Applicable Laws - Convergence of Two Regimes

The tribunal held that bilateral investment treaties (BITs) should not be understood as only providing rights to investors without also imposing obligations, as BITs reference other sources of international law. Specifically, the applicable BIT referenced "general principles of international law" in its applicable law clause. While the tribunal rejected the argument that corporations cannot be subjects of international law, it also found that even if a BIT does not explicitly make investors subjects of international law, investors could still be subject to international obligations. The tribunal then examined several international agreements relating to human rights to water and sanitation. However, the tribunal ultimately found no direct legal obligation on the investor under international law to fulfill human rights

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Applicable Laws - Convergence of Two Regimes

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Abhimanyu Singh

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Applicable Laws – Convergence of Two Regimes

With respect to the applicable law, the tribunal held that it would be wrong to categorically
understand BITs as not providing any rights to the host state and not imposing any obligations
upon investors.

In the eyes of the tribunal, the applicable BIT was not an isolated or closed system, since the BIT
itself allows reference to other sources of international law. The tribunal came to this conclusion
by looking at three provisions of the BIT: the dispute settlement clauses, the applicable law
clause and the MFN clause titled “more favourable terms.” It noted that the applicable law clause
was particularly interesting as it refers to “general principles of international law.” The tribunal
found that this reference would be meaningless if the BIT were construed in isolation of the rest
of international law. Interpreting the BIT in such a way would even be wrong, according to the
tribunal, since the interpretation of a treaty must give effet utile to its provisions. Thus, the
tribunal found that the BIT cannot be construed as an isolated set of rules of international law for
“the sole purpose of protecting investments through rights exclusively granted to investors”
(para. 1189).

The tribunal, then, turned to the question of the BIT’s relation with international human rights
law. Here, it rejected the claimants’ argument that corporations could not by nature be subjects
of international law in a state-to-state system and stated that, “[w]hile such principle had its
importance in the past, it has lost its impact and relevance in similar terms and conditions as this
applies to individuals” (para. 1194). Interestingly, the tribunal also held that, even if a BIT does
not contemplate investors as subjects of international law, this would not undermine the idea that
foreign investors could be subjected to international law obligations (para. 1194). Moreover, the
tribunal stressed that, in the light of recent developments in international law, it could no longer
be admitted that companies operating internationally would be immune from becoming subjects
of international law (para. 1195).

To determine whether there are international law obligations attached to non-state entities, the
tribunal held that the focus must be on contextualizing the “corporation’s specific activities as
they relate to the human right at issue” (para. 1195). In doing so, the tribunal looked at
international conventions and referred to the Universal Declaration on Human Rights (UDHR),
the International Covenant on Economic, Social and Cultural Rights (ICESCR) and the
International Labour Organization Declaration of Principles concerning Multilateral Enterprises
and Social Policy. These instruments enounce human rights that are or can be associated with the
right to water (paras. 1196–1197).

The tribunal found in particular that article 30 of the UDHR and Article 5(1) of the ICESCR are
relevant in the present context (paras. 1196–1197). These articles read as follows:

Article 30 UDHR

“Nothing in this Declaration may be interpreted as implying for any State, group or person any
right to engage in any activity or to perform any act aimed at the destruction of any of the rights
and freedoms set forth herein.”

Article 5 (1) ICESCR

“Nothing in the present Covenant may be interpreted as implying for any State, group or person
any right to engage in any activity or to perform any act aimed at the destruction of any of the
rights or freedoms recognized herein, or at their limitation to a greater extent than is provided
for in the present Covenant.”
The tribunal stressed that it was undisputed that the right to water and sanitation is recognized as
part of human rights and that this right has as its corresponding obligation the duty of states to
provide all persons living under their jurisdiction with safe and clean drinking water and sewage
services (para. 1205).Despite this finding, the tribunal’s remaining challenge was to construe a
legal obligation on the investor (para. 1206), but it could find no such obligation.

According to the tribunal, Argentina’s argument conflated the concessionaire’s provision of

water and sewerage with the obligation to fulfill the human right to water, and this meant that the
source of the human right in question was not the BIT or international law but the concession
contract (para. 1206).
Finally, the tribunal examined the human right to water in the framework of AGBA’s
concession. It agreed with Argentina that the concession was designed as a substantial
contribution to the enforcement of the population’s right to water. Even so, it found no such
corresponding obligation exists under international law (para. 1212). The main responsibility
was on the state to exercise its authority over the concessionaire so as to ensure and preserve the
population’s basic right to water and sanitation.