Human rights and social issues are becoming more central to investment treaty arbitration. Natural resource, energy and infrastructure projects are often located in proximity to local and indigenous communities. As a result, the interaction between these projects and communities is increasingly at issue in investor-state disputes. At the same time, some newer generation treaties are seeking to expressly address these social and human rights issues. We expect to see this trend to continue.
By Caroline Richard, Carsten Wendler, Lluis Paradell, Vasuda Sinha, Carla Yoon and Domen Tursic
International treaties, such as the International Covenant on Civil and Political Rights, the American Convention on Human Rights, the African Charter on Human and Peoples’ Rights and the Indigenous and Tribal Peoples Convention, require states to protect human rights. Additionally, international business and human rights standards, such as the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises, call upon investors to respect human rights and to exercise due diligence to safeguard human rights. Against this backdrop, multinational corporations develop their own policy commitments, codes of conduct and sustainability policies reflecting these standards.
Alongside international requirements, there has been a proliferation of domestic regulation to protect human rights, including legislation relating to supply chains as well as the protection of indigenous rights. Such developments can arise from new legislation, as seen in Canada, but often stem from court rulings, as in South Africa and Ecuador.
Financial institutions, including the International Finance Corporation, may also condition the provision of project finance on compliance with human rights-related requirements.
This growing mix of hard- and soft-law requirements are a key consideration when developing projects. Mining companies, for example, rank community impact and indigenous trust among their top five considerations and risk factors in 2025. States have invoked community consultation requirements to annul or terminate concessions and land titles. For instance, citing non-compliance with consultation requirements, Mexico terminated a contract for a major wind farm and revoked gold and silver mining concessions. Similarly, in Kenya, courts invalidated land titles for wind farm projects.
Investors and states must navigate these international and domestic frameworks in the context of operating and overseeing major projects. Increasingly, human rights and social issues are being raised in the context of investment disputes.
Social and human rights issues are increasingly at issue in investment treaty disputes. Social issues are often the catalyst for state measures leading to investment treaty claims. They are also increasingly being raised by states both as a shield and a sword in investment treaty arbitration, i.e. as defences to investment claims or even as a basis for counterclaims. Separately, newer treaties are expressly referring to human rights norms. We expect this area to continue to develop over the coming years, as more tribunals are faced with such issues and interpret new treaties. Our team has vast experience in successfully navigating these new challenges.
