Natural Resources Grabbing: an International Law Perspective [1 ed.] 9789004305663, 9789004305656

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Natural Resources Grabbing: An International Law Perspective

Legal Studies on Access and Benefit-sharing Series Editors Elisa Morgera Matthias Buck Elsa Tsioumani

VOLUME 4

The titles published in this series are listed at brill.com/labs





Natural Resources Grabbing: An International Law Perspective Edited by

Francesca Romanin Jacur Angelica Bonfanti Francesco Seatzu

LEIDEN | BOSTON

 Library of Congress Cataloging-in-Publication Data Natural resources grabbing : an international law perspective / Edited by Francesca Romanin Jacur, Angelica Bonfanti, Francesco Seatzu.   pages cm. -- (Legal studies on access and benefit-sharing ; 4)  Includes bibliographical references and index.  ISBN 978-90-04-30565-6 (hardback : alk. paper) 1. Natural resources--Law and legislation. 2. Environmental law. 3. Land use--Law and legislation. 4. Human rights. 5. International law. I. Romanin Jacur, Francesca, editor. II. Bonfanti, Angelica, editor. III. Seatzu, Francesco, editor.  K3478.N39 2015  346.04’4--dc23 2015031742

issn 2213-493x isbn 978-90-04-30565-6 (hardback) isbn 978-90-04-30566-3 (e-book) Copyright 2016 by Koninklijke Brill nv, Leiden, The Netherlands. Koninklijke Brill nv incorporates the imprints Brill, Brill Nijhoff and Hotei Publishing. All rights reserved. No part of this publication may be reproduced, translated, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior written permission from the publisher. Authorization to photocopy items for internal or personal use is granted by Koninklijke Brill nv provided that the appropriate fees are paid directly to The Copyright Clearance Center, 222 Rosewood Drive, Suite 910, Danvers, ma 01923, usa. Fees are subject to change. This book is printed on acid-free paper.



Contents Preface ix List of Abbreviations x Notes on Contributors xv Introduction 1 F. Romanin Jacur, A. Bonfanti and F. Seatzu

PART 1 Mapping the Field 1 The Practice of Land Grabbing and Its Compatibility with the Exercise of Territorial Sovereignty 17 Federica Violi 2 Resources Grabbing and Human Rights: Building a Triangular Relationship Between States, Indigenous Peoples and Corporations 38 Jérémie Gilbert and Nadia Bernaz

PART 2 The Human Rights Context 3 Who is Entitled to Cultivate the Land? Sovereignty, Land Resources and Foreign Investments in Agriculture in International Law 55 Jochen von Bernstorff 4 Land Grabbing and International Human Rights: The Jurisprudence of the Inter-American Court of Human Rights on the Rights of Indigenous Peoples 75 Elisa Ruozzi 5 Water Grabbing and Water Rights: Indigenous ‘Sovereignty’ v. State Sovereignty? 93 Marta Bordignon, Roberta Greco and Giada Lepore

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Right to Water and Access to Water Resources in the European Development Policy 116 Marco Borraccetti

PART 3 The Environmental Context 7

Tackling the Grabbing of Genetic Resources and of Associated Traditional Knowledge through the Nagoya Protocol 139 Francesca Romanin Jacur

8

Natural Resource Grabbing: The Case of Tropical Forests and redd+ 159 Annalisa Savaresi

9

International Land Investments or the Environment Put up for Auction: The Case of the Niger Basin 181 Komlan Sangbana

10

The European Integration and the 2009 Renewable Energy Directive: A Suitable Framework for the Implementation of the Sustainability Criteria for Biofuels Production in Third-States? 199 Federico Esu and Solenne Avet

PART 4 The Investment Context 11

Integrating Human Rights into the Extractive Industries: How Investment Contracts Can Achieve Protection 225 Anil Yilmaz-Vastardis and Tara Van Ho

12

The Role of International Environmental Principles in Investment Treaty Arbitration: Precautionary and Polluter Pays Principles and Partial Compensation 245 Tomoko Ishikawa

13

Exploration and Extraction of Natural Resources: miga’s Role in the Promotion of Responsible Investments in Developing Countries 275 Inesa Stolper

Contents

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On the World Bank’s Efforts in Defence of the Human Right to Land 294 Francesco Seatzu

PART 5 The wto Context 15 The wto Members’ Right to Protect Animals in International Trade: A tbt Perspective 317 Angelica Bonfanti 16

Water Resources’ Exploitation and Trade Flows: The Impact of International Trade Law 338 Julinda Beqiraj

17

Energy Export Restrictions in the wto between Resource Nationalism and Sustainable Development 361 Ilaria Espa

PART 6 Conflicts and Crimes 18

On the Financing of Civil Wars through Natural Resources: Is There a Duty of Vigilance for Third States on the Activities of Trans-National Corporations? 383 Marco Pertile

19

Breaking the ‘Resource Curse’: Prosecuting Pillage of Natural Resources 407 Garima Tiwari

20 Concluding Observations 427 F. Romanin Jacur, A. Bonfanti and F. Seatzu Bibliography 435 Index 459

Preface The underlying idea of this research project is to provide a comprehensive assessment of the existing international legal framework applicable to the large-scale – often unsustainable – investments in land and other natural resources, which are commonly referred to as ‘grabbing’. In the beautiful setting of Sardinia (Italy) in the fall of 2013, the University of Cagliari hosted a workshop of young researchers, leading scholars and practitioners coming from different parts of the World to discuss the challenges for international law deriving from the growing demand for natural resources and the related ‘race’ to their exploitation, especially in developing countries. This volume is the refined outcome of this conference and reflects in its chapters a selection of the papers presented and the rich discussion and exchange of ideas among the participants. This book studies in an international law perspective the grabbing of various natural resources: land, water, forests, biologic resources, animal species, oil and minerals. These phenomena are examined in a cross-cutting approach through the lens of international instruments protecting human rights and the environment, trade and investment agreements and in the context of conflicts. With this comprehensive and cutting-edge approach, the editors and authors of this book remarkably contribute to a better and deeper understanding of these complex and fast-growing phenomena. Indeed, besides describing the state of the art and considering how fundamental principles of international law, such as State sovereignty, are called into question by natural resources grabbing and how international treaties, organizations and judicial bodies respond to these challenges, this book also critically shows the weaknesses in the system that need to be further investigated and carefully examines emerging trends and new elements that could shape the future international regime in this context. This book provides for a valuable and insightful analysis of the implications for international law of natural resources grabbing: a welcome and useful contribution that fills a gap in the existing literature. T. Treves



List of Abbreviations aafp Africa Agricultural Finance Project ab Appellate Body abs Access and Benefit Sharing achpr African Commission on Human and People’s Rights achr American Convention on Human Rights acp African, Caribbean and Pacific Group of States afrc Armed Forces Revolutionary Council aidcp Agreement on International Dolphin Conservation Program aknr Afghanistan and Afghan Krystal Natural Resources amt American Manufacturing & Trading, Inc. AoA Agreement on Agriculture awglca Ad Hoc Working Group on Long-term Cooperative Action biicl British Institute of International and Comparative Law bit(s) Bilateral Investment Treatie(s) cao Compliance Advisor/Ombdusman car Central African Republic cas Country Assistance Strategy cbd Convention on Biological Diversity cbdr Principle of Common but Differentiated Responsibilities ccba Climate, Community and Biodiversity Alliance ccpr Centre for Civil and Political Rights cdf Civil Defence Forces cfs Committee on World Food Security cifor Center for International Forestry Research CoE Council of Europe com Communication CoP Conference of the Parties cso Civil Society Organization dcf Discounted Cash Flow dg Directorate General drc Democratic Republic of Congo dsb Dispute Settlement Body ec European Community ecosoc Economic and Social Council ect Energy Charter Treaty echr European Court of Human Rights eci European Citizen’s Initiative

List of Abbreviations edf eeas eni enp enpi ep escr Committee esia esmp etp eu euwi fao fcpf fdi fil fmv fpic ga gatt ghg hipc hrc IAComHR IACtHR iba ibrd icc iccpr icescr icj icsid ictsd icty ida ifad ifc ifs ihrl iia(s)

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European Development Fund European External Action Service European Neighborhood Instrument European Neighborhood Policy European Neighborhood Partnership Instrument European Parliament Committee on Economic, Social and Cultural Rights Environmental and Social Impact Assessment Environmental and Social Management Plan Eastern Tropical Pacific European Union European Union Water Initiative Food and Agriculture Organization Forest Carbon Partnership Facility Foreign Direct Investment Foreign Investment Law Fair Market Value Free Prior Informed Consent General Assembly General Agreement on Tariff and Trade Greenhouse Gas Heavily Indebted Poor Countries Initiative Human Rights Council Inter-American Commission of Human Rights Inter-American Court of Human Rights International Bar Association International Bank for Reconstruction and Development International Criminal Court International Covenant on Civil and Political Rights International Covenant on Economic, Social and Cultural Rights International Court of Justice International Centre for Settlement of Investment Disputes International Centre for Trade and Sustainable Development International Criminal Tribunal for the Former Yugoslavia International Development Association International Fund for Agricultural Development International Finance Corporation Instrument for Stability International Human Rights Law International Investment Agreement(s)

xii iied iisd ila ilc ilo iluc imf inef io(s) ipcc iso itprgfa ldpi lmap mat mdgs mea mfn miga mmda mnc MoMP MoP mrm nafta nba ngo nieo nmt nt oas oau octs oea oecd opec pca pes pic pln

List of Abbreviations International Institute for Environment and Development International Institute for Sustainable Development International Law Association International Law Commission International Labour Organization Indirect Land-Use Change International Monetary Fund Institut für Entwicklung und Frieden (Institute for Development and Peace) International Organization(s) Intergovernmental Panel on Climate Change International Organization for Standarditazion Treaty on Plant Genetic Resources for Food and Agriculture Land Deals Politics Initiative Land Management and Administration Project Mutually Agreed Terms Millennium Development Goals Multilateral Environmental Agreement Most Favored Nation Multilateral Investment Guarantee Agency Model Mining Development Agreement Multinational Corporation Ministry of Mines and Petroleum Meeting of the Parties Marine Resource Management North American Free Trade Agreement Niger Basin Authority Non-governmental Organization New International Economic Order Nuremberg Military Tribunals National Treatment Organization of American States Organisation of African Unity Overseas Countries and Territories Organización de los Estados Americanos Organization for Economic Co-operation and Development Organization of the Petroleum Exporting Countries Permanent Court of Arbitration Payment for Ecosystem Services Prior Informed Consent Perusahaan Listrik Negara

List of Abbreviations

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Processes and Production Methods ppms prai Principles on Responsible Agricultural Investment prsp Poverty Reduction Strategy Papers psnr Permanent Sovereignty over Natural Resources pvs Participatory Varietal Selection rai Responsible Agricultural Investment red Renewable Energy Directive redd+ Reducing Emissions from Deforestation and Forest Degradation in Developing Countries rspo Roundtable on Sustainable Palm Oil ruf Revolutionary United Front sbsta Subsidiary Body for Scientific and Technological Advice scm Subsidies and Countervailing Measures scsl Special Court for Sierra Leone serac Social and Economic Rights Action Centre serap Socio-Economic Rights Accountability Project siwi Stockholm International Water Institute smta Standard Material Transfer Agreement tbt Agreement on Technical Barriers to Trade teu Treaty on the European Union tfeu Treaty on the Functioning of European Union udhr Universal Declaration of Human Rights umhk Belgian Union minière du Haut Katanga un United Nations unced United Nations Conference on Environment and Development uncerd un Convention on the Elimination of All Forms of Racial Discrimination uncitral un Commission on International Trade Law unctad un Conference on Trade and Development undrip un Declaration on the Rights of Indigenous Peoples unece un Economic Commission for Europe unep un Environment Programme unesco United Nations Educational, Scientific and Cultural Organization unfccc un Framework Convention on Climate Change unga un General Assembly unhcr un High Commissioner for Refugees unidroit International Institute for the Unification of Private Law unita National Union for the Total Independence of Angola unitar un Institute for Training and Research updf Uganda People’s Defence Force us United States of America

xiv vclt wb wfs wg wto ww wwf

List of Abbreviations Vienna Convention on the Law of Treaties World Bank World Food Summit Working Group World Trade Organization World War World Wildlife Fund

Notes on Contributors Solenne Avet is Web Editor in Corporate Social Responsibility, Ethiquedesorganisations.fr; Postgraduate Diploma in Law, University of Kent (uk); Master’s Degree in Ethics and Business Law, University of Cergy-Pontoise (France); Master’s Degree in Business Law and European and International Law, University of Paris Ouest Nanterre La Défense (France). Previously, Intern in Ethics & Compliance, Airbus Group (France); Legal Intern, Ethics Intelligence. Nadia Bernaz is Senior Lecturer at Middlesex University School of Law (United Kingdom) and a specialist in international criminal law and international human rights law. Her current research focuses specifically on business and human rights questions, including state obligations to regulate businesses and corporate liability for human rights violations. Jochen von Bernstorff (Prof. Dr. iur.) holds the chair for constitutional law, international law and human rights at the Eberhard Karls Universität Tübingen (since 2011) and teaches international law as a visiting professor at the German Federal Foreign Office Academy Berlin, Université Panthéon-Assas (institut des hautes études internationales), Université Aix-Marseille and National Taiwan University Taipei. He has acted as a consultant for the German Government and various un-institutions on human rights, development and international environmental law issues. Julinda Beqiraj is Research Fellow at the Bingham Centre for the Rule of Law, British Institute of International and Comparative Law. She works on a number of projects, including one on the place of the rule of law in the context of the post-2015 millennium development agenda and one on barriers to access to justice across jurisdictions. Previously, she worked in Italy, as a research fellow in international law on projects relating to the social dimension of international and regional economic integration agreements, and on human rights and international criminal justice. She holds a Ph.D. from the School of International Studies (Trento) and has lectured on international economic institutions, public international law and eu law.

