Report No. 260

Chapter IV

Investor, Investment and Home State Obligations

A. General comment:

4.1.1 Conventionally, BITs tend to guarantee foreign investors a certain quality and standard of treatment when they enter a Host State, without placing any obligations on the investors themselves.

In the recent years, there has been a trend towards rebalancing rights and obligations of Host States and investors, through the inclusion of provisions that seek to preserve the Host State's discretion on matters of public policy. India, too, has officially acknowledged that in future BITS, 'the rights and obligations of investors vis-a-vis India should be rebalanced and economic and public policy objectives like security, public health, and environment protection should be introduced into these agreements'.58

58 Ministry of Commerce, 'International Investment Agreements between India and Other Countries' (document on file with the author), as cited in Prabhash Ranjan, 'India and Bilateral Investment Treaties - A Changing Landscape', 2014, ICSID Review, pp 1-32

4.1.2 India has in the past signed a few BITs that guarantee investors certain rights (such as the right to repatriate investments or returns) only if the investors comply with certain defined obligations (such as 'fiscal', 'tax', or 'financial' obligations)59 or general obligations 'in accordance with all laws'.60

An equivalent of Chapter III of the 2015 Model, which imposes direct obligations on investors and sets out consequences of the non-compliance in relation to the investor-State dispute resolution process, was however not present in India's 2003 Model. This has presumably been included in light of this above policy position articulated by the Indian government.

59 See, for example, BITs with Belarus, Bulgaria, Israel, Kazakhstan, Kyrgyz Republic, Macedonia, Morocco, Slovak Republic, Uzbekistan

60 See, for example, BITs with Argentina, China

4.1.3 Model BITs prepared by bodies such as the Southern African Development Community (SADC)61 and the International Institute for Sustainable Development (IISD)62 suggest a deviation from the current international practice by including specific obligations for investors. Some of the text in Chapter III of the 2015 Model appears to have been borrowed from those models.

The Model BIT adopted by Ghana in 2008 also contains a provision requiring investors to be bound by the laws of the Host State, including labour, health and environment laws; assist in human capital formation and capacity building; and behave in accordance with internationally accepted standards applicable to foreign investors.63

61 SADC is an inter-governmental organisation whose goal is to promote sustainable and equitable economic growth and socio-economic development. Its 15 member States belong to the Southern African region. See SADC Model Bilateral Investment Treaty, 2012, available at:
http://www.iisd.org/itn/wp-content/uploads/2012/10/sadc-model-bittemplate-final.pdf

62 IISD, a Canada-based charitable organization, seeks to promote human development and environmental sustainability through innovative research, communication and partnerships. See IISD Model International Agreement on Investment for Sustainable Development, 2006, available at:
https://www.iisd.org/pdf/2005/investment_model_int_agreement.pdf

63 Article 12, Ghana Model BIT, 2008, available at
http://investmentpolicyhub.unctad.org/Download/TreatyFile/2866

4.1.4 As noted above, provisions of this nature are not commonly seen in actual treaty practice. Examples found in regional cooperation agreements and free trade agreements are listed in the table below. Most treaties either tend to remain silent on the obligations of investors or provide for a general obligation to act in accordance with the laws of the Host State. In instances where specific investors are expected to comply with specific requirements, the practice seems to be, to make the State Parties responsible for ensuring that such expectations are met rather than casting direct obligations on investors themselves.

	Treaty	Relevant provision
1.	SADC Protocol on Finance and Investment, 200664	Article 10 - Corporate responsibility Foreign investors shall abide by the laws, regulations, administrative guidelines and policies of the Host State.
2.	Investment Agreement for the Common Market for Eastern and Southern Africa65	Article 13 - Investor Obligation COMESA investors and their investments shall comply with all applicable domestic measures of the Member State in which their investment is made.
3.	Economic Partnership Agreement between the Forum of the Caribbean Group of African, Caribbean and Pacific (CARIFORUM) States and the European Community (EC), 200866	Article 72 - Behaviour of investors The EC Party and the Signatory CARIFORUM States shall cooperate and take, within their own respective territories, such measures as may be necessary, inter alia, through domestic legislation, to ensure that: (a) Investors be forbidden from, and held liable for, offering, promising or giving any undue pecuniary or other advantage, whether directly or through intermediaries, to any public official or member of his or her family or business associates or other person in close proximity to the official, for that person or for a third party, in order that the official or third party act or refrain from acting in relation to the performance of official duties, or in order to achieve any favour in relation to a proposed investment or any licences, permits, contracts or other rights in relation to an investment. (b) Investors act in accordance with core labour standards as required by the International Labour Organization (ILO) Declaration on Fundamental Principles and Rights at Work, 1998, to which the EC Party and the Signatory CARIFORUM States are parties.67 (c) Investors do not manage or operate their investments in a manner that circumvents international environmental or labour obligations arising from agreements to which the EC Party and the Signatory CARIFORUM States are parties. (d) Investors establish and maintain, where appropriate, local community liaison processes, especially in projects involving extensive natural resource-based activities, in so far that they do not nullify or impair the benefits accruing to the other Party under the terms of a specific commitment.
4.	Canada-Columbia Free Trade Agreement68	Article 816: Corporate Social Responsibility Each Party should encourage enterprises operating within its territory or subject to its jurisdiction to voluntarily incorporate internationally recognized standards of corporate social responsibility in their internal policies, such as statements of principle that have been endorsed or are supported by the Parties. These principles address issues such as labour, the environment, human rights, community relations and anti-corruption. The Parties remind those enterprises of the importance of incorporating such corporate social responsibility standards in their internal policies.

64 SADC Protocol on Finance and Investment, 2006, available at
http://www.sadc.int/files/4213/5332/6872/Protocol_on_Finance__Investment2006.pdf

65 Investment Agreement for the Common Market for Eastern and Southern Africa (COMESA), 2007, available at:
http://www.tralac.org/wp-content/blogs.dir/12/files/2011/uploads/Investment_agreement_for_the_CCIA.pdf

66 Economic Partnership Agreement between the Forum of the Caribbean Group of African, Caribbean and Pacific (CARIFORUM) States and the European Community, 2008, available at:
http://trade.ec.europa.eu/doclib/docs/2008/february/tradoc_137971.pdf

67 These core labour standards are further elaborated, in accordance with the Declaration, in ILO Conventions concerning freedom of association, the elimination of forced labour, the abolition of child labour and the elimination of discrimination in the work place.

68 Canada-Columbia Free Trade Agreement (last modified: 2013), available at:
http://www.international.gc.ca/tradeagreements-accords-commerciaux/agr-acc/colombia-colombie/chapter8-chapitre8.aspx?lang=eng

4.1.5 Chapter III of the 2015 Model also introduces a new provision on "Home State obligations" requiring courts in the Home State to recognize foreign direct liability in situations where an investment causes damages or loss of life in the Host State. The Home State is required to ensure that its legal system does not bar such actions.

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