an excuse to seize the investment. In such cases investors
must have the protection of the applicable IIA. But in cases such as Copper Mesa or
Bear Creek, where the interference with citizens’ and indigenous peoples’ rights was
clear on the facts, a different response is needed.
75
My thanks to the anonymous peer reviewer for raising these issues.
IIAs need to contain express commitments to further the human rights responsi-
bilities of investors and to clarify the discretion of tribunals when dealing with invest-
or misconduct.
A number of African initiatives have shown the way, including: the Morocco–
Nigeria BIT of 2016, which, though not in force, is a highly innovative development;
the South African Development Community Model BIT of 2012; and the Draft Pan-
African Investment Code of 2016 (PAIC).76 They form part of a wider movement
among states of the Global South to reform IIAs in a more balanced way.77
Following the facts of Copper Mesa, the first requirement is a commitment to
undertake pre-entry environmental and social impact assessments (ESIAs). Such a
commitment is found in the Morocco–Nigeria BITof 2016, based on standards to be
drawn up by the Joint Committee of the Contracting Parties.78 The Draft PAIC
requires an environmental impact assessment only.79 The Southern African
Development Community (SADC) Model BIT of 2012 goes further and specifies in
article 13.2 that the ESIAs required under article 13.1 ‘shall include assessments of
the impacts on the human rights of the persons in the areas potentially impacted by
the investment, including the progressive realization of human rights in those
areas’.80
A second requirement is the post-entry observance of environmental, labour and
social standards, including human rights. All three African model agreements require
investors to observe such standards. For example, article 15 of the SADC Model
BIT states:
15.1. Investors and their investments have a duty to respect human rights in the work-
place and in the community and State in which they are located. Investors and their
investments shall not undertake or cause to be undertaken acts that breach such human
rights. Investors and their investments shall not assist in, or be complicit in, the violation
of the human rights by others in the Host State, including by public authorities or dur-
ing civil strife.
15.2. Investors and their investments shall act in accordance with core labour standards
as required by the ILO Declaration on Fundamental Principles and Rights of Work,
1998.
15.3. Investors and their investments shall not [establish,] manage or operate
Investments in a manner inconsistent with international environmental, labour, and
human rights obligations binding on the Host State or the Home State, whichever obli-
gations are higher.
This provision offers a clear response to the human rights issues that emerged in
Copper Mesa and would make the illegal use of paramilitary guards in breach of citi-
zens’ and communities’ human rights a breach of the treaty. The Morocco–Nigeria
76
See further Makane Moise Mbengue, ‘Africa’s Voice in the Formation, Shaping and Redesign of International
Investment Law’ (2019) 34(2) ICSID Rev—FILJ 455.
77
See further Sonia E Rolland and David M Trubek, ‘Legal Innovation in Investment Law: Rhetoric and Practice in
Emerging Countries’ (2017) 39(2) U Pa J Int’l L 355; Krajewski (n 56) 113–21.
78
Reciprocal Investment Promotion and Protection Agreement between the Government of the Kingdom of
Morocco and the Government of the Federal Republic of Nigeria (signed 3 December 2016) (Morocco-Nigeria BIT)
art 14(1) and (2).
79
Draft Pan African Investment Code 2016 art 37(4) <https://au.int/sites/default/files/documents/32844-doc-draft_
pan-african_investment_code_december_2016_en.pdf> accessed 21 May 2021 (Draft PAIC).
80
Southern African Development Community Model Bilateral Investment Treaty Template with Commentary (July
2012) <https://investmentpolicy.unctad.org/international-investment-agreements/treaty-files/2875/download> accessed
21 May 2021 (SADC Model BIT).
BIT contains a similar provision in article 18,81 while the Draft PAIC has the weakest
provision, containing a general obligation on investors to observe host State CSR
laws, regulations and administrative guidelines and policies and a hortatory provision
on business ethics and human rights.82
Such provisions require effective rights of enforcement. Ideally, this should allow
host States and affected individuals and groups to initiate human rights-based claims
directly against investors before a tribunal.83 None of the above agreements goes so
far. The dispute settlement clauses remain focused on investor claims against host
States.84 On the other hand, all three agreements can permit a human rights-based
counterclaim on the part of the host State in response to an investor claim. Thus, art-
icle 43 of the Draft PAIC states:
Where an investor or its investment is alleged by a Member State party in a dispute