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Angelica Bonfanti is Associate Professor in International Law at the University of Milan, where she teaches International Trade Law, International Investment Law and Human Rights, and eu law on business and human rights. Her research focuses on public and private international law, business & human rights, international trade law, international investment law. She is the author of the book Imprese multinazionali, diritti umani e ambiente. Profili di diritto internazionale pubblico e privato [Milan: Giuffrè, 2012, pp. 434], and of several articles dealing with public and private international law issues. Marta Bordignon Ph.D. in International Law at University of Rome “Tor Vergata”, Master in International Relations and Bachelor in Political Science at “LUISS Guido Carli” University in Rome. Lecturer and Teaching Assistant in International Law at the University of Rome “Tor Vergata” and the European University of Rome. Business advisor with particular reference to MENA countries and consultant in stakeholder assessment and engagement projects. Member of the avsi Foundation Expert Group on Business and Human Rights. Marco Borraccetti Ph.D., a Researcher and Senior Lecturer of European Union Law at Alma Mater Studiorum – Università di Bologna, School of Political Science where he teaches eu Institutional Law and eu Immigration Law (Jean Monnet Module). Visiting Scholar at the eu Center at University of Illinois at Urbana-Champaign (2015). Legal Expert, Italian Delegation to the Global Forum on Migration and Development (2014). Visiting Professor at Université Libre de Bruxelles – Institut d’Etudes Européennes (2011). His current main research interests include: Migration and Mobility; the Right to water and eu Development cooperation; the Judicial protection of Fundamental rights in the eu. Ilaria Espa is a Marie Curie Senior Research Fellow at the World Trade Institute. She is a Member of the Swiss National Centre of Competence and Research (nccr) Work Package on Energy, Trade and Climate Change. A PhD in International Law and Economics from Bocconi University (summa cum laude), Ilaria specialises in wto law, Natural Resources Management and Energy Law, and Climate Change. She serves the E15 Expert Group on Trade and Investment in Extractive Industries, an initiative jointly implemented by ictsd and the World Economic Forum, and the ila Committee on International Law and  Sustainable Development of Natural Resources. Her research has been

NOTES ON Contributors

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published in a number of peer-reviewed journals and in 2012 she received the sidi prize awarded to a younger author for meritorious scholarship published in Revue Internationale de Droit Économique. She was a Visiting Scholar at Columbia Law School in 2012 and a consultant for the Trade and Environment Division of the wto during 2009–2011 and for various Swiss governmental agencies during 2014–2015. Federico Esu Ph.D. Candidate, Erasmus School of Law, Erasmus University Rotterdam (The Netherlands); ll.m., University College London (ucl); Bachelor’s and Master’s Degrees in Law, University of Cagliari (Italy) and University of Glasgow (Scotland, uk). Previously, tutor and research assistant in International and eu Law, University of Cagliari; legal intern, Consulate General of Italy in Edinburgh (uk); trainee lawyer and associate, Cagliari-based boutique law firm; part-time legal consultant. Attorney-at-law, Italian Bar Association. Jérémie Gilbert is a Reader in Law at the University of East London, United Kingdom. His main area of research is on international human rights law, and more particularly the rights of minorities and indigenous peoples. He has published various articles and book chapters on the rights of indigenous peoples, looking in particular at their right to land and natural resources. His latest monograph is ‘Nomadic Peoples and Human Rights’ (Routledge, 2014). Roberta Greco holds a Ph.D. in International Law (European Label, summa cum laude) from the University of Rome “Tor Vergata”. She is a Research Fellow at the Faculty of Law of the LUMSA University of Rome. In 2013 she was boursière d’excellence at the Platform for International Water Law of the University of Geneva and visiting scholar at the IHP-HELP Centre for Water Law, Policy and Science of the University of Dundee. She is a practicing lawyer specialized in litigating cases before the European Court of Human Rights. Her publications include articles on the human right to water. Tomoko Ishikawa is an Associate Professor at University of Tsukuba in Japan. She received an llm from the University of Tokyo, a second llm from the University of Cambridge, and earned her PhD in public international law from University College London (ucl). Her professional experiences include serving as a Judge at Tokyo District Court and holding the position of Deputy Director at the

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International Legal Affairs Bureau of the Ministry of Foreign Affairs of Japan. Her recent publications include: “Keeping Interpretation in Investment Treaty Arbitration on Track: The Role of States Parties” in J. Kalicki and A. Joubin-Bret (eds.) Reshaping the Investor-State Dispute Settlement System: Journeys for the 21st Century (Brill/Nijhoff, 2015). Giada Lepore J.S.D. candidate in International Law and Human Rights at “St. Thomas University” in Miami (usa). ll.m. magna cum laude in Intercultural Human Rights at the same University, where she also served as Editor in Chief of the Intercultural Human Rights Law Review. She worked as a legal consultant focusing on projects of development cooperation, promotion of small and medium enterprises, and human rights compliance. Member of the avsi Expert Group on Business and Human Rights. Marco Pertile is Associate Professor in International Law at the University of Trento, where he teaches International Law of Armed Conflicts and Foundations of International and eu Law. Until 2012, he carried out a two-year Marie Curie project on the relationship between natural resources and armed conflicts at the iheid in Geneva, where he is now visiting lecturer within the Master in International Affairs and the Master in Development. Previously, he was lecturer at the Geneva Academy of International Humanitarian Law and Human Rights, visiting researcher at the Max Planck Institute in Heidelberg and visiting professional at the International Criminal Court. Francesca Romanin Jacur PhD (Milano), is Adjunct Professor of International Environmental Law at the State University of Milano, Italy. She is also Senior Consultant of the Italian Ministry for the Environment, Land and Sea. She has published a monograph (The dynamics of multilateral environmental agreements: institutional architectures and law-making processes, Editoriale Scientifica, 2013) and several articles in public international law. Elisa Ruozzi PhD (Milano), is Researcher in International Law at the University of Turin, where she teaches European Union and International Environmental Law. Her current research interests are focussed on human rights and the environment, with particular regard to the environmental jurisprudence of international human rights bodies, and on the relationship between the multilateral trading system and the use of renewable sources of energy.

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Komlan Sangbana is currently a Research and teaching Assistant at the Faculty of Law and the Institute of Environmental Studies of the University of Geneva. Since 2009, he is Member of the Platform of International Water Law (University of Geneva). His research area include International Environmental Law, Protection of International Freshwater and Governance of Water Resources. Annalisa Savaresi is currently Research and Teaching Fellow in Global Environmental Law at the University of Edinburgh School of Law, United Kingdom. She specialises in European, international and comparative environmental law. Her research interests include climate change, forestry, environmental liability and the relationship between human rights and environmental law. She has studied and worked in Denmark, Italy and the uk and has lectured in various capacities in a number of institutions around the world. She is member of the iucn World Commission on Environmental Law and writer for the Earth Negotiation Bulletin, published by the International Institute for Sustainable Development. Francesco Seatzu jd (Cagliari), PhD (Nottingham), is a Full Professor of International and European Union Law at the University of Cagliari, Italy. He authored The un Committee on Economic, Social and Cultural Rights: The Law, Process and Practice (Abingdon: Routledge, 2012) (with M. Odello), The World Bank Inspection Panel (Turin: Giappichelli, 2007), Insurance in Private International Law: A European Perspective (Oxford: Hart, 2003), and co-edited Latin American and Caribbean International Institutional Law (with M. Odello, tmc Asser Press, 2015); Foreign Investment, International Law and Common Concerns (with T. Treves and S. Trevisanut, Routledge, 2013); Armed Forces and International Jurisdictions (with M. Odello, Antwerp, Cambridge: Intersentia, 2013); Tradition and Innovation in Private International Law (with L. Pereznieto Castro and T. Treves, New York: Juris Publishing, 2005). Professor Seatzu is the author of several articles in public and private international law published in Italy and foreign countries. Inesa Stolper has received her ll.b. at European Humanities University, Lithuania and her ll.m. degree at College of Europe, Belgium. She is interested in international public law and investment law. She is working as a teaching assistant at ehu. Inesa has experience teaching the following courses: Legal Informatics, Advocacy Skills, Commercial Arbitration and Civil Litigation. In addition to her

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work, she is involved in moot court competitions, in particular Philip. C. Jessup International Law Moot Court Competition. Under her coaching in 2013, ehu team was included into a list of best 16 teams in the world (out of 630). Garima Tiwari is a PhD Research Fellow at the School of Law, University of Camerino, Italy. She holds an ll.m. in International Crime and Justice from University of Torino/United Nations Interregional Crime and Justice Research Institute, Italy and a b.a. ll.b (Hons.) degree from National Law Institute University, India. She was awarded 2012 JusticeMakers Fellowship from International Bridges to Justice, Geneva and has worked as Law Associate (faculty) at the National Judicial Academy, Supreme Court of India. She is a co-founder and author at the A Contrario icl research group and has authored six academic law books along with several papers. Tara Van Ho is a post-doc researcher with the INTRA law Centre at the University of Aarhus and a Project Associate with the Essex Business & Human Rights Project. She has a B.A. in English from Marietta College, a J.D. from the University of Cincinnati, as well as an LL.M. in International Human Rights Law and a Ph.D. in Law, both from the University of Essex. She is the former Director of the Essex Human Rights Clinic and is a licensed attorney in the us State of Ohio, where she previously worked in corporate law. Anil Yilmaz-Vastardis is a Project Associate with the Essex Business & Human Rights Project, and a Lecturer at the University of Essex. She holds her ll.m. in International Trade Law and her Ph.D. in Law from the University of Essex, and has an undergraduate law degree from the University of Marmara in Turkey. She served as a corporate and commercial lawyer with a local law firm in Istanbul for 2 years. Federica Violi has recently earned her PhD in International Law from the University of Milan, with a dissertation on Permanent Sovereignty of States over Natural Resources and the Phenomenon of Land Grabbing. She has been Visiting doctoral student at the Max Planck Institute for Comparative Public Law and International Law and is currently International and European Union Law Fellow at the University of Messina, where she has been assigned teaching and research responsibilities. As Vice President of ilsa Chapter Messina, she has been collaborating to the realization of several research projects, among others on the normative significance of political and economical self-determination of people.

Introduction

Natural Resources Grabbing: An International Law Perspective Francesca Romanin Jacur, Angelica Bonfanti and Francesco Seatzu It is a common understanding that the liberalization of trade and foreign investments in developing countries are important drivers for their economies.1 However, it is not always the case that these flows of foreign capitals bring about only positive developments. In fact, the willingness of recipient States to attract foreign investments that have the potential to reduce poverty and bring inclusive development may find itself at odds in the short and long  term with respect to fundamental human rights and environmental protection. Investments in natural resources are no exception to this pattern. Much on the contrary, the growing demand for agricultural resources by emerging economies concerned about ensuring long-term food and energy security for their peoples and the continuous appetite for raw materials mainly situated in developing countries contribute to increase competition for land and natural resources. Land is the primary and vital natural resource where the majority of other resources are found. Hence, access to land and the recognition of a legitimate tenure title are of great importance to ensure the enjoyment not only of the right to land itself, but also of the rights to other natural resources that depend on it. On the supply-side, the exhaustibility and the scarcity of natural resources that are necessary for the sustenance of local peoples and communities – such as water and land – or that are subject to trade and investment activities by the local governments – such as oil, gas, genetic resources, precious minerals and agricultural products – exacerbate the phenomenon. This is the context in which natural resources grabbing (nrg) occurs and expands. Large-scale investments in land to acquire control over these natural resources often backed by foreign capital and endorsed by domestic governments (even allegedly in pursuit of national development purposes) entail the seizure of territories and ancestral lands of local populations, their unavoidable relocation to other areas with ensuing loss of their cultural identity and 1 See e.g. J.A. Ocampo, S. Spiegel, J.E. Stiglitz, “Capital Market Liberalization and Development,” J.E. Stiglitz, J.A. Ocampo (eds.), Capital Market Liberalization and Development, (oup, 2008) 1.

© koninklijke brill nv, leiden, ���6 | doi 10.1163/9789004305663_002

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major problems of vulnerability and marginalization. Escalations in these practices have led to – and continue to trigger – the so called ‘resource curse’ in developing and underdeveloped countries rich in natural resources: their natural resources instead of being drivers of development provoke political and social disorders and tremendous civil wars to gain control over the areas where they can be found. Several actors interact and in various ways contribute to the globalized and complex dimension of nrg: States, State-owned companies and governmental agencies, international organizations (igos) and financial institutions (ifis), foreign investors and multinational corporations, local peoples and indigenous communities. 1

Natural Resources Grabbing: Mapping the Research Field

The term ‘grabbing’ is generally found in the literature and in the media with reference to land, and is generally perceived as tainted by a negative connotation.2 This is mainly because its use is associated with practices that not only do not contribute to the sustainable development of the recipient countries but also result in adverse impacts on human rights and the environment. Following this common recognition, aware that it immediately calls to the mind of the readers these practices, when we use term ‘grabbing’ in this book we neither intend to imply that all deals in natural resources are necessarily bad nor to condemn them altogether. Despite its broad use, there is no commonly agreed legal definition of ‘grabbing.’ Considering the complexity of the phenomenon, not surprisingly so. At present, consensus on its constituent elements has yet to be reached among legal scholars. We will provide for a tentative definition of the grabbing phenomenon concerning natural resources (that we call natural resources grabbing, nrg) in the concluding remarks to this publication, on the basis of the results emerging from the various chapters.

2 See e.g. M. Fitzmaurice, M. Szuniewicz (eds), Exploitation and Management of Natural resources in the 21th century: The Challenge of Sustainable Development (Kluwer Law International, 2003); M.E. Margulis, Land Grabbing and Global Governance (Routledge, 2013); F. Seatzu, “On the Roles and Responsibilities of the World Bank and its Affiliate Institutions in Agriculture and Water (Mis)Investments,” Indian Journal of International Law, 2011, 486. ifad, Responding to ‘Land Grabbing’ and Promoting Responsible Investment in Agriculture (ifad Occasional Paper, 2010).

Natural Resources Grabbing

3

This book aims at examining the phenomenon of nrg from an international legal perspective. The research embraces a broad approach to nrg and addresses different situations that may qualify as grabbing. Examples of nrg covered in this book are large-scale leases of lands for agricultural investments and the taking of resources like water, forests and other resources essential to ensure the livelihood of local peoples in developing countries, the taking from indigenous peoples of their ancestral lands, the inhumane killing of endangered animal species in order to derive tradable products from them. Thus, nrg presents two dimensions, which may exist separately or contextually: a qualitative and a quantitative one. The former relates to the way in which the practices are carried out, the latter relates to the scale or gravity of the phenomenon. Besides, if we consider the modalities according to which natural resources are either accessed or managed, we can distinguish between ‘direct’ and ‘indirect nrg.’ ‘Direct’ nrg occurs when the subject entitled to a natural resource is illegally deprived of it. In other words, this happens when natural resources – such as land, water, biological and genetic resources, forests, oil, gas and mineral resources, to name a few – are illegitimately obtained, because they are accessed in violation of the property rights of the owner and/or of the applicable procedural requirements. This is the case, for instance, of genetic resources accessed without obtaining the consent of indigenous peoples who legitimately own them. ‘Indirect’ nrg relates to the unsustainable management of the resources and encompasses situations where – even when the natural resources are legally accessed – their subsequent exploitation entails negative effects on the environment, on fundamental rights of the local communities and of the other stakeholders involved. This is the case, for instance, of investment contracts entailing long-term breaches of fundamental human rights and adverse environmental effects. Other examples are the inadequate sharing of the benefits deriving from the exploitation of the natural resources, as well as the lack of due consideration of the rights of the local communities and of the other stakeholders, or the violation of environmental standards. A specific typology of ‘indirect’ nrg may be qualified as nrg de facto or ‘despite the respect of law.’ It occurs when States have their ‘hands tied by international law’ because they are bound by conventional obligations limiting their regulatory powers to pursue legitimate public objectives. In these cases, States cannot react to situations of grabbing because their public policy space is limited, for example, by their international trade or investment commitments. In such a case, in the face of prospective shortages of raw materials, energy security concerns, water scarcity or inhumane treatment of animal species, the State risks seeing its own sovereign prerogatives restricted to the point of being

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barred from adopting appropriate measures to protect its vital interests. Finally, a residual case of grabbing may take place when trade and investments in natural resources are carried out by subjects who take advantage of their disproportionate bargaining powers. Despite formal compliance with the substantive and procedural safeguards established by law, in these cases weaker parties often accept unequitable contractual conditions and agree to unfair deals. 2

The Principle of Permanent Sovereignty over Natural Resources

nrg touches upon core principles of international law that are closely interconnected: the permanent sovereignty over natural resources and the peoples’ right to self-determination. The State right to dispose freely of its own natural resources is one of the basic tenets of State sovereignty, as acknowledged by treaties, resolutions of international organizations and by international judicial decisions. The un General Assembly recognized that permanent sovereignty over natural resources is an “inalienable right of all States freely to dispose of their natural wealth and resources in accordance with their national interest”3 and that its violation “is contrary to the spirit and principles of the Charter of the United Nations and hinders the development of international cooperation and the maintenance of peace.”4 The principle is reflected in the common art. 1 of the International Covenant on Civil and Political Rights (iccpr)5 and of the International Covenant on Economic, Social and Cultural Rights (icescr)6 and embodied within art. 21.4 of the African Charter of Human Rights.7 Furthermore, as recognized by the icj in Congo v. Uganda, State permanent sovereignty over natural resources is a principle of customary 3 un General Assembly, Permanent sovereignty over natural resources, Resolution 1803 (xvii), adopted on 14 December 1962, preamble. 4 Ibid., art. 7. The principle has been further elaborated by the un General Assembly in the Declaration on the Establishment of a New International Economic Order (Resolution 3201 (S.vi), adopted on 1 May 1974) and in the Charter of Economic Rights and Duties of States (Resolution 3281 (xxix), adopted on 12 December 1974). 5 International Covenant on Civil and Political Rights (iccpr), ga res. 2200A (xxi), 21 un gaor Supp. (No. 16), p. 52, un Doc. A/6316 (1966), adopted on 16 December 1966. 6 International Covenant on Economic, Social and Cultural Rights, ga res. 2200A (xxi), 21 un gaor Supp. (No. 16), 49, un Doc. A/6316 (1966), adopted on 16 December 1966. 7 African (Banjul) Charter on Human and Peoples’ Rights, oau Doc. Cab/Leg/67/3 Rev. 5, 21 ilm 58 (1982), adopted on 27 June 1981, entered into force on 21 October 1986, art. 21.4.

