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Simma, Bruno (July 2011): Foreign Investment Arbitration: A Place for Human Rights? In: International & Comparative Law Quarterly, Vol. 60, No. 3: pp. 573-596




The protection of foreign investment by way of treaties and arbitration has recently suffered attacks on its legitimacy. The article turns on human rights concerns in this context and analyses what legal mechanisms and arguments can be employed to ease the tension between investment protection and human rights. Harmonization in this regard finds two key entry points: first, at the inter-State level of investment agreements, and secondly, at the intra-State level of the foreign investment contract. At the first level, human rights considerations, particularly concerning economic and social rights, can be brought to bear by way of their systematic integration qua treaty interpretation. The article subjects this inroad to close scrutiny but concludes that, while it possesses considerable merits and has attracted a certain attention (albeit still more in the academic world than in that of arbitration practice), it remains an approach ex post, possibly leaving excessive discretion to arbitrators. Thus, at the second level, already at the pre-investment stage, efforts should be made to recast investors' "legitimate expectations" under foreign investment contracts by including a "human rights audit" as part of the due diligence to be conducted by the investor and the host State, to survey the host State's human rights treaty commitments and domestic methods for implementing these commitments. The primary objective of this audit would thus be to fully include the prospective host State's international obligations as part of the body of applicable law and thus create a better map of the landscape of an investor's "legitimate expectations".