settlement proceeding under this Code to have failed to comply with its obligations
under this Code or other relevant rules and principles of domestic and international law,
the competent body hearing such a dispute shall consider whether this breach, if proven,
is materially relevant to the issues before it, and if so, what mitigating or off-setting
effects this may have on the merits of a claim or on any damages awarded in the event
of such award.85
Article 19(2) of the SADC Model BIT also expressly permits counterclaims, while the
Morocco–Nigeria BIT does not expressly address counterclaims. However, the jurisdic-
tion clause permits tribunals to determine ‘any dispute’ arising between the Parties,
which seems wide enough to allow a counterclaim by a State that an investor has
breached an obligation under the IIA.86 Counterclaims are not an ideal solution as this
procedure assumes that a State must commit, or be alleged to have committed, a
wrong.87 Furthermore, in arbitration under the ICSID Rules, a State will be required to
demonstrate that its counterclaim arises out of the ‘subject-matter of the dispute’ in
order to establish the jurisdiction of the tribunal over the counterclaim.88 It may be
hard to show that violations of human rights by the investor form the subject-matter of
a dispute principally concerning the host State’s conduct. Further problems may arise
out of the broad drafting of investors’ human rights obligations in IIAs and whether
they are actually legally binding on them given that many human rights instruments are
addressed exclusively to States or are ‘soft law’ instruments.89
Another feature relevant to enforcement of human rights claims is provision for
litigation before the courts of the contracting parties to the agreement. Thus article
19(3) of the SADC Model BIT permits, in accordance with its applicable domestic
law, ‘the Host State, including political subdivisions and officials thereof, private per-
sons, or private organizations’ to ‘initiate a civil action in domestic courts against the
81
Morocco–Nigeria BIT (n 78).
82
Draft PAIC (n 79) arts 22 and 24.
83
One such example are the Hague Rules on Business and Human Rights Arbitration (2019) <https://www.cilc.nl/
project/the-hague-rules-on-business-and-human-rights-arbitration/> accessed 21 May 2021.
84
Morocco–Nigeria BIT (n 78) art 27; SADC Model BIT (n 80) art 29.4; Draft PAIC (n 79) art 42(1).
85
Draft PAIC (n 79) art 43.
86
Morocco–Nigeria BIT (n 78) art 28(1); and see Naomi Briercliffe and Olga Owczarek, ‘Human-rights-based
Claims by States and ‘New-Generation’ International Investment Agreements’ (Kluwer Arbitration Blog, 1 August 2018)
<http://arbitrationblog.kluwerarbitration.com/2018/08/01/human-rights-based-claims-by-states-and-new-generation-
international-investment-agreements/> accessed 21 May 2021.
87
Briercliffe and Owczarek (n 86).
88
ibid.
89
ibid.
Investor or Investment for damages arising from an alleged breach of the obligations
set out in this Agreement’. Equally, transnational litigation against investors in their
home State on the part of claimants in host States is permitted under article 19(4) in
accordance with the domestic law of the home State. The host State, its political sub-
divisions and officials, private persons or private organisations, may initiate a civil ac-
tion in domestic courts of the home State.90 Article 17 ensures that procedural rules
in the home State do not prevent access to its courts by claimants from the host State
seeking to sue the investor there.91 These provisions introduce rules of domestic law
to guide claims based on these IIA provisions. As the IIA is only binding on the State
parties under international law, the laws of the contracting parties must contain a
mirror image of the legal duties that investors have under those treaties for them to
found claims. They must also provide expressly for each category of listed claimant
to ensure that they have standing before the national courts to bring claims.
Finally, the role of ADR should be stressed. As already noted, human rights remedies
go beyond monetary compensation. They must also involve a degree of vindication and,
importantly, a means by which to resolve the human costs of human rights infringe-
ments. Thus, symbolic remedies and truth and reconciliation procedures may be
required. Such matters go well beyond the traditional subject-matter of IIAs.
Nonetheless there is some recognition of these wider remedial questions in the African
model treaties. A key example is the co-operation mechanism under the Morocco–
Nigeria BIT through the Joint Committee of the Parties, which gives the Parties a means
to develop practice under the agreement in consultation with investors and other stake-
holders.92 In addition, the agreement contains a dispute prevention procedure allowing
recourse to the Joint Committee before ISDS is instituted.93 Other agreements introduce
a national ombudsperson procedure in addition to such joint committee procedures.94
VI. CONCLUDING REMARKS