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international law8 and has also been considered as a possible candidate as a jus cogens norm.9 States may exercise their sovereignty over natural resources in different ways. Once acknowledged that “territorial sovereignty confers upon the State an exclusive competence to organize as it wishes the economic structure of its territory,”10 it is appropriate to distinguish between the ‘enjoyment’ of sovereignty, when States directly exploit their resources, and the ‘exercise’ of State sovereignty, when they delegate this task to other subjects in exchange of an economic return, for instance by concluding a concession contract that limits the State’s sovereignty by allowing its counterpart to exploit natural resources on its territory.11 As clarified by the International Law Association (ila) in its 1986 Seoul Declaration: “Permanent sovereignty (…) is inalienable. A State may, however, accept obligations with regard to the exercise of such sovereignty, by treaty or by contract, freely entered into.”12 Different corollaries derive from the State right to dispose freely of its natural resources: inter alia the right to determine and control the prospecting, development, exploration, exploitation, use, and marketing of natural resources.13 These are some of the many rights that States can confer to foreign investors. Permanent sovereignty over natural resources is not absolute and entails that States in exercising it respect a series of duties. First of all, the exercise of sovereign rights should pursue the national development and the wellbeing of the people, especially in under-developed countries.14 Furthermore, it must be consistent with the international environmental and human rights obligations binding on the State and with the international law on the protection of foreign investments. Thus, permanent sovereignty over natural resources is a complex notion, embracing freedoms, rights and duties: while States are free 8

icj, Case Concerning Armed Activities on the Territory of the Congo, Democratic Republic of the Congo v. Uganda, Judgment of 19 December 2005, para. 244. 9 I. Brownlie, “Legal Status of Natural Resources in International Law,” Recueil des Cours, 1979, 245. 10 Texaco v. Libya, 17 ilm (1978), para. 59. 11 Ibid., paras. 66–7. This distinction has been extensively studied and at times criticized by scholars. See N. Schrijver, Sovereignty Over Natural Resources: Balancing Rights and Duties (Cambridge: Cambridge University Press, 1997) 262 and references therein. 12 International Law Association, Seoul Declaration, principle no. 5.2. 13 Schrijver, Sovereignty Over Natural Resources op.cit., 264. 14 un General Assembly, Resolution 1803 (xvii) cit., art. 1; un General Assembly, Integrating Economic Development and Commercial Agreements, Resolution 523 (vi) adopted 12 January 1952. Schrijver, Sovereignty Over Natural Resources op.cit., 308.

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to directly exploit their resources or to delegate this task to other subjects, they are required to comply with their international obligations and to respect the self-determination of their peoples. On these premises, a first set of questions this book attempts to clarify relates to the interactions between the exercise of State sovereignty and nrg. To what extent do States have the right to dispose of natural resources? Does nrg entail an erosion of State sovereignty? When looking at certain grabbing practices carried out with the endorsement of the State, it might also be wondered: can the legitimate exercise of State sovereignty lead to phenomena characterized as nrg? 3

Peoples’ Self Determination

The recognition of permanent sovereignty over natural resources is closely related with peoples’ self-determination. As recognized by un General Assembly Resolution 1803: The right of peoples and nations to permanent sovereignty over their natural wealth and resources must be exercised in the interest of their national development and of the well-being of the people of the State concerned.15 This human-related dimension is ‘the other side of the coin’ of the State-based principle of permanent sovereignty because it recognizes that governments are vested with the duty to exercise such sovereignty in the interest of their people.16 The icescr recognizes that: All peoples may, for their own ends, freely dispose of their natural wealth and resources without prejudice to any obligations arising out of international economic cooperation, based upon the principle of mutual benefit, and international law. In no case may a people be deprived of its own means of subsistence.17 15 16

17

Resolution 1803 (xvii) cit., para. 1. iccpr, art. 1.1; icescr, art. 1.1. “All peoples have the right of self-determination. By virtue of that right they freely determine their political status and freely pursue their economic, social and cultural development.” See also African Charter of Human and Peoples’ Rights, art. 20. icescr, art. 1.2.

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The mentioning of ‘natural wealth’ may be interpreted as covering the comprehensive and intangible values, including the social, moral and religious importance of nature as well as ecosystems in their tangible elements, such as lands, forests, lakes and rivers. It follows that States have the duty to respect the principle of self-determination and the deriving rights on natural resources, in accordance with the provisions of the un Charter and international law.18 The principle of self-determination has been described by the icj as the “need to pay regard to the freely expressed will of people (…) in matters concerning their condition.”19 In the East Timor (Portugal v. Australia) case, the Court clarified the legal nature of self-determination by recognizing that it is ‘one of the essential principles of contemporary international law’ and that it is also a ‘right’ with an ‘erga omnes character.’20 While its importance and recognition as a fundamental customary principle of international law is far beyond doubt, differing views emerge when the principle further develops in more specific rules and norms. The literature on the legal nature of self-­ determination is extremely vast. Scholars debate whether self-determination is a ‘soft’ legal principle that informs international law and its development, or whether it may also translate in justiciable autonomous rights.21 The ‘internal’ dimension of self-determination, namely the relationship between the peoples and the State where they live, is further developed in the context of the recognition of the rights of indigenous peoples, local communities and minorities by the African Commission, by the un Human Rights Committee and by the Declaration on the Rights of Indigenous People (undrip).22 18 19 20

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22

Accordingly, see D. Dam-de Jong, International Law and Governance of Natural Resources in Conflict and Post-Conflict Situations (oup, 2015) 77. icj, Western Sahara, Advisory Opinion of 16 October 1975, 128. icj, East Timor, Portugal v. Australia, Judgment of 30 June 1995, icj Reports 1995, 90 at 102, para. 29: “Portugal’s assertion that the right of peoples to self-determination, as it evolved from the Charter and from United Nations practice, has an erga omnes character, is irreproachable. The principle of self-determination of peoples has been recognized by the United Nations Charter and in the jurisprudence of the Court.” These issues are extensively discussed notably by A. Cassese, Self-determination of Peoples: A Legal Reappraisal (Cambridge: Cambridge University Press) 1995; J. Crawford, “The Right of Self-Determination in International Law: Its Development and Future”, in P. Alston (ed.), Peoples’ Rights (Oxford: Oxford University Press, 2001) 7. un General Assembly, United Nations Declaration on the Rights of Indigenous Peoples, Resolution 61/295 of 13 September 2007, art. 19: “States shall consult and cooperate in good faith with the indigenous peoples concerned through their own representative institutions in order to obtain their free and informed consent prior to the approval of any project affecting their lands or territories and other resources, particularly in connection with the development, utilization or exploitation of mineral, water or other resources.”

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The illegitimate or unsustainable exploitation of natural resources may lead to the violation of the principle of self-determination and of other human rights, and even entail the suppression of their fundamental freedoms. Many controversial issues arise in this context, first and foremost because there is still uncertainty on the definition of ‘people’ in international law and on whether the rights on natural resources are individual or collective rights. Although the States’ and the peoples’ permanent sovereignty on natural resources are strictly intertwined, diverging interests and tensions between these two dimensions exist. As far as the indigenous peoples’ self-determination is concerned, the following research questions are explored: does nrg entail an erosion of indigenous peoples’ sovereign prerogatives on their lands and associated resources? What is the relationship between State sovereignty and indigenous people right of self-determination? 4

The Challenges of a Complex Legal Framework

4.1 Conflicting Interests Besides States and their peoples, nrg involves also international organizations, financial institutions, ngos, private investors and multinational corporations. Diverging interests typically exist among these various actors and nrg brings these tensions to the surface by touching upon the – often controversial – relationship between economic interests, on the one hand, and environmental and human rights concerns, on the other hand. These issues are regulated at the international level in the context of human rights law, environmental law, and economic law. Since natural resources may be considered as public goods, their management entails both a public regulatory dimension, on the one hand, and a private one, on the other. In this light, natural resources provide for basic liveli­hood and the sustenance of local people, while at the same time they are also tradable goods and commodities with an economic value for investors. How are the diverging interests of economic development and human rights and environmental protection combined? 4.2 Multiplicity of Relevant Legal Orders and Legal Instruments These legal regimes are increasingly characterized by the interaction of different legal sources: hard law, on the one hand, that includes general principles of law, customary law, treaties and judicial decisions; on the other hand, soft law instruments, such as codes of conduct, certifications schemes, resolutions of

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international organizations, and technical standards. This international regulatory framework is complemented by contracts, traditional practices and customs of indigenous peoples, as well as domestic laws. The interaction of these various subjects, stakeholders, interests and legal sources creates a highly complex and dynamic scenario that this book aims at examining. Given the great variety of actors participating to nrg and of legal sources that are relevant in this field, the following questions arise: how do the different sources of law (hard law, soft law, codes of conduct, standards) that establish rules and principles on nrg interact among themselves? Do they provide for an effective regulatory framework? In this context, what is the role of the international organizations, the European Union (eu) and of the international financial institutions? In recent years disputes dealing with natural resources’ exploitation are increasingly brought before different international courts and tribunals, such as investment arbitral tribunals, the wto Dispute Settlement Body, the World Bank Inspection Panel and the Compliance Advisor Ombudsman (‘cao’). How  do these international courts and quasi-judicial bodies address these disputes? 4.3 Is there a Comprehensive Legal Regime for Natural Resources Grabbing? Having answered the previous questions, it can be wondered whether a comprehensive legal regime covering nrg can be envisaged, even in an infant phase, which embraces basic common principles and is applicable to land, water, forests, genetic resources, living species, oil and minerals. Keeping in mind the above-mentioned characterizations of grabbing, the essential elements of these grabbing practices are related to the ways in which the natural resources are accessed and managed. With regard to access to natural resources, procedural guarantees are increasingly envisaged in favor of the legitimate owners of such resources. One may think, for instance, of the prior informed consent (pic) requirements set by human rights instruments, such as the undrip, by multilateral environmental treaties, such as the cbd and the Nagoya Protocol, and by the operational policies of international financial institutions. Are these procedural guarantees able to provide for an adequate legal protection from the risks of ngr? Can the pic principle be considered as a fundamental tenet of nrg legal regime? How should the sharing of the economic and non-economic benefits deriving from natural resources take place? Can the benefit sharing be considered as a general principle of the nrg legal regime. In cases of violation of the above-mentioned principles on natural resources’ access and management, do victims have the right to access to

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justice and to obtain compensation? Do these latter remedies qualify as general principles applicable to nrg? 5

Description of the Book

This book looks at grabbing with regard to natural resources situated under the jurisdiction of States and adopts a broad approach, looking at land, water, forests, biologic and genetic resources, animal species, oil and minerals. The phenomenon of nrg is examined in an international law perspective, through its different relevant branches. To this extent the book is divided into six parts: after addressing some general issues (Part i), it deals with human rights protection (Part ii), the environmental perspective (Part iii), the investment context (Part iv), the international trade context (Part v), and conflicts and crimes (Part vi). In the first chapter, Federica Violi addresses the relationship between land grabbing and State sovereignty. Although land deals with foreign investors seem prima facie consistent with the principle of permanent sovereignty of States over natural resources, a closer look at them shows that they lead not only to the exploitation of natural resources, but they transform the territory into exchange commodities for the global market. This causes a worrisome disarticulation between the territory and the host State sovereign powers. The author points out that these practices lead to the unlawful exercise of sovereign powers with respect to international law obligations related, in particular, to food security and access to natural resources for rural communities. In chapter 2, Nadia Bernaz and Jérémie Gilbert analyze the right to freely dispose of natural resources both as a right of the State and a right of the peoples, and focus on its relationship with the corporate responsibility to respect human rights. The authors call for a new triangular relationship with regard to the exploitation of natural resources, based on an enhanced dialogue among these three actors. On the basis of these premises, Part ii focuses on the human rights context, looking mainly at land and water grabbing. In Chapter 3, Jochen von Bernstorff examines the extent to which international law and its institutions can be seen as enabling and stabilizing land grabbing. It then focuses on the diverse strategies of how disregarded local populations frame their opposition in international legal semantics, comparing in this context the permanent sovereignty concept with the human rights approach and their respective repercussions in the recently adopted un standards. In Chapter 4, Elisa Ruozzi explores the jurisprudence of the Inter-American Court of Human Rights with regard to the

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rights of indigenous peoples to their ancestral lands and provides insightful elements for the definition of nrg. Furthermore, she shows that the Court greatly contributes to strengthening the individual and collective rights of indigenous people on natural resources, both in their substantive and procedural dimensions. The following chapters examine water grabbing: Chapter 5 (M. Bordignon, R. Greco, G. Lepore) illustrates the different forms of water grabbing (conversion of water in other products, commodification of water, privatization of water resources, acquisition of land for water extraction, use of water for hydroelectric power generation, etc.), analyzes, through the lens of water rights, the limits to States’ sovereignty with regard to indigenous peoples, and looks at to what extent stakeholders can invoke States’ obligations under investment treaties. In Chapter 6, Marco Borraccetti focuses on the right to water and access to water resources pursuant to the development policies of the European Union. The third part of the book is devoted to the environmental-related aspects of nrg. Francesca Romanin Jacur (Chapter 7) focuses on a sui generis grabbing: the misappropriation and misuse of biological and genetic resources and of the traditional knowledge held by indigenous people and local communities that is associated to their use. To halt these ‘bio-piracy’ practices, the Nagoya Protocol on Access and Benefit Sharing – which recently entered into force – establishes hybrid legal mechanisms and procedures involving national and international entities that should improve legal certainty and transparency. Chapter 8 by Annalisa Savaresi on ‘Natural Resources Grabbing: The Case of Tropical Forests and redd+’ considers the impacts of projects to protect carbon stored in forests in developing countries promoted under the United Nations Framework Convention on Climate Change (unfccc) on communities that rely upon forests for their livelihood. She argues that the concerns raised by redd+ could be at least partially addressed by referencing to the vast body of human rights law and practice that has already emerged in connection with the protection of indigenous peoples and other forest-dependent communities. Komlan Sangbana’s contribution (Chapter 9) focuses on the impact of large-scale land investment and the related intensive farming techniques on transboundary freshwater resources in the Niger Basin area. The author suggests that the minimum standards needed to guarantee an environmental friendly agro-investment can be drawn from the Niger River Basin innovative legal framework. Chapter 10 by Federico Esu and Solenne Avet focuses on the norms regulating land acquisitions by European investors in third States to produce biofuels that are imported to the European market and contribute to meet climate change commitments. These eu agricultural investment policies raise concerns with regard to their fairness and in order to be conducted in a responsible way, they should respond, inter alia, to principles of equity.

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Part iv examines nrg from the investment perspective. To this extent, two perspectives are considered: the first two chapters deal with foreign direct investments. Anil Ylmaz and Tara Van Ho (Chapter 11) focus on the legal tools integrating human rights protection into the extractive industry’s activities, by examining the good practices and weaknesses in how States address human rights issues in their investment contracts. In Chapter 12, Tomoko Ishikawa addresses the question of how to properly balance the interests of foreign investors against environmental concerns, focusing on the remedy phase of legal disputes. It is argued that there are cases that involve a difficult balancing between public interests and the protection of foreign investment. In these cases, even if the host state is found to have breached investment protection obligations, the awarding of full compensation is inappropriate. Against this background, Ishikawa proposes that the precautionary and the polluter-pays principles may provide a viable ground for awarding partial compensation. The subsequent two chapters analyze the international investments carried out under the promotion of international financial institutions and aim at assessing the role of these institutions in preventing and tackling nrg. In Chapter 13, Inesa Stolper, focusing on the extractive sector, examines miga’s contribution to promote responsible investment through its environmental and social standards and through its implementation and compliance procedures monitoring the project’s performance. Francesco Seatzu (Chapter 14) makes an account of the World Bank’s involvement in the fight against land grabbing. The author compares the Bank’s approach with the one taken by other institutions and agencies advocating the cause, records the dynamics of the inter-agency debate on land grab between the World Bank and the European Union, and ends with a critical note on the Bank’s recent approval of the Principles for Responsible Agricultural Investment (rai), which encompass all types of investment in agriculture, including between principal investors and contract farmers. Considered that natural resources are tradable goods, their management constitutes an important aspect under the wto’s legal perspective. In Chapter 15, Angelica Bonfanti examines how animal protection touches on natural resources grabbing, since products are often manufactured from the meat and skins of animals fished and hunted by methods causing either inhumane sufferings or threatening the conservation of endangered species. Trade of products obtained through these methods is often the subject of domestic regulatory measures. However, these measures can have negative impacts on international trade and be inconsistent with wto law. This Chapter develops a legal analysis of this topic from the perspective of the tbt Agreement, with the aim of assessing whether and to what extent it allows Members to exercise their

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sovereign power in implementing measures to protect animal welfare. In the following Chapter 16, Julinda Bequirai discusses the possible impact of international trade rules on the exploitation, use and access to water resources. Acknowledging that wto Agreements were developed with a particular focus on the promotion of market access, the author explores the extent to which, under today’s circumstances, existing international trade rules leave room for States to guarantee access to water supplies. The last wto perspective is provided by Ilaria Espa (Chapter 17), who assesses the adequacy of existing wto rules on export restrictions which directly touch upon the need to ensure access to energy supplies. The author identifies the main gaps and inconsistencies inherent in the current disciplines and suggests reforms based on the Russian ‘model’ of accession to the wto. Such approach could raise the overall level of commitments in the energy sector while still allowing for the systemic applicability of gatt environmental exceptions in a manner consistent with the principle of sustainable development. The last part of the book looks at nrg in the context of conflicts and under an international criminal law perspective. Marco Pertile (Chapter 18) describes the legal regime applicable to the financing of civil wars through transactions on natural resources and investigates the possible existence of a duty of vigilance on States for the activities of transnational corporations that finance civil wars through natural resources. Continuing in this perspective, in Chapter 19, Garima Tiwari postulates that the traditional incident based theory and the corporate theory of pillage prosecution in international courts and tribunals may not be sufficient to cure the system from this ‘resource curse’ and suggests an all-encompassing systematic theory. While acknowledging that the International Criminal Court (icc) should pursue resource pillaging as a war crime, this paper argues that the systematic theory coupled with other existing prosecution strategies, should be applied to effectively combat the resource curse.

part 1 

Mapping the Field

∵

chapter 1

The Practice of Land Grabbing and Its Compatibility with the Exercise of Territorial Sovereignty Federica Violi* 1

Land Grabbing and Direct Investment in Agriculture: From Decolonization to Globalization

The liberalization of international trade in agriculture and the food price crisis of 2007–2008 have prompted both human rights and economic development cooperation organizations (wb, unctad, fao, oecd, ifad, unchr and the Special Rapporteur on the Right to Food) to emphasize the need to combine the natural expansion of investment in agriculture and the protection of human rights and the environment, thus encouraging the adoption of responsible investment policies. The initiatives that have been undertaken in this regard have led to the endorsement of several international instruments, both through the activity of ngos and international organizations, amongst them the Principles for Responsible Agricultural Investment that respect Rights, Livelihood and Resources (developed by fao, ifad, unctad and the World Bank)1 and the Voluntary Guidelines on the Responsible Governance of Tenure of Land, Fisheries and Forests in the Context of National Food Security (endorsed by fao).2 Most of the instruments that have been adopted are aimed at diverting the course of the phenomenon of land grabbing. Because of its peculiarities, the ‘race to land’ has raised serious concerns related to its compatibility with international law. * The present article draws on research conducted in the context of the PhD project Il principio di sovranità permanente degli Stati sulle risorse naturali ed il fenomeno del land grabbing. The author would like to thank Prof. Marcella Distefano, Marjolein Schaap and the reviewers for their valuable comments on a previous version of this paper. Any mistakes or incoherent statements are entirely the fault of the author. 1 fao, ifad, unctad, World Bank Group, “Principles for Responsible Agricultural Investment that Respects Rights, Livelihoods and Resources,” 25 January 2010. 2 fao, cfs, “Voluntary Guidelines on the Responsible Governance of Tenure of Land, Fisheries and Forests in the Context of National Food Security,” 11 May 2012.

© koninklijke brill nv, leiden, ���6 | doi 10.1163/9789004305663_003

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Land grabbing is generally understood as the phenomenon of large-scale investments in land in developing countries by foreign investors, including both States and private companies. Driven by the necessity to attract foreign capital to create liquid assets and finance infrastructure projects, developing countries have implemented favorable Foreign Direct Investment (fdi)3 policies, thus allowing the purchase or lease of fertile land lots, for rather meager fees and long terms (usually ranging from thirty to ninety-nine years).4 Land grabbing can be considered as a vigorous representation of contemporary economic globalization: the gradual disappearance of traditional barriers 3 Given the difficulty of providing a uniform definition for the concept of foreign direct investment (hereinafter fdi), the notion here embraced includes the acquisition of shareholdings in foreign companies or the establishment of a branch in the host country, which implies the involvement of the investor in the direction and management of the established or incorporated company. A distinction can also be made between vertical fdi (relocation of production stages upstream and downstream of its production phase), and horizontal fdi (relocation of the same stage of production). On this point see, among others, L. Migliorino, Gli accordi internazionali sugli investimenti (Giuffrè 1989), 27; S. Marchisio, “Investi­menti esteri nel diritto internazionale,” in Digesto delle discipline pubblicistiche, 1993, 567; G. Sacerdoti, Bilateral Treaties and Multilateral Instruments on Investment Protection, Recueil des Cours (Brill/Martinus Nijhoff 1997, vol. 251), 269; A. Escher, “Current Development, Legal Challenges and Definitions of fdi,” in A. Escher, D. Bradlow (eds) Legal Aspects of Foreign Direct Investment (Wolters Kluwer 1999) 24; A.F. Lowenfeld, “Investment Agreements and International Law,” Columbia Journal of Transnational Law, 2003, 123; E. Gaillard, “Identify or Define? Reflections on the Evolution of the Concept of Investment in icsid Practice,” in C. Binder, U. Kriebaum et al. (eds) International Investment Law for the 21st Century. Essays in Honour of Christoph Schreuer (Oxford University Press 2009) 403; M. Sornarajah, The International Law on Foreign Investment (Cambridge University Press 2010) 8; D. Carreau, P. Juillard, Droit international économique (Dalloz 2010) 417; F. Galgano, F. Marrella, Diritto e Prassi del Commercio Internazionale (cedam 2010) 813; R. De Santis, “Investimento Diretto Estero,” Dizionario di Economia e Finanza, 2012, at http://www.treccani.it/enciclopedia/investimento-diretto-estero_%28Dizionario-di-Economia -e-Finanza%29/. 4 A World Bank study indicates that the interest expressed by foreign investors towards the purchase or lease of land covers an area of approx. 56 million hectares, 29 million in SubSaharan Africa, see K. Deininger, D. Byerlee, Rising Global Interest in Farmland: Can it Yield Sustainable and Equitable Benefits? The International Bank for Reconstruction and Development/The World Bank, 2011. On the export data, see unctad, “World Investment Report 2009, Transnational Corporations, Agricultural Production and Development,” 16 September 2009, unctad/wir/2009. With regard to a more extended period of time, an analysis of Land Matrix Partnership observes that the land allocated to land investments between 2001 and 2010 was in the region of 200 million hectares, LAND MATRIX PARTNERSHIP, “The Land Matrix, Beta Version: The online public database on land deals,” 26 July 2014, at http://www.landmatrix.org/en/.

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to the movement of goods and capital, the opening of markets and international economy evolvement have all facilitated intensive expansion of the phenomenon. The multiplication of power axes among diverse centers of interest, unlike traditional centers, has determined an interconnected network of direct or indirect relationships, which make the phenomenon extremely complex. This renewed interest in investment in agriculture actually represents a shift from the minimal investment trend recorded after the process of decolonization: low prices of agricultural products, surplus production in oecd countries and barriers imposed on their marketing had made agriculture an unattractive sector for investors. The above mentioned situation slowly began to change in the early years of this decade with the full expansion of food chain globalization. Food companies have found a viable guarantee of low-cost production through fdi in agriculture, that, on the one hand, meets the needs of market demand and, on the other, strengthens control over suppliers. Even if in most cases companies have made use of production contracts or the generalized system of preferences, a strong growth trend has been observed in buying or renting land.5 The food price crisis of 2007–2008 further encouraged this course.6 The adoption of protectionist policies by exporting countries has, in fact, resulted in a serious food crisis, thus raising the concerns of those countries, which are net importers of agricultural products, in terms of food and energy security. Gulf countries, in particular, have established intensive agricultural production outsourcing programs to circumvent the uncertainties of the market and secure a stable supply of raw materials. Investment strategies promoted by these States are not oriented so much towards obtaining comparative advantages for crop production on a large scale for the global market (Market-Seeking), 5 It should be emphasized that the process of food chain globalization has been facilitated by an already favorable normative system in developing countries. In the early Eighties, the pressures of international economic institutions had, in fact, forced these States to introduce a series of ‘structural adjustment’ policies, that favored the liberalization of the agricultural market, thus eliminating distortions caused by subsidies and by measures of import substitution. These measures supplemented conditionalities, a prerequisite to get grants from the imf or the World Bank, or to obtain favorable interest rates on loans. According to these new policies, agricultural producers in developing countries would have to independently perceive the needs of the market and adapt to them. Most of these, however, were unable to do so for several reasons, including the lack of access to credit and the absence of a strong infrastructural support from the State. 6 After the peak of 2007–2008, prices, albeit with a minimal decrease, continue to maintain levels far above the average recorded in the last decade. It is unclear, however, what is going to follow, either a period of stabilization or, rather, a new wave of inflation.

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but rather, towards the retrieval of land to ensure domestic food and energy requirements (Resource-Seeking). The phenomenon presents, therefore, a markedly public connotation, given the direct or indirect involvement of States in the transactions.7 Formally these kinds of investments are solely directed towards the production of raw materials, necessary to address food and energy requirements, in particular for those countries which are net importers of agricultural products. Host countries may well then decide to conclude lawful deals with the investors towards this aim. Prima facie, therefore, the conclusion of investment contracts in land apparently reflects the host country’s exercise of permanent sovereignty over its natural resources, which has the full right to regulate the exploitation thereof. Nevertheless, such investments potentially carry a high number of risks8 for the population of the host country, in particular in terms of access to land and food supply. It is likely, in fact, that on the land subject to a given investment, there may already exist crops or animal herds of rural communities, who use the land by virtue of custom or usage rights. These rights are usually granted a lower level of protection if compared to the formal titles of ownership, which are at best rare in most developing countries. In some regions of the world, holders are therefore particularly vulnerable, given the difficulty to exercise their uncertain land rights and to obtain, as a result, adequate judicial protection.9 7 The operating modes range from participation in joint ventures with private companies to public enterprises, to the creation of subsidiary companies. Sovereign wealth funds are, for host countries, a secure source of fdi, given their stability and risk tolerance, and the large investment horizon they guarantee. Examples of these are provided by the investment fund of Qatar, Kuwait and Libya. The best known campaign at the moment is the ‘King Abdullah Initiative for Saudi Agricultural Investment Abroad,’ which supports Saudi private companies in investments in countries with a high potential of agricultural production, in order to promote food security domestically and internationally. On this see infra and extensively L. Cotula, S. Vermeulen, R. Leonard, J. Keeley, Land Grab or Development Opportunity? Agricultural Investment and International Land Deals in Africa, iied/fao/ifad, 2009. More frequent instead is direct involvement of public enterprises. These often have a high level of expertise in agribusiness and are significantly involved in the production of primary agricultural products. The latter case raises the question of whether public investors enjoy sovereign immunity from the jurisdiction of the host State, see infra. 8 O. De Schutter, “The Emerging Human Right to Land,” International Community Law Review, 2010, 303; O. De Schutter, “The Green Rush: The Global Race for Farmland and the Rights of Land Users,” Harvard International Law Journal, 2011, 505. 9 This aspect is extremely important in the light of the results reported by the World Bank Report of 2010, which observes that countries with the lowest degree of formalization and protection of land rights attract greater interest among investors, supra note 4.

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This poses a question of legitimacy with regard to the exercise of territorial sovereignty by the host country, especially in those cases where the disposal of land generates considerably negative impact on the local population: sovereignty cannot be exercised without due regard to the specific obligations incumbent upon States under international law, related, in particular, to both the protection of human rights, and the protection of the environment.10 2

Investment Contracts, between Economic Development and Exploitation

Foreign Direct Investment in agriculture is not a new phenomenon on the economic landscape. Although this type of investment significantly differs from traditional ones,11 it has been argued that large-scale investments in land legitimately follow the process of trade liberalization and promote a development opportunity for host countries. According to the World Bank, this type of investment matches, together with the adoption of other adequate support measures for rural development, the needs imposed by population growth, which requires an increase in food production of about 70%.12 Under international law the single investment transaction takes the form of an investment contract in agriculture. This is concluded in most cases under the auspices of Bilateral Investment Agreements between the home and host State, as a typical fdi.

10

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12

The analysis of the obligations to which the State is bound in the se field of food security and environmental protection, and the impact determined by these investment operations over natural resources goes beyond the scope of the present work. On this see, among others, L.  Cotula, The Right to Food and Access to Natural Resources (fao 2008); Human Rights Council, “Agribusiness and the Right to Food,” 5 March 2010, un Doc. A/HRC/13/33; De Schutter, “The Green Rush,” op. cit., 508; I. Biglino, “L’accesso alla terra e la realizzazione del diritto al cibo,” Diritti Umani e Diritto Internazionale, 2011, 173; M. Silvestri, “Investimenti Diretti Esteri, Land Deals e Tutela dei Diritti Umani,” in A. Di Stefano, R. Sapienza (eds), La tutela dei diritti umani e il diritto internazionale, Atti del xvi Convegno Sidi Catania 2011, (Editoriale Scientifica 2012) 503; A. Bonfanti, Imprese multinazionali, diritti umani e ambiente. Profili di diritto internazionale pubblico e privato (Giuffrè 2012). In most cases companies have made use of contract farming or financial and technical assistance to farmers, see on this N. Cuffaro, D. Hallam, “‘Land grabbing’ nei Paesi in via di sviluppo: investitori esteri, regolamentazione e codici di condotta,” Rivista dell’Associazione Rossi-Doria, 2011, 131. See the K. Deininger, D. Byerlee, Rising Global Interest, op. cit., 4.

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Far from condemning fdi in agriculture tout-court and the beneficial effects that may result from it in terms of economic and social development for the host country, it is however necessary to identify those particular (and recurring) characteristics, which connote the ‘race to land’ or ‘land grabbing’ and reveal a certain degree of danger in terms of territorial integrity for the host State. The analysis of the ‘race to land’ practice shows that the regulatory framework the contracts provide for the purchase or lease of land seem to respond to a specific model, in which it is possible to identify certain characteristics, common to several transactions. The first relevant aspect is related to the extent of the acquired or rented land. A single investment operation may cover a surface ranging between 10,000 and 500,000 hectares, thus often including the development of infrastructure such as roads or railways. Furthermore, the negotiated rental term is usually quite long and subject to renewal. The duration of the contracts, however, does not seem to respond to an analysis of the operation costs and the potential advantages deriving from it, but rather complies to a standard temporal clause. The time extension of the investment (in some cases up to 99 years and renewable), which assimilates, in fact, rents to acquisitions, may result in a final separation of local communities from the territory they live on.13 In most cases, rent or selling prices established by contractual arrangements are far below the market rates (the average is approx. $1.50 per hectar).14 A similar connotation may denote the interest of the host countries in attracting foreign investment for their potential benefits in terms of capital and infrastructure, rather than in securing themselves a form of public revenue, particularly for those countries lacking the tools to fully exploit their own resources. The absence 13

14

Such an extended term determines the definitive expulsion of rural communities that originally occupied the lands which are object of the investment, with inevitable consequences in terms of eradicating generational cultural and social traditions. The risk is that the investment activities on land will threaten perpetuation, generating, furthermore, significant internal migration, see extensively A. Kwokwo Barume, Land Rights of Indigenous Peoples in Africa: With Special Focus on Central, Eastern and Southern Africa (International Work Group for Indigenous Affairs 2010). In some cases, land plots are leased for free. See for example the contract between Mali and Malibya, Convention d’investissement dans le Domaine agricole entre La République du Mali et La Grande Jamahiriya arabe Libyenne populaire et socialiste signed in May 2008. The contract requires the company to pay a fee only for the use of water resources; the investor is granted, nevertheless, a high degree of discretion in utilization thereof.

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of realistic rental price may encourage speculative operations and discourage other forms of investment which may involve, for example, collaboration with small farmers.15 In such cases, the contract should, then, adequately specify the obligations whose fulfillment the investor is committed to and should also require a rental review mechanism during the term of the contract.16 As mentioned, land investment contracts may be used by the host State to promote employment growth, thus imposing labour obligations on the investor. In several transactions, however, there is no detailed description of the characteristics of the employment, in terms of tasks, workers social protection and minimum wage. Indeed, although apparently benefiting from an increase in employment terms, these kinds of high mechanized plantations are labour-expelling. At most, what has hitherto occurred, is the incorporation of small farmers – unable to compete with big investors – in the enclaves of advanced agriculture, as employees, seasonal or permanent workers, who do not enjoy any protection, but facilitate the lowering of production costs for the investor.17 Furthermore, contractual arrangements often provide a number of tax incentives granted by the host State to the advantage of the foreign investment activity, ranging from exemption from export taxes for the production of the first years of activity, to import tax exemption for industrial processing machines.18 Although these kinds of measures would be attractive for investors, such an exemption could allow them to sell products or produce at far 15

16 17

18

The non-collection of the rental may be substituted by investor’s commitments to develop infrastructures which are linked to the investment project (irrigation systems, schools, hospitals). Similar commitments, however, rarely appear among the provisions of the contract, if not in the form of a general statement of intent. Samples of lease or purchase contracts in land are available at www.farmlandgrab.org; see, in particular, the 100,000 hectare lease contract signed by Cameroun with Herakles Farms ltd in February 2006, a us controlled company. Considering the duration of the contract, the possibility to review the rental from time to time would guarantee the equivalence of the price to land value changes. Dispossession of land generates an extreme labor surplus, which cannot be totally absorbed by the large plantations, as they are highly mechanized, and, therefore, more labor expelling than labor attracting. See for instance, H. Bernstein, “Labour Regimes and Social Change under Colonialism,” B. Crow, M. Thorpe et al. (eds), Survival and Change in the Third World (Oxford University Press 1988), 30; B. White, S.M. Borras Jr. et al., “The New Enclosures: Critical Perspectives on Corporate Land Deals,” Journal of Peasant Studies, 2012, 619. See for example the Convention d’investissment cit. between Mali and Malibya.

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lower prices than the fair market value, thus depriving the host State of a large slice of public revenue. It should be added that most of the investments are export-oriented; in other words, there are often no or non-binding obligations for the investor to sell part of its production on the local market, thus allowing foreign investors to (lawfully) ignore the needs thereof. Moreover, the object of the contract is often generically identified in the implementation of agricultural activity tout court, whilst no mention is made of a possible change of use of the land, which may incisively change the economic, environmental and social scope of the investment. Finally, as mentioned, several transactions tend to ‘freeze’ the applicable law via stabilization clauses. The contract is, in other words, regulated by the law in force at the time of the conclusion and, in the case where the investor is required to comply with new host State legislations, he is entitled to compensation for costs of compliance. Such clauses are a deterrent to the State in the implementation of rules aimed at addressing environmental and social needs. In other words, analysis of contractual practice shows that serious investor commitments in terms of positive impact for the development of the host country rarely appear among the provisions of the contract, and often, if at all, just in the form of general statements of intent, which are not compelling, thus not enforceable by the host State.19 The risks are that, on the one hand, local people internalize the costs without adequately participating in the benefits20 and, on the other, the State loses its regulatory power of control on the territory plots destined for the investment. 3

Control Grabbing and Respect of Permanent Sovereignty of States over Natural Resources

The phenomenon of land grabbing is closely linked to the commodification of natural resources and the rise of the so-called ‘flex crops and commodities,’ characterized by flexible and multiple uses.21 It is not, in fact, the mere production 19 See, e.g., the contract signed between Cameroun and Herakles Farms ltd, where the whole set of labor obligations are subordinate to investor needs and, therefore, not fully binding. 20 See Cotula et al., Land Grab or Development Opportunity op. cit., at 56. 21 A typical example of this is grain, which can be devoted to both human or animal consumption and the production of biofuels. On this, extensively, S.M. Borras, J. Franco, C. Wang, “The Challenge of Global Governance of Land Grabbing: Changing International Agricultural Context and Competing Political Views and Strategies,” Globalizations, 2011, 161.

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(or growing) of a specific product that defines the agricultural investment per se, but rather the ultimate goal to which it is allocated in the flow of trade. This aspect is extremely important in view of a specific interpretation of land grabbing on a global level. The impossibility of ascribing the race to land to a single economic sector,22 has led some commentators to develop the concept of ‘control grabbing,’ according to which land grabbing would not be aimed at acquiring land and products thereof per se, but rather at exercising control over its resources. Serious concerns in this regard are raised in relation to the exercise of sovereignty by the host State over portions of the territory covered by the investment and the impact of the phenomenon on the principle of territorial integrity. The phenomenon proves even more dangerous when the investment is carried out by another State, through investment funds, sovereign wealth funds and public enterprises, as well as through economic and legislative support to private companies who have invested in this field. The trend towards the use of public wealth to intervene in the market of other countries and the impact of public enterprise activity on the host country’s national economy may pose a threat in light of the projection of the sovereign power of the home State on the territory of the host State.23 In other words, the home State exercises sovereignty beyond its territorial limits,24 to the point that some commentators have raised the issue of the risk of the emergence of a ‘new colonialism.’25 This may generate a hindrance for the ability of the host State to regulate and control activities carried out within its territory. Furthermore, the expansion of fdi operated through sovereign investors may pose a threat to the judicial activity of the State: these subjects could, under certain conditions, be entitled to invoke both immunity from jurisdiction and enforcement, thus preventing the host State from fully restoring judicial protection.26 22 23 24

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L. Peluso, C. Lund, “New Frontiers of Land Control: Introduction,” Journal of Peasant Studies, 2011, 667. Exstensively A. Rozanov, “Who Holds the Wealth of Nations,” Central Banking Journal, 2005, 52. L. Catá Backer, “Sovereign Investing in Times of Crisis: Global Regulation of Sovereign Wealth Funds, State Owned Enterprises and the Chinese Experience,” Transnational Law and Contemporary Problems, 2010, 118. H. Knaup, J. Von Mittelstaedt, “The New Colonialism: Foreign Investors Snap up African Farmland,” Spiegel Online, 30 July 2009, at http://www.spiegel.de/international/ world/0,1518,639224,00.html; S. Liberti, Land Grabbing. Come il mercato delle terre crea il nuovo colonialismo (Minimum Fax 2011). Sovereign investors are often equipped with a high level of expertise in agribusiness and are significantly involved in the production of primary agricultural products. It is,

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However, it must be noted that the legal–economic relation, realized through the investment transaction, is carried out voluntarily:27 in the matter at hand, the host country plays a predominant role. Formally, transactions take place in a legitimate manner and are conveyed by the host State, whose national or regional authorities conclude lawful deals with the investors: clearly no colonial subjection is to be found here.28 The host country is a sovereign State, freely disposing of the resources on its territory, thus exercising its economic sovereignty. Nevertheless, with regard to territorial sovereignty, it should be pointed out that the territory integrates the legal title of State jurisdiction, not as an object

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therefore, necessary to assess whether sovereign investors enjoy a kind of immunity from the host State’s jurisdiction. The difficulties encountered reflect the duplicity of these instruments: sovereign investment is located in an intersection area between public and private law. The use of traditionally private trade instruments to pursue public purposes adds quite some confusion on how to treat these vehicles. On the one hand, these entities can be considered as a means through which home States exert public authority and invest their economic resources to pursue public objectives; in this case, sovereign investors might be subject to a less intrusive host State treatment. On the other, the economic activity of State owned enterprises and sovereign wealth funds can be understood as the sole interest States have in maximizing the value of investments or profits of the company itself, regardless of any specific objective; in the latter hypothesis sovereign investors could be equated to private investors – albeit with public participation – hence fully subject to host State jurisdiction. An analysis of the activity performed by sovereign investors and its implications on the regime of international responsibility of States is highly relevant with reference, in particular, to the much debated issue of extraterritorial obligations incumbent on the home State. See among others D. Gaukrodger, “Foreign State Immunity and Foreign Government Controlled Investors,” oecd Working Papers on International Investment, 2010. The activities of the host State are quite pervasive in all phases of investment: the State is committed to the promotion of foreign investment, the identification of ‘marginal’ and ‘underproductive’ lands, in their acquisition through, where necessary, coercive force, and finally, in the transfer of the land to the investor. Those lands with no formal ownership or ‘visibly’ productive activities are considered State property, through a mechanism of simplification of social relationships, exclusively based on a more or less transparent registration and stacking. See on this Peluso, Lund, “New Frontiers of Land” op. cit., 667; S. Sassen, “Land Grabs Today: Feeding the Disassembling of National Territory,” Globalizations, 2013, 25; C. Cramer, P. Richards, “Violence and War in Agrarian Perspective,” Journal of Agrarian Change, 2011, 277. See M.E. Margulis, T. Porter, “Governing the Global Land Grab: Multipolarity, Ideas and Complexity in Transnational Governance,” Globalizations, 2013, 65.

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of the State, but rather as the internally limited sphere where the State exercises its sovereignty.29 Actually, the State does not entertain an ownership relationship with its territory:30 the theory of the territoire – objet, which assimilates the exercise of territorial sovereignty to a ius in rem, dates back to a patrimonial conception of the State, which is typical of absolute monarchies and based on a relationship of altered power. The powers exercised by the State on its territory cannot, therefore, be abusive or arbitrary, such as those of an owner on his own property; they should rather be functional to its own existence. The economic dimension of territorial sovereignty is reflected in the exercise of permanent sovereignty of States over natural resources and, therefore, in the latter’s right to regulate the exploitation thereof.31 29

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Territory cannot be considered as a constitutive element of State’s personality, the risk would otherwise be that any territorial change may involve changing the identity of the State. On the refusal of the concept of the State as a ternary institution, see M. Giuliano, La comunità internazionale e il diritto (cedam 1950) 236. The definition here embraced is in accordance with the territorial element reconstructions theorized by the proponents of the competence and functional theories; in particular, the latter seems to better accommodate a legal theory of territory in accordance with international law, as it assimilates territory, in its normative meaning, to territorial sovereignty, focusing on the exercise of State power in a given geographical sphere. For the theory of competence, see A. Verdross, Die Verfassung der Voelkerrechtsgemeinschaft (Springer 1926); H. Kelsen, Das Problem der Souveranitaet und die Theorie des Voelkerrechts (Mohr 1920). For the functional theory, R. Quadri, Cours général de droit international public, Recueil des Cours, vol. 113 (Brill/ Martinus Nijhoff 1963), 263. See A. Pellet, P. Daillier, M. Forteau, Droit International Public (L.G.D.J. 8th ed. 2010), 456; M. Shaw, International Law (Cambridge University Press 6th ed. 2008) 487; E. Milano, Unlawful Territorial Situations in International Law. Reconciling Effectiveness, Legality and Legitimacy (Martinus Nijhoff 2006), 64. This can generally be understood as a State’s sovereign right to dispose of the natural resources on its territory and the economic activities related to it. This principle takes advantage of the status of customary law; in this respect see the arbitration decision in the case Texaco Overseas Petroleum Co. v. Government of the Libyan Arab Republic, Ad Hoc Award of 19 January 1977, International Legal Materials, 1978, 1, in which the sole arbitrator Dupuy states that General Assembly Resolution n. 1803 of 14 December 1962, adopted by a large majority of countries belonging to different geographical areas and economic systems, expressed the communis opinio of the States. Similarly icj, Armed Activities (Congo v Uganda), Judgment of 19 December 2005, icj Reports, 2005, 168, para. 244: “The Court recalls that the principle of permanent sovereignty over natural resources is expressed in General Assembly resolution 1803 (xvii) of 14 December 1962 and further elaborated in the Declaration on the Establishment of a New International Economic Order (General Assembly resolution 3201 (S.vi) of 1 May 1974) and the Charter of Economic Rights and

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The principle of permanent sovereignty over natural resources was initially rooted in two spheres: the first aimed at strengthening the economic independ­ ence of developing countries, the second was directed towards full affirmation of self-determination of peoples under colonial subjugation.32 Due to the rapid end of the decolonization process, however, this double meaning has left space to a markedly public connotation of permanent sovereignty over natural resources, primarily aimed at full emancipation of developing countries and the redistribution of the balance of power in economic relations with developed countries. Although States initially manifested a tendency to international development cooperation, the oil crisis and political embargoes led to an intense wave of nationalizations that inevitably produced a widening of the gap between developing countries and industrialized countries.33

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Duties of States (General Assembly resolution 3281 (xxix) of 12 December 1974). While recognizing the importance of this principle, which is a principle of customary international law (…).” unga Res. 626 (vii) (21 December 1952) reaffirmed, on the one hand, that the principle of permanent sovereignty over natural resources is inherent to State sovereignty and consistent with the principles of equality and independence among States, as enshrined in the un Charter; on the other, the document was directed to assert full economic and political self-determination of the peoples who were under, or had just come out from foreign domination, and were subjected to a legal and political system whose formation they had not participated in. In 1958, the General Assembly adopted a resolution which established the creation of a United Nations Commission for permanent sovereignty over natural resources with the task of studying the nature and extent of the right to exercise it. The result was unga Res. 1803 (xvii) (14 December 1962), the Declaration on permanent sovereignty over natural resources. The latter establishes the right of peoples and nations to exercise permanent sovereignty over natural resources in the interest of their national development and well-being of the people. The distinction between nations and peoples thus became extremely important. According to the literal meaning, in fact, even peoples under colonial domination and independent communities could have full use of their resources, as a means of achieving independence against land administrators. This actually explains the initial subjective duality of both nations and peoples as holders of the right to freely dispose of their natural resources. See on this F. Francioni, “Compensation for Nationalisation of Foreign Property: The Borderline between Law and Equity,” International and Comparative Law Quarterly, 1975, 256; A. Giardina, “La legittimità internazionale dell’indennizzo,” Democrazia e Diritto, 1970, 184; M. Frigo, “Nazionalizzazioni e Diritto internazionale,” Economia Pubblica, 1978, 316; F.V. Garcia-Amador, “The Proposed New International Economic Order, A New Approach,” Lawyer of the Americas, 1980, 1; O. Schachter, “Compensation for Expropriation,” American Journal of International Law, 1984, 121; P. Murphy, “Compensation for Nationalisation in International Law,” South Africa Law Journal, 1993, 79.

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This phase coincided with the adoption of the resolution on the New International Economic Order,34 which was later replaced by the Charter of Economic Rights and Duties of States.35 An intense and progressive accentuation of a rigid conception of sovereignty gradually took place: permanent sovereignty over natural resources was then claimed for the sole purpose of power management, control and exploitation of the resources of the territorial State. Actually, the interest of new States was to pursue full economic development through the free disposal of natural resources. The main objective was, therefore, to regain control over resources, through a pervasive monitoring of the activities of foreign investors acting on the territory and strict regulation on the admission of foreign investments. The New International Economic Order was intended, in other words, to prevent any foreign intervention that could hinder the effective exercise of the State’s sovereignty over its natural resources. And, in fact, further adjectives, such as ‘full,’ ‘permanent’ and ‘inalienable,’ originally attributed to the principle, terminologically evoke connotations of absoluteness;36 however, this issue appeared immediately in contradiction with the importance of the interdependence of the international economic system, as conceived by the nieo, and even more significant at present. It is worthwhile, therefore, trying to contextualize the scope of such adjectives in the view of possible limitations that arise to unconditional explication of the principle. First, the right of a State to dispose of the natural resources on its territory also includes the ability to ratify agreements or conclude contracts which include the exploitation thereof.37 The discrimen to an acceptable compression of State’s sovereignty is given by its free consent to be bound by, and accept, the limitations of sovereign powers deriving from the contract.

34 See unga Res. 3201 and 3202 (S-vi) (1 May 1974). 35 See unga Res. 3281 (xxix) (12 December 1974). 36 See P. Picone, “Ordine economico internazionale,” P. Picone, G. Sacerdoti (eds), Diritto Internazionale dell’economia: raccolta sistematica dei principali. atti normativi internazionali ed interni con testi introduttivi e note (Franco Angeli 1982) 155. 37 Scholars debate whether this is a form of exercise of sovereignty or rather a limitation of it. By analyzing the practice, it can be said that the two coincide: in fact, it is a legitimate exercise of State sovereignty, which however effectively determines a deminutio to full and direct State control over resources. In the sense of a discretionary choice of the State in the full exercise of sovereignty and in compliance with the normative content of the principle, see A. Orakhelashvili, Peremptory Norms in International Law (Oxford University Press 2006) 52.

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The principle of permanent sovereignty over natural resources is thus safeguarded in those situations where the State retains its authority – thus continuing to effectively exercise control over the activities carried out within its territory by the investor – and, at the same time, keeps the right to regain those powers temporarily transferred, while respecting the legitimate positions of the other parties. In this regard, it seems useful to distinguish between restrictions to the exercise of sovereign powers and derogation of sovereignty tout court.38 When the terms to which the State is bound realize a permanent limitation, so as to generate the loss of State jurisdiction on the resources involved, the transaction may result in the alienation of sovereignty over that portion of territory. The discretion of the State with respect to the obligations that it can negotiate with regard to the exploitation of natural resources finds, therefore, its supreme limit in the inalienability of sovereignty.

38

In this regard, the reasoning of authoritative literature proves illuminating. The principle of permanent sovereignty over natural resources would actually be imperative, as a norm inherent to the international order. While singling out a fundamental interest of the international community as a whole, this principle is designed to protect the weak position of some States and aims at rebalancing international relations. However, in virtue of the fact that it is placed in these States’ benefit, they maintain the freedom to adjust their sovereign positions, which end up being ‘at least in the details sometimes freely waivable.’ The mandatory nature can therefore be said to be absolute when other States agree to limit the scope of that provision to the detriment of a third State; the latter preserves, however, the right to dispose of the rule in a discretionary manner (even with the limitations seen above). Sovereignty over natural resources would then be considered flexibly imperative. See P. Picone, “La distinzione tra norme internazionali di jus cogens e norme che producono obblighi erga omnes,” Rivista di Diritto Internazionale, 2008, 34. The International Law Association included in Seoul’s Declaration of 1986 the following paragraph: “Permanent sovereignty (…) is inalienable. A State may, however, accept obligations with regard to the exercise of such sovereignty, by treaty or by contract, freely entered into.” On the Declaration see P. Peters, N. Schrijver, P. De Waart, “Responsibility of States in Respect of the Exercise of Permanent Sovereignty over Natural Resources: An Analysis of Some Principles of the Seoul Declaration (1986) By The International Law Association,” Netherlands International Law Review, 1989, 258. In other words, the principle of permanent sovereignty prevents the State from selling its sovereignty; the State may, however, freely accept a partial limitation of sovereignty with respect to spatial and temporal welldefined circumstances, see on this Kuwait v. Aminoil, Ad Hoc Award, 24 March 1982, International Law Materials, 1982, 976. On this issue, extensively N. Schrijver, Sovereignty over Natural Resources Balancing Rights and Duties (Cambridge University Press 1997).

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This latter feature, although considered to be inherent to the principle of sovereignty of States over their natural resources,39 seems to originate from a specific obligation of the State in the exercise of its sovereign powers, which obliges it to use the resources in view of the highest national development and well-being40 of its population.41 The illegitimacy of an act of ultimate disposal lies, therefore, in respect of the obligations of the State towards its territorial community. This reasoning introduces an internal dimension to the concept of permanent sovereignty of States over their natural resources and recovers the initial double connotation of the principle.42 If the external dimension is realized through relationships with other international actors, in respect to its internal dimension, States should exercise their sovereignty in a way in which people may enjoy the benefits deriving from exploitation. Host States should, therefore, implement foreign investments in natural resources in full compliance with these obligations. 39

See G. Abi Saab, “Progressive Development of the Principles and Norms of International Law Relating to the New International Economic Order, Report of the Secretary-General,” un Doc. A/39/504/Add.1, 23 October 1984. 40 The criterion of ‘well-being’ should be interpreted in the light of the full realization of human rights, which include, of course, the right to adequate food. 41 See supra unga Res. 1803; African Charter on Human and Peoples’ Rights (African Charter) (adopted 27 June 1981, entered into force 21 October 1986) art. 21, and unga Third Committee (41st Session) “Declaration on the Right to Development,” 4 December 1986, un Doc. A/RES/41/128 provide for such a requirement in the exercise of permanent sovereignty. 42 It is worth noting that the principle of permanent sovereignty over natural resources had fully entered the debate on human rights in the context of the negotiation process of the International Covenant on Civil and Political Rights (iccpr) (adopted 16 December 1966, entered into force 23 March 1976) and the International Covenant on Economic, Social & Cultural Rights (icescr) (16 December 1966, entered into force 3 January 1976). The General Assembly decided in 1952 to include an article on self-determination and economic policy, reflected in the identical art.1 of both Covenants: “All peoples may, for their own ends, freely dispose of their natural wealth and resources without prejudice to any obligations arising out of international economic co-operation, based upon the principle of mutual benefit, and international law. In no case may a people be deprived of its own means of subsistence.” Relevant in this regard African Commission on Human and Peoples’ Rights, serac v. Nigeria, Communication 155/96: the African Commission has found a violation of art. 21 of the African Charter on Human and Peoples’ Rights perpetrated by the Nigerian State, which expressly provides the right of peoples to freely dispose of natural resources. The State had, in fact, allowed oil companies to cause serious prejudice to the enjoyment of vital resources of the Ogoni people.

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Conversely, large-scale investments in land here considered significantly diverge from these standards. It is interesting to observe that land grabbing represents a paradox in relation to the principle of permanent sovereignty of States over natural resources. The race to land causes an inversion of the principle as originally envisaged by the nieo, from nationalization to an unrestrained alienation of natural resources. In fact, the characteristics of these transactions seem to perfectly fit into the phenomenon of ‘control grabbing’: the result, indeed, is a transfer of control over the interested plots of land from the State to another entity, whose commitments are vague and hardly enforceable. Under these conditions, no positive effects for the benefit and well-being of the local population is to be found, which actually determines the legitimacy of the exercise of State sovereignty over natural resources. Ultimately the unconditioned transfer of control from the State to a public or private investor seems to be incompatible with the internal dimension of permanent sovereignty of States over natural resources, that is the respect of the principle of self-determination of peoples. Art. 1(2) of both the 1966 International Covenant on Civil and Political Right and the International Covenant on Economic, Social and Cultural Rights seem very clear in this regard. This provision should not, in fact, be read as a mere restatement of permanent sovereignty of States. Quite on the contrary, art. 1(2) regulates the exercise thereof, within the country and towards its population.43 The State has, indeed, the obligation to exploit its natural resources in a way not to cause detriment to its people or depriving it of its means of subsistence.44 This is also reflected in the obligation of the State to make sure that investors’ exploitation activity is exercised in a way to safeguard the interest of the population.45 4

Land Grabbing and the Rhetoric of ‘Waste’ Land

All the elements that contribute to the definition of the phenomenon of land grabbing seem to be inspired by the appropriation of resources in the hands of 43

See on this extensively A. Cassese, Self-determination of Peoples. A Legal Reappraisal (Cambridge University Press 1995) 103; R.N. Kiwanuka, “The Meaning of People in the African Charter on Human and Peoples’ Rights,” American Journal of International Law, 1988, 80. 44 See supra on the respect of the ‘well-being’ criterion. 45 The author has further analyzed this aspect in F. Violi, “Autodeterminazione dei popoli e nuove forme di colonialismo,” M. Distefano (ed.), Il principio di autodeterminazione dei popoli alla prova del nuovo millennio (cedam 2014) 105.

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a few subjects, who tend to exclude or regulate access and use of land and its resources to the detriment of the former users.46 As already mentioned, the sheer quantity of invested land characterizes the ‘race to land.’ Nevertheless, although indicative of the extent of the phenomenon at a global level, this element should be contextualized in the light of the single investment transaction and the characteristics of the land in question.47 More than a quantitative consideration, the most important aspect relates to the qualification/classification of the land to be allocated to large-scale investments. In the most targeted host countries, in particular African States, ‘unused,’ ‘available’ or ‘marginal’ land is apparently copious.48 According to the World Bank49 the amount of available land in the world would amount to a figure of about 446 million hectares of arable, unoccupied and unforested land. The study also includes a ranking of countries related to the proportion that they present between the amount of agricultural land and the performance gap that characterizes it. Because of its low productivity index – determined by the prevailing cultivation of small farmers – SubSaharan Africa recorded the highest figure, thus making these lands particularly attractive to foreign investors and large-scale mechanized plantations. However, even though this would be classified as ‘waste land,’ it is possible, as previously mentioned, that there already exist small patches of land of rural communities, or that the lands are destined to hunting or herding; it is plausible, therefore, that what is qualified as unused land is, in fact, already occupied and exploited.50 46

47 48

49 50

This process is inspired by the neo-liberal revolution of private property, which is considered as a fundamental cornerstone of economic growth and efficiency, to be extended to all social models. It basically consists of two elements: accumulation (of resources or capital) by a single or few individuals, and dispossession, its natural counterpart. The land in question could in fact include a reservoir or, although not particularly vast, it could be used by a larger community. However, the rhetoric of ‘marginal’ lands is rather misleading: it does not take into account the economic preferences of the investor, which may lead to choosing land plots according to proximity to water sources and infrastructure. See Deininger, Byerlee, Rising Global Interest, op. cit., 53. It should be noted that the land represents an immediate link of cultural identity for rural communities and a development opportunity for development, in full respect of the principle of the multifunctionality of agriculture, which assumes (or should) great importance in the selection of the investment operations and in the assessment of their social impact. As already pointed out by the un Human Rights Committee, land is part of the culture of the local population, which is expressed in various traditional activities related

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These classifications (‘waste,’ ‘unused’) are employed in making an assessment of the use of the land according to an index of productivity (or rather, on the basis of what is perceived as a productive use by the host State); that is not, however, indicative of the existence of the actual use of resources by the communities living on that territory. The framework is particularly complex, especially considering the level of unsecure land rights. In most countries of Sub-Saharan Africa, access to land is regulated by custom or usage rights. The State maintains, therefore, a central role in the distribution and allocation of land, with a variable degree of discretion, pursuant to the provisions of national law. The State’s interest seems, therefore, to create a legal system that favors the exploitation of natural resources, rather than the protection of the rights of ownership.51 Customary rights can be recognized and acquire the form of usage rights or ownership, only if subjected to a registration procedure, which varies from State to State. The conversion is subject, however, to stringent conditions in terms of land productivity. Lands destined for herding or hunting, albeit subject to customary rights, are therefore often excluded from the registration process.52

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to, for example, political-administrative organization, methods of supply and the religious cult, Human Rights Committee (Fiftieth session) “General Comment 23, Article 27,” un Doc. hri/gen/1/Rev.1 (1994). On this, see also Human Rights Committee, Lubicon Lake Band v. Canada, Communication n. 167/1984, un Doc. Suat No. 40 (A/45/40), para. 33: “Historical inequities, to which the State party refers, and certain more recent developments threaten the way of life and culture of the Lubicon Lake Band, and constitute a violation of article 27 so long as they continue.” The attitude of institutional actors is very interesting in this regard: the Ethiopian Minister of Agriculture, with regard to the forced relocation of several communities of shepherds from plots of land subject to an investment contract concluded by the State, has stated that they “(…) can just go somewhere else”; this declaration is related by the newspaper article “Ethiopie. L’heure de la moisson to sonné,” L’Hebdo, 3 September 2009, at http:// farmlandgrab.org/post/view/7502. On the extension of legal protection to rights on land, other than ownership, see European Court of Human Rights, Matos & Silva lda and Others v. Portugal, Judgment of 16 September 1996, Application n. 15777/89 in which the Court states that the concept of ‘possession’ within the meaning of Protocol 11 of the ECHR, has an autonomous meaning and shall apply to all land claims regardless of the existence of a formal title. See also European Court of Human Rights, Holy Monasteries v. Greece, Judgment of 9 December 1994, Application n. 13092/87; 13984/88, the Court holds that the term ‘possession’ includes land rights acquired by adverse possession. At regional level, in Court of Appeal of Tanzania, Attorney General v Akonaay, Lohar and Another, 21 December 1994, Civil Appeal

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These procedures are also inaccessible, as they are expensive and extremely cumbersome bureaucratically. The result is that registered rights represent a small percentage of customary rights that actually exist. On the other hand, even if the concession of rights is subject to such procedures, it remains to be seen whether the protection accorded by the legal system guarantees protection from eviction. In some countries,53 the approval of an investment project which provides for the transfer of natural resources shall be subject to consultation with the local communities that enjoy customary rights over land. Such consultations may vary, from a generic community involvement in the examination of environmental and social impact of the investment to negotiations of partnerships between the investor and the community. While the latter is a particularly positive development, there remain, however, doubts about the practical effectiveness of this provision. Aside from the absence of a specific regulation regarding the way in which such consultations should take place, these communities do not enjoy a veto power that can block the investment project, it is rather a ‘negotiating’ tool that allows them to achieve the greatest possible benefits from the investment. Moreover, although it is long-term investment, there is only one consultation and it is held prior to project approval. 5

The Race to Land, between Sovereignty and Territorial Disarticulation

Although the phenomenon of land grabbing could appear prima facie, to be perfectly consistent with the principle of territorial sovereignty, and in particular with the principle of permanent sovereignty over natural resources, after careful analysis, it seems, instead, in clear violation. Disposal of such a quantity of land is leading to dangerous fragmentation in the territorial fabric of the State. Transactions are even more dangerous when they are likely to turn into

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No. 31, the Court of Appeal of Tanzania stated that although customary rights on land is not fully equivalent to the formal title of ownership, they nevertheless represent a title of ‘real’ possession, protected by the Constitution of Tanzania and which should be extended the same legal protection afforded in the event of expropriation. In Mozambique, for example, according to the Land Act of 1997 investors shall consult local communities, before obtaining land leases from the government, see L. Cotula, “‘Land Grabbing’ in the Shadow of the Law: Legal Frameworks Regulating the Global Land Rush,” R. Rayfuse, N. Weisfelt (eds), The Challenge of Food Security International Policy and Regulatory Frameworks (Edward Elgar Publishing 2012) 206.

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a transfer of sovereignty from the host State to the home State, in particular when the latter acts through sovereign wealth funds or public enterprises.54 Through the operations of land grabbing, the host State, ultimately, divests itself of sovereign powers. Although it is true that (..) Territorial sovereignty confers upon the State an exclusive competence to organize as it wishes the economic structures of its territory and to introduce therein any reforms which may seem to be desirable to it. It is an essential prerogatives of sovereignty for the constitutionally authorized Authorities of the State freely to choose and build an economic and social system. International law recognizes that a State has this prerogative just as it has the prerogative to determine freely its political regime and its constitutional institutions.55 its exercise cannot lead to a discretional misuse, considering that the normative content of territorial sovereignty is to be conceived as a set of rights and obligations. The risk with land grabbing is that the State does not simply allow the exploitation of natural resources, but rather their alienation, thus transforming the territory into exchange goods for the global market. The interested plots take on the characteristics of an enclave;56 they are deprived of the host State power and left at the discretion of the investor, changing from sovereign territory into a land without law. The analysis of the ‘race to land’ gives a sense of the inalienability of the territorial dimension of sovereignty. The detachment of the territory from the exercise of State power ultimately determines an unacceptable simplification, which deprives the territory of its legal meaning. The phenomenon results, therefore, in a disarticulation of the territory from the power of regulation and

54 See Sassen, “Land Grabs Today,” op. cit., 29. 55 See Texaco v. Libyan Arab Republic, cit., 3. 56 The enclave model realizes a specific contractual scheme, consisting of the acquisition of the land and its resources (1) accompanied by the construction of infrastructure necessary to the process of industrial transformation, and (2) likely to be preceded by the dispossession of the former users. This type of ‘agricultural enclaves’ are particularly independent and insulated by the environment; furthermore, their agricultural production is usually export-oriented.

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control of the host country: the latter (voluntarily) removes its responsibility with regard to the operations that are carried out internally. This is likely to delegitimize the State and leads to unlawful exercise of State sovereignty with respect to the obligations incumbent upon it under international law and, in particular, with respect to the effects that this type of transaction determines on food security for the rural communities living off the lands allocated to the investments.

chapter 2

Resources Grabbing and Human Rights: Building a Triangular Relationship Between States, Indigenous Peoples and Corporations Jérémie Gilbert and Nadia Bernaz 1 Introduction In recent years, a large increase in land investments mainly in developing countries has led phrases such as ‘land grabbing’ and ‘land grab’ to enter the media lexicon.1 While land grabbing is making the headlines, little focus is put on the wider notion of ‘resources grabbing’ taking place across the globe. Exploitation of natural resources is certainly not a new phenomenon, but it seems as though in the last few years the demand for raw materials and natural resources has risen.2 The increased global demand for raw materials has led governments, corporations and investors to look for cheap resource-rich land. This global ‘resources grabbing’ is driven not only by the higher demand for natural resources but also by the increased marketization of natural resources. This results from a number of related phenomena including the globalisation of agricultural production, the strive for investment in energy and biofuel ventures, and recent demands for resources from newer hubs of global capital.3 Resources grabbing often negatively affects local populations, especially indigenous communities. Evidence is increasingly showing that instead of benefiting from the exploitation of natural resources, local indigenous communities may face forced eviction or degradation of their lands resulting in a dramatic loss of access to traditional livelihoods.4 1 For references, see: E. Butler, “Land grab fears for Ethiopian rural communities,” bbc World Service, 16 December 2010; E. Woertz, “Gulf food security needs delicate diplomacy,” Financial Times, 4 March 2009; F. Pearce, The land grabbers: the new fight over who owns the Earth, (Beacon Press, 2012) 447. 2 See: M. Klare, The race for what’s left: the global scramble for the world’s last resources (Picador, 2012) 306. 3 See: L. Cotula, The outlook on farmland acquisitions (International Land Coalition, iied, 2011); Transnational Institute, The Global Land Grab: A Primer (tni, Agrarian Justice Programme, February 2013); S. Borras and J. Franco, “Global Land Grabbing and Trajectories of Agrarian Change: A Preliminary Analysis,” Journal of Agrarian Change, 2012, 34, 59. 4 For illustrations and references, see: J. Mander and V. Tauli-Corpuz (eds), Paradigm wars: indigenous peoples’ resistance to globalization (Sierra Club Books, 2006) 261; Forest People © koninklijke brill nv, leiden, ���6 | doi 10.1163/9789004305663_004

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Control over natural resources is a highly controversial issue. Legally, natural resources can be said to belong to the State. Traditionally, under international law, ownership of and control over natural resources are attributes of State sovereignty; as such States exercise a nearly absolute control over the exploitation of natural resources.5 The assumption is that governments make the best use of natural resources for the good of their citizens. However, governments have a limited sense of accountability when it comes to the use they make of their natural resources, and whether or not this benefits their citizens. The “resource curse” which denotes the paradox under which countries rich in raw natural resources have a tendency to be economically less developed than countries with less natural resources is an illustration of the lack of benefit to local communities.6 Likewise, and while so-called community engagement initiatives are becoming more commonplace, there is generally a lack of accountability of multinational corporations, particularly of the extractive sector, when it comes to their impacts on local communities. In this context, international human rights law and recent soft law developments in the field of business and human rights could play a positive role in the way natural resources are used and exploited by providing a more peoples’ rights-centred approach to development, as well as some form of accountability with regard to the way corporations are operating. The present chapter examines the extent to which international human rights law and soft law standards on business and human rights may influence the way natural resources are exploited, and notably how the rights of local communities could be better protected in that context. The first section of the chapter explores how the issue of ownership of natural resources has been approached under international law. The main question here is whether it is a State right or a right of the peoples. Permanent sovereignty over natural resources is defined both as a State and peoples’ right, turning it into a multifaceted and even ambiguous legal concept. Building upon this discussion, the second section focuses on recent developments regarding indigenous Programme and Tebtebba Foundation, “Indigenous Peoples’ Rights, Extractive Industries and Transnational and Other Business Enterprises,” A Submission to the srsg (Forest People Programme & Tebtebba Foundation pub, 2006). 5 See: G. Elian, The principle of sovereignty over natural resources (Sijthoff & Noordhoff ,1979) 238; J.N. Hyde, “Permanent Sovereignty over Natural Wealth and Resources,” American Journal of International Law, 1956, 854, 867; and also: General Assembly, Resolution 3281 (xxix), “Charter of Economic Rights and Duties of States,” un Doc. A/res/29/3281 (1974), art. 2. 6 See: R. Auty, Sustaining development in mineral economies: the resource curse thesis (Routledge, 1993) 288; J. Sachs and A. Warner, “The Curse of Natural Resources,” European Economic Review 2001, 827, 838.

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peoples’ human rights. In the last two decades the rights of indigenous peoples have become an important segment of the human rights agenda culminating with the adoption of the United Nations Declaration on the Rights of Indigenous Peoples (undrip) in 2007.7 The issue of control over natural resources is at the heart of such developments. For example, the right to consent to and participate in the exploitation of natural resources is one of the most important legal entitlements for indigenous peoples defined in the undrip.8 The third section turns to the issue of the human rights responsibilities of private corporations. When it comes to the extraction, exploitation and trade of natural resources, multinational corporations, primarily the extractive sector, are key actors. The corporate responsibility to respect human rights (including the rights of local communities), as defined in the 2011 un Guiding Principles on Business and Human Rights,9 has become a central aspect of the international human rights framework. In this context, the third section examines how recent developments regarding the corporate responsibility to respect human rights may help address existing and long-standing issues around control and use of natural resources. Ultimately, by examining the role of the State (Section 1), the rights of indigenous peoples (Section  2), and the responsibilities of corporations (Section  3), this chapter aims at exploring the extent to which the international human rights legal framework encourages the consolidation of a triangular relationship between States, indigenous peoples and corporations when it comes to the exploitation of natural resources. 2

States Versus Peoples: Uncertainties around the Notion of Sovereignty over Natural Resources

Under international law, the right to ownership of and control over natural resources is ambiguous because essentially it is a right that belongs to two different sets of legal persons. On the one hand, under public international law, States are the ultimate owners of natural resources, and control over the natural resources located on their national territory is a component of their sovereignty. On the other hand, under international human rights law, peoples are entitled to freely dispose of and benefit from the use of their natural resources. 7 United Nations Declaration on the Rights of Indigenous Peoples, un Doc. A/61/295 (2007). 8 Ibid., art. 32(2). 9 Guiding Principles on Business and Human Rights: Implementing the United Nations “Protect, Respect and Remedy” Framework, A/hrc/17/31.

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In many ways, this could be said to be the result of a ‘double birth’ of the rights relating to sovereignty over natural resources under international law. The first birth of the rights over natural resources took place during the decolonisation period from the 1950s until the end of the 1970s. During that period the issue of control and sovereignty over natural resources was crucial, both for former colonial States and newly independent States. This was a time when United Nations bodies adopted numerous resolutions on the issue of sovereignty over natural resources.10 For example, in 1962, the un General Assembly adopted Resolution 1803 (xvii) entitled “Permanent Sovereignty over Natural Resources.” The preamble declares that “any measure in this respect must be based on the recognition of the inalienable right of all States freely to dispose of their natural wealth and resources in accordance with their national interests, and on respect for the economic independence of States.”11 The principle of sovereignty over natural resources was further affirmed with the emergence of a ‘New International Economic Order.’ The issue of sovereignty over natural resources became central to the development of international economic law during the 1970s. Under the 1974 Declaration on the Establishment of a New International Economic Order the issue of sovereignty over natural resources was seen as being a central principle for the establishment of the new international economic order. The Declaration strongly affirmed that the new economic order should be founded on full respect of the “full permanent sovereignty of every State over its natural resources and all economic activities.”12 Likewise, art. 2 of the Charter of Economic Rights and Duties of States reads: “Every State has and shall freely exercise full permanent sovereignty, including possession, use and disposal, over all its wealth, natural resources and economic activities.”13 Under the new economic order, the emphasis was on the affirmation of States’ sovereignty over their natural resources and the need to allow all States to enjoy such sovereignty. The principle of States’ sovereignty over natural resources is also encapsulated in various international treaties such as the 1978 Vienna Convention on Succession of States in Respect of Treaties,14 the 1982 Convention on the Law 10 11 12 13 14

For details and analysis, see: N. Schrijver, Sovereignty over natural resources: balancing rights and duties (Cambridge University Press, 2008) 484. Permanent Sovereignty over Natural Resources, unga res 1803 (xvii) (14 December 1962). General Assembly, un Doc. A/res/S-6/3201 (1974), para. 4 (e). General Assembly, Resolution 3281 (xxix), “Charter of Economic Rights and Duties of States,” un Doc. A/res/29/3281 (1974), art. 2. Vienna Convention on Succession of States in Respect of Treaties, 17 i.l.m. 1488.(Aug. 22, 1978), see art. 13.

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of the Sea,15 the 1983 Vienna Convention on Succession of States in Respect of State Property, Archives and Debt,16 and the 1993 Convention on Biological Diversity.17 Overall, under public international law, the principle of States’ permanent sovereignty over natural resources is well-established and affirmed in more than eighty resolutions and instruments of different bodies of the United Nations.18 However, the international legal discourse remains ambiguous on the issue of sovereignty over natural resources as in parallel to all these developments taking place under public international law, control over natural resources has also developed as a right of peoples under another branch of international law, namely international human rights law. The right of peoples to freely dispose of their natural resources is prominently affirmed in common art. 1 of the 1966 International Covenants on Civil and Political Rights, and Economic, Social, and Cultural Rights, which are the two main un human rights treaties. Common art. 1(1) asserts that “all peoples have the right of self-determination,” while art. 1(2) reads as follows: All peoples may, for their own ends, freely dispose of their natural wealth and resources without prejudice to any obligations arising out of international economic co-operation, based upon the principle of mutual benefit, and international law. In no case may a people be deprived of its own means of subsistence. Hence under international human rights law, “peoples,” not States, exercise sovereignty over their own natural resources. This human rights approach, based on the right of peoples to control and freely dispose of their natural resources, is re-affirmed in art. 21(1) of the 1981 African Charter on Human and Peoples’ Rights which states: “All peoples shall freely dispose of their wealth and natural resources. This right shall be exercised in the exclusive interest of the people. In no case shall a people be deprived of it.” Hence, human rights law, specifically the two 1966 Covenants and the African Charter, supports the claim that the right to freely dispose of natural resources is a right of the people, not a State right.

15 16 17 18

Convention on the Law of the Sea, 1833 u.n.t.s. 397(Dec. 10, 1982), see arts. 56 and 193. Vienna Convention on Succession of States in Respect of State Property, Archives and Debt, 25 i.l.m. 1640 (April 8, 1983), see art. 38(2). Convention on Biological Diversity, June 5, 1992, 1760 u.n.t.s. 143., art. 15. For details and analysis, see: Schrijver, Sovereignty over natural resources op. cit., 484.

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The contradiction between public international law resolutions supporting the principle of State sovereignty and the affirmation of peoples’ rights under international human rights law is highly problematic. One possible way to reconcile the two approaches is to consider the affirmation of a right for the people as a way to articulate the fundamental idea that States should exercise control over natural resources but that this should be done in the interest of their peoples. Viewed from this perspective, the affirmation of a people’s right over natural resources is a form of restriction of State sovereignty. It implies that States must ensure that their people freely dispose of their natural resources. This compromise is uneasy because it rests on two distinct and competing sets of right-holders. Nonetheless, at the very least, international human rights law proposes an alternative to the sacrosanct principle of States’ permanent sovereignty over natural resources, by making room for the interests of peoples, and for their fundamental right over their own natural resources. Moreover, it is worth bearing in mind that despite such prominence within human rights treaties, the right of peoples to freely dispose of their natural resources has been remarkably inconsequential in legal jurisprudence. Overall, the right of peoples to freely dispose of and control their natural resources has never really received any concrete application until the more recent development of indigenous peoples’ rights. 3

Indigenous Peoples, Natural Resources and Consent

One of the common features of indigenous peoples’ communities worldwide is a distinctive relationship with their traditional lands and the natural resources of those lands, not only for livelihood and economic survival, but also for their cultural and spiritual significance, and ultimately as a basis for indigenous peoples’ identity. Under international law, one of the central claims by indigenous peoples is for the recognition of their fundamental rights over their lands and territories.19 This territorial claim includes a strong call for the recognition of their rights over the natural resources contained in their ancestral lands. For most indigenous communities the notion of territory includes a collective rights-based approach to the access, disposal and use of the natural resources. This has been captured in the 2004 un study on indigenous peoples’ 19

See: J. Anaya & R. Williams, “The Protection of Indigenous Peoples’ Rights over Lands and Natural Resources under the Inter-American Human Rights System,” Harvard Human Rights Journal 2001, 33; J. Gilbert, Indigenous peoples land rights under international law (Brill, 2007), 327.

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permanent sovereignty over natural resources.20 The study has notably highlighted that for indigenous peoples, territorial claims include claims for the direct enjoyment of natural resources, including the right to freely dispose of these resources. It is within this context of territorial claims that elaborate, practical implications of the right of peoples to freely dispose of their natural resources have been articulated and recognized. In practice, the right to freely dispose of natural resources was operationalized in two main ways. First, a strong legal corpus on the rights of indigenous peoples to their lands has developed. When claiming land rights, indigenous peoples made clear that such rights to the land should include the natural resources contained in the territories. In the words of the Inter-American Court of Human Rights in the Saramaka case against Suriname, indigenous peoples’ land rights would be rendered meaningless “if not connected to the natural resources that lie on and within the land.”21 At the international level, the un Human Rights Committee, the treaty body monitoring the implementation of the International Covenant on Civil and Political Rights, has directly connected art. 1 of the Covenant which, as seen above, proclaims the right of people to self-determination, and indigenous peoples’ right to land.22 In several of its observations on States reports, the Human Rights Committee has highlighted that in the case of indigenous peoples art. 1 comports an obligation to ensure a right for indigenous peoples to control their lands and natural resources.23 For example, in the case of Norway, the Human Rights Committee invited the government to report “on the Saami peoples’ right to self-determination under Article 1 of the Covenant, 20

21 22

23

Mrs. Erica-Irene A. Daes, Special Rapporteur of the Sub-Commission for the Promotion and Protection of Human Rights, “Indigenous peoples’ permanent sovereignty over natural resources,” un Doc. E/cn.4/Sub.2/2004/30 and Add.1. Inter-Am. Ct. H.R., Saramaka People v. Suriname, 2007 Judgment of 28 November 2007, (ser. C) No. 172, para. 122. In general see: M. Scheinin, “The Right to Enjoy a Distinct Culture: Indigenous and Competing Uses of Land,” T.S. Orlin et M. Scheinin (eds), The jurisprudence of human rights: a comparative interpretive approach (Åbo Akademi University Institute for Human Rights, 2000), 198. Art. 1(2) of the Covenant notably states: “All peoples may, for their own ends, freely dispose of their natural wealth and resources without prejudice to any obligations arising out of international economic co-operation, based upon the principle of mutual benefit, and international law. In no case may a people be deprived of its own means of subsistence.” Among others see: Concluding observations of the Human Rights Committee: Canada (07/04/99), para. 8. un Doc. ccpr/C/79/Add.105. (Concluding Observations/Comments) (1999) and Concluding observations of the Committee on Economic, Social and Cultural Rights: Canada. 10/12/98. E/C.12/1/Add.31, para. 18.

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including paragraph 2 of that article.”24 This aspect of a people’s right to dispose of their natural resources is based on the special relationship that indigenous peoples have with their territory, and on the need to protect their right to that territory in order to safeguard the physical and cultural survival of such peoples.25 This represents one of the very few references to common art. 1(2) of the two Covenants within un human rights treaty bodies’ official documents. Hence, while this constitutes an important development, the ‘natural resources’ aspect of self-determination has not yet received a great deal of attention.26 The second practical implication of the right of peoples to freely dispose of their natural resources is to be found in the development of the right to free, prior and informed consent. The right to free, prior and informed consent is central to the rights of indigenous peoples and is affirmed in the 2007 un Declaration on the Rights of Indigenous Peoples. Art. 32 of the Declaration specifically affirms: States shall consult and cooperate in good faith with the indigenous peoples concerned through their own representative institutions in order to obtain their free and informed consent prior to the approval of any project affecting their lands or territories and other resources, particularly in connection with the development, utilization or exploitation of mineral, water or other resources. Securing free, prior, and informed consent of local peoples before undertaking the exploitation of natural resources contained on indigenous territory constitutes a concrete example of how to respect their right to freely dispose of their natural resources.27 The notion of consent is pivotal to the idea of a right of peoples to freely dispose of their natural resources. The connection between control over natural resources and consent is strongly established in 24 25

26 27

Human Rights Committee, Concluding Observations, Norway, un Doc. ccpr/C/79/ Add.112 (1999). See: Inter-Am. Ct. H.R., Case of the Indigenous Community Sawhoyamaxa v. Paraguay, (Merits, Reparations and Costs), Judgment of March 29, 2006, Series C No. 146, paras. 118, and Inter-Am. Ct. H.R., Case of the Indigenous Community YakyeAxa v. Paraguay, Merits, Reparations and Costs, Judgment of 17 June 2005, Series C No. 125, paras. 137. See: J. Gilbert, “The right to freely dispose of natural resources: Utopia or forgotten right?,” Netherlands Quarterly of Human Rights 2013, 314, 341. See: C. Doyle & J. Gilbert, “Indigenous Peoples and Globalization: From ‘Development Aggression’ to ‘Self-Determined Development’,” European Yearbook of Minority Issues 2009, 219, 262; and see: C. Doyle, Indigenous peoples, title to territory and resources: the transformative role of free prior & informed consent (Routledge, 2015) 366.

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the jurisprudence. In a case concerning a Mayan community in Belize, the Inter-American Commission on Human Rights has recognised that the authorities had violated the rights of the community to property by allowing the exploitation of timber and oil on their ancestral lands.28 The Commission highlighted that the exploitation of the resources contained on the land of the indigenous community would require the fully informed consent of the community, which in turn requires “at a minimum, that all of the members of the community are fully and accurately informed of the nature and consequences of the process and provided with an effective opportunity to participate individually or as collectives.”29 The African Commission on Human and Peoples’ Rights echoed this approach in their decision in the case of the Endorois community of Kenya.30 In this case the Commission found Kenya in violation of art. 21 of the African Charter affirming peoples’ right to freely dispose of their natural resources for not having undertaken proper consultation with the concerned indigenous community and not having obtained their consent.31 To summarise, in the context of indigenous peoples’ rights, the rights of peoples over their own natural resources has branched out in two directions: as a right to use and enjoy the natural resources that lie within their traditional territories; and as a right to give or withhold their consent to any exploitation, exploration and extraction of natural resources in such territories. The right to free, prior and informed consent is often referred to as a “process right” as it entails the establishment of a process which should allow indigenous peoples to be able to give their free and informed consent before any development taking place on their land is undertaken.32 This reference to a process right is 28

Inter-Am. C.H.R., OEA/Ser.L/v/ii.122 Doc. 5, rev. 1, Maya Indigenous Community of the Toledo District v. Belize, Case 12.053, Report No. 40/04 of 12 October 2004, para. 117. 29 Ibid, para. 142. 30 African Commission on Human and Peoples’ Rights, Centre for Minority Rights Development (Kenya) and Minority Rights Group International on behalf of Endorois Welfare Council v Kenya, Communication 276/2003 (hereinafter: Endorois Case). The decision was adopted by the African Commission in May 2009 and approved by the African Union at its January 2010 meeting. 31 See: J. Gilbert, “Indigenous Peoples’ Human Rights in Africa: the Pragmatic Revolution of the African Commission on Human and Peoples’ Rights,” International & Comparative Law Quarterly 2011, 37, 62. 32 F. MacKay, “Indigenous peoples’ rights to free, prior and informed consent and the World Bank’s Extractive Industries Review,” Sustainable Development Law and Policy 2004, 43; B.  McGee, “The Community Referendum: Participatory Democracy and the Right to Free, Prior and Informed Consent to Development,” Berkeley Journal of International law 2009, 570.

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important as it means that ideally all interested actors, governments but also corporations involved in the extraction of natural resources should support the establishment of such process. Moreover, and independently from indigenous peoples’ rights, when it comes to respecting human rights, corporations have a clear responsibility encapsulated in recent soft law developments at the international level. 4

Corporate Human Rights Responsibilities and the Exploitation of Natural Resources

In the 1970s, in the context of the ‘New International Economic Order,’ multinationals were the subject of intense discussions within the United Nations. These discussions were dominated by the confrontation between, on the one hand, a growing number of newly independent states eager to protect the sovereignty many had fought hard for, and on the other hand, Western states whose multinational corporations were increasingly investing in these new states. Among other sectors, foreign direct investments concerned the exploitation of natural resources. In 1982 these discussions culminated when the now defunct un Commission on Transnational Corporations issued a un Draft Code of Conduct on Transnational Corporations.33 After a decade of discussions, the Draft Code was eventually abandoned as states could not agree on it.34 The Draft Code did mention some limited human rights responsibilities of corporations. Specifically, Draft Paragraph 13 entitled “Respect for Human Rights and Fundamental Freedoms,” stated: Transnational corporations should/shall respect human rights and fundamental freedoms in the countries in which they operate. In their social and industrial relations, transnational corporations should/shall not discriminate on the basis of race, colour, sex, religion, language, social, national and ethnic origin or political or other opinion. Transnational corporations should/shall conform to government policies designed to extend equality of opportunity and treatment. 33 34

u.n. Document E/C.l0/1982/6, 5 June 1982, reprinted in International Legal Materials, 1983, 192. P. Muchlinski, Attempts to extend the Accountability of Transnational Corporations: The Role of unctad, Menno T Kamminga and Saman Zia-Zarifi (eds), Liability Of Multinational Corporations Under International Law (Kluwer Law International, 2000), 101.

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However, the Draft Code did not mention any specific human rights treaty or standard, and it remained silent on the subject of the right of peoples over their natural resources. By contrast, it did emphasize the rights of states over the said resources, albeit in a heavily bracketed paragraph indicating an absence of consensus on the issue. Draft Paragraph 6 read as follows: Transnational corporations should/shall respect the national sovereignty of the countries in which they operate and the right of each State to exercise its [full permanent sovereignty] [in accordance with international law] [in accordance with agreements reached by the countries concerned on a bilateral and multilateral basis] over its natural resources [wealth and economic activities] within its territory. Clearly it was felt at the time that the emphasis ought to be on the right of states over their natural resources. Although by then the 1966 Covenants, and their common art. 1, had already entered into force,35 the right of peoples to freely dispose of their natural resources was essentially ignored. The main, and arguably only, actors of importance were capital-importing and to some extent capital-exporting states, and multinational corporations. It was then assumed that capital-importing states had the best interests of their populations at heart. As countless reports on and accounts of corrupt, abusive governments have piled up since then,36 it is clear that the present context is different in a variety of ways, and the time may have come to move the agenda forward with regard to the right of peoples over their natural resources. In 2011, almost thirty years after the elaboration of the Draft Code, the un Human Rights Council unanimously endorsed the un Guiding Principles on Business and Human Rights. The potential role of the Guiding Principles in encouraging the realisation of the right of peoples, notably indigenous peoples, over their natural resources is much clearer. The Guiding Principles rest on three pillars, the State duty to protect human rights, the corporate responsibility to respect human rights and access to remedies for victims of corporate human rights abuse. The use of the words “duty” and “responsibility” of states and corporations respectively is of crucial importance and the words are in no way interchangeable. States are under an international legal obligation (duty), deriving from international human rights law, to protect individuals and peoples from corporate human rights abuse. 35 36

Both of them entered into force in 1976. See for example the annual reports of Amnesty International on The State of the World’s Human Rights. See also Transparency International’s annual Corruption Perception Index.

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This may entail an obligation to act, as opposed to a mere obligation to refrain from acting. In that respect, the un Guiding Principles are a mere restatement of existing obligations of states, rephrased to specifically address human rights violations committed by business actors. By contrast, the un Guiding Principles state that corporations have a responsibility to respect human rights, which means that they should ‘do no harm.’ This responsibility is not grounded in law as such, but is rather a social expectation. However, the contents of such responsibility derive directly from international human rights law, and specifically from the two 1966 Covenants, the Universal Declaration of Rights, and “the principles concerning fundamental rights set out in the International Labour Organization’s Declaration on Fundamental Principles and Rights at Work.”37 The fact that the two Covenants are included is arguably one of most far-reaching aspects of the Guiding Principles. There is no ‘picking and choosing’ of human rights. Both civil and political, and economic, social and cultural rights are included. The official commentary of Guiding Principle 12 reaffirms this with great force: “Because business enterprises can have an impact on virtually the entire spectrum of internationally recognized human rights, their responsibility to respect applies to all such rights.” Crucially for our purposes, the commentary then reads as follows: Depending on circumstances, business enterprises may need to consider additional standards. For instance, enterprises should respect the human rights of individuals belonging to specific groups or populations that require particular attention, where they may have adverse human rights impacts on them. In this connection, United Nations instruments have elaborated further on the rights of indigenous peoples; (…). In practice, this means that when corporations, for example in the extractive sector, wish to exploit natural resources within portions of land occupied by indigenous peoples, they should at the very least take into account the rights of such peoples as protected for example by common art. 1 of the 1966 Covenants. This is an important development which slightly reframes the right to freely dispose of resources as encapsulated in this article. First, although from a strict legal point of view corporations are not bound by the article, which practically speaking means that they cannot be sued for not respecting it, they are expected to respect it. In other words, although corporations are not duty bearers they nevertheless have a role to play in the realisation of this right, and 37

Guiding Principle 12. The un Declaration on the Rights of Indigenous Peoples is not included.

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indigenous communities and their advocates can strategically remind them of this role. Second, going further, this seems to imply that the contradiction (outlined in Section 1) inherent to the notion of sovereignty over natural resources, which is both a right of the states and a right of peoples, is more likely to be resolved in favour of the right of peoples. This is because not only states, but another crucially important set of actors, namely corporations, have responsibilities when it comes to this right. Finally, the admittedly loose reference to ‘additional standards’ that should be ‘consider[ed],’ including those related to indigenous peoples is also of importance, given the centrality of the principle of free, prior and informed consent in the main un document pertaining to indigenous peoples, the undrip. The un Guiding Principles are not the only international development of importance in the area of corporate human rights responsibilities, which could impact positively the realisation of the right of peoples, specifically indigenous peoples, over their natural resources. In 2012, the International Finance Corporation (ifc), the World Bank branch providing loans to the private sector, issued a revised document, Performance Standard 7 on Indigenous Peoples, which recognises the principle of free prior and informed consent.38 This is a standard applicable to a carefully delineated set of circumstances since corporations must respect this principle only in the context of a project funded by the ifc. It is nevertheless telling that within Performance Standard 7, the phrase “natural resources” is used only in the sense of resources of the peoples, not resources belonging to states by virtue of the permanent sovereignty principle. On the whole, it looks as though placing responsibilities on corporations, albeit of a non-legal nature or in very specific contexts, should allow the voice of indigenous communities to be better taken into consideration. At the very least, dialogue between corporations and communities is clearly encouraged. Resource grabbing remains a reality, but the tools to address it, at least through advocacy mechanisms, exist. 5 Conclusion Rights over natural resources are a complex and controversial area of the international human rights legal framework. As demonstrated in this chapter, the 38

ifc Performance Standards on Environmental and Social Sustainability, 1 January 2012, http://www.ifc.org/wps/wcm/connect/115482804a0255db96fbffd1a5d13d27/PS _English_2012_Full-Document.pdf?MOD=AJPERES.

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right to freely dispose of natural resources has developed in an ambiguous manner, being defined both as a right of the State and a right of the peoples. While for many years it seems that this ambiguous approach regarding the right-holders did not attract much attention, with States acting as the main controllers of the natural resources found on their territories, recent claims by local communities, and notably indigenous peoples, have challenged the State-dominated approach. By reclaiming their right to land and by insisting on playing an active part in development, indigenous peoples, for example through the development of the right to free, prior and informed consent, have switched the focus on peoples as being possibly the key right-holders with regard to control over the way natural resources are used. Interestingly, this development has taken place while at the same time, the un were engaged in a larger reflection on the obligations of private corporations under international human rights law. This focus on the corporate responsibility to respect human rights and the increased recognition of the rights of indigenous peoples, as well as the acknowledgement of a State duty to protect human rights, all call for a new triangular relationship when it comes to the exploitation of natural resources. This is because these developments are meant to encourage dialogue between the three sets of actors, through engagement, direct participation and consultations. It is hoped that this dialogue will limit instances of resources grabbing, and that the exploitation of natural resources will have more positive outcomes especially for local indigenous communities.

part 2 

The Human Rights Context

∵

chapter 3

Who is Entitled to Cultivate the Land? Sovereignty Land Resources and Foreign Investments in Agriculture in International Law Jochen von Bernstorff 1 1 Introduction Over the last two years un development and food security institutions attempted to react with a sense of urgency to a phenomenon called the global ‘land-grab.’ The term ‘land-grabbing’ describes a dramatic increase in largescale foreign investments in agricultural lands, especially those located in the Global South and in Eastern Europe.2 un agencies were pressured to take action through intergovernmental standard setting because a considerable number of these foreign investments in land had been reported to disregard the interests of local populations and to have been carried out in violation of international human rights and environmental standards.3 The un Committee on World Food Security (cfs), an umbrella institution for all un food security and agriculture agencies, after one year of world-wide stakeholder consultations and intergovernmental negotiations in 2014 adopted the Principles on Responsible Agricultural Investment (rai-Principles) as a non-binding consensus document. Already in 2012, after two years of intergovernmental negotiations, the same institution had adopted the more specific Voluntary Guidelines 1 The author participated in the negotiations on the two un standard setting processes as a legal consultant for the German Government delegation from 2012–2014. The views expressed are his own. 2 The Land Matrix, “The Online Public Database on Land Deals,” Land Matrix (2014), at http:// landmatrix.org; K. Deininger et al., Rising Global Interest in Farmland: Can it Yield Sustainable and Equitable Benefits? (2011); Grain, Land Grab Deals Data Set (2012), at http://www.grain .org/attachments/2453/download; L. Cotula, “Land Deals in Africa: What is in the contracts?,” iied-research paper (2011); on this phenomenon see the special issues of the Journal of Peasant Studies: “Forum on Global Land Grabbing Part 2: on methods,” Journal on Peasant Studies, 2013, 469–609, and of Globalizations, “Land Grabbing and Global Governance,” Globalizations, 2013, 1–209. 3 L. Kleemann et al., Economic and Ethical Challenges of “Land Grabs” in Sub-Saharan Africa, Policy Brief, 2013, 67; O. De Schutter, “How not to think of Land-Grabbing: Three Critiques of Large-Scale Investments in Farmland,” The Journal of Peasant Studies, 2011, 249–279.

© koninklijