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Opinion

5 Oct 2022

Author:
Dr Okechukwu Ejims, University of Bedfordshire

Using investment treaties to hold companies accountable: a case study of the Morocco-Nigeria Bilateral Investment Treaty

Governments around the world have signed more than 2,800 treaties that offer legal protections to international companies investing internationally. These treaties – known as Bilateral Investment Treaties (BITs) – often include an investor-state dispute settlement (ISDS) mechanism through which ‘host states’ can be sued by investors for failing to protect investor profits. BITs therefore essentially grant to investors the right to continued profits, with host states on the hook to compensate any losses. Meanwhile, BITs offer no enhanced rights to states themselves. This lop-sided approach has been criticised for failing to effectively regulate foreign investors’ conduct.

However, there are signs a new generation of investment treaties is aiming to do things differently, reversing the fundamental logic of investment treaties and instead placing duties on investors to act responsibly. The Morocco-Nigeria BIT, signed in 2016 and awaiting ratification, is perhaps the prime example of this, containing progressive provisions supported by an element of enforceability.

This blog looks at how this BIT could be used to regulate the conduct of investors, and what lessons can be learnt and applied to other agreements.

The Morocco-Nigeria BIT places duties on investors ranging from respect for human rights to environmental protection. It provides that investors and investments must uphold human rights in the host state and act in accordance with core labour standards as laid out in the ILO Declaration on Fundamental Principles and Rights of Work 1998. When conducting their business under the terms of this treaty, foreign investors have an obligation not to undermine international environmental, labour and human rights obligations to which Morocco or Nigeria are parties.

And there’s more. Under this BIT, investors must conduct social and environmental impact assessments of their potential investment. Investors and investments are also expected to contribute to the sustainable development of the host state and local community through high levels of socially responsible practices, which must be embedded in the application of the ILO Tripartite Declaration on Multinational Investments and Social Policy.

Of course, the effectiveness of the Morocco-Nigeria BIT will depend heavily on how the investor duties and obligations are actually enforced.

Here again there is good news. The BIT allows states to bring direct actions against an investor for violating their obligations to protect the environment and promote human rights. In the event of non-compliance by an investor, either Morocco or Nigeria (whichever is the host state) can bring a direct claim or action before an arbitral tribunal to sanction this non-compliance.

This is a major step forward. Current practice in investment treaty arbitration does allow for states to bring actions against foreign investors in order to hold them accountable for violating their environmental and human rights duties and obligations – but this is limited to “counterclaims” which can be brought only in response to the investor filing an ISDS claim. For example, in Urbaser v Argentina, Argentina faced an ISDS claim from an investor for having taken emergency measures to guarantee affordable water to its citizens during a financial crisis, leading to losses for Urbaser, which had financial interests in the water and sewage concessionaires. In response, Argentina filed a counterclaim against the foreign investor, arguing Urbaser had violated its obligations under international law in relation to the human right to water. This tool offers a greater balance between the duties of states and investors, but the fact that counterclaims are only possible following an ISDS claim instigated by an investor is a major shortcoming.

The Morocco-Nigeria BIT also offers a ground-breaking mechanism for holding foreign investors liable for failing to uphold their environmental and human rights obligations. Article 20 of the Morocco-Nigeria BIT provides that civil actions for damages for failing to uphold environmental and human rights human rights can be brought against the investor in their home state. This provision is undoubtedly innovative and could address long-running issues surrounding access to justice for individuals and groups affected by foreign investment.

In conclusion, once ratified, the Morocco-Nigeria BIT could provide a basis for states to bring civil actions against foreign investors for not upholding their environmental and human rights obligations under the BIT. The investor liability provision could also provide access to remedy for those impacted by environmental and human rights abuses caused by the activities of foreign investors. Taken together, these provide a ground-breaking example of an investment agreement that serves to enhance corporate accountability, rather than the other way around. We should be thinking about how the Morocco-Nigeria BIT provisions regarding investor duties and liability could be tailored to fit other investment agreements, with the aim that they become a prerequisite for greater economic integration between countries.

Dr Okechukwu Ejims is a Senior Lecturer in Law and LLB Course Co-ordinator at the University of Bedfordshire