It remains unclear whether the above developments in ‘new-generation’ IIAs can
fully determine the legal impact of investor breaches of human rights. Much is left
out.95 For example, the SADC Model BIT states, in article 19(1):
Subject to any other specific directions under this Agreement as to the consequences of
a breach of an obligation, where an Investor or its Investment is alleged by a State Party
in a dispute settlement proceeding under this Agreement to have failed to comply with
its obligations under this Agreement, the tribunal hearing such a dispute shall consider
whether this breach, if proven, is materially relevant to the issues before it, and if so,
what mitigating or off-setting effects this may have on the merits of a claim or on any
damages awarded in the event of such award.96
90
SADC Model BIT (n 80). In a similar vein, art 20 of the Morocco–Nigeria BIT (n 78) states: ‘[i]nvestors shall be
subject to civil actions for liability in the judicial process of their home state for the acts or decisions made in relation to
the investment where such acts or decisions lead to significant damage, personal injuries or loss of life in the host state’.
91
ibid.
92
Morocco–Nigeria BIT (n 78) art 4.
93
ibid art 26.
94
See eg Brazil Model Cooperation and Facilitation Investment Agreement (2015) arts 17–18 <https://investmentpo
licy.unctad.org/international-investment-agreements/treaty-files/4786/download> accessed 24 May 2021.
95
See Krajewski (n 56) 114–16 for a critique of the Morocco–Nigeria BIT on this basis.
96
SADC Model BIT (n 80).
The Model BIT and the similar above-quoted article 43 of the Draft PAIC remain si-
lent on how a tribunal should approach investors’ human rights responsibilities as
there are no ‘specific directions’ under the agreement.
In the course of a human rights-based counterclaim, it should be possible to argue
that where investors knowingly and wilfully engage in acts or omissions that risk violat-
ing human rights, they must expect to run the additional risk of not being able to miti-
gate any consequential losses to their investment caused by reactive State regulation.
By allowing such questions to be characterised as contributory faults going to quantum
of damages, tribunals diminish human rights violations to the status of compensable
risks that may be worth taking if the profitability of the venture remains sound. Such
an approach weakens the host State’s legal duty to protect the human rights of its citi-
zens by requiring it to trade off the economic benefits of the investment against the
human rights of its citizens. This situation often arises in the context of a divided com-
munity, where there are winners and losers from an investment, and which an investor
can use to foment further discontent. If that discontent can be contained by violence
and subterfuge, and the cost is not prohibitive, then investors may pursue that course
of action safe in the knowledge that they will still be able to get compensation if the in-
vestment is terminated. Surely that is not the proper purpose of IIAs.
Against this background, and assuming a political will for reform, a better way for-
ward is to ensure that future IIAs contain provisions preventing investors from treat-
ing human rights responsibilities on a cost–benefit basis by relying on notions of
contributory fault. This requires that any substantial and serious human rights viola-
tion by the investor, as exemplified by the facts of Copper Mesa or Bear Creek, renders
a claim inadmissible. This is by no means a simple solution, and, as was noted in
Section IV, it raises many difficult questions of procedure and fact. It is also not the
only solution, given the other remedial procedures, discussed in Section V, which
may be used to deal with investor human rights violations. However, as part of a
range of procedures, it has the merit of being more consistent with wider approaches
to human rights remediation. An investor obligations clause should therefore distin-
guish between different types of misconduct and ensure that the most serious human
rights violations have distinctive consequences from commercial misconduct and
negligent mismanagement, for which a reduction of damages may be a reasonable de-
terrent. In contrast, there can be no price to pay for the freedom to violate fundamen-
tal human rights and investors who commit serious violations of such rights should
be prevented from bringing claims under the relevant IIA.

Can International Investment Law Punish Investors Human Rights Violations

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ICSID Review, Vol. 37, No. 1-2 (2022), pp.

II. INVESTOR CONDUCT AS A FACTOR IN ARBITRAL

a claim based on a breach of the FET standard.15 This includes misrepresentations

III. INVESTOR’S CONTRIBUTORY FAULT

Accordingly, the measure of compensation should be lower than the amount

IV. CONTRIBUTORY FAULT AND INVESTORS’

paramilitary security forces who go on to commit crimes in violation of human rights

V. DEALING WITH INVESTORS’ HUMAN RIGHTS

VI. CONCLUDING REMARKS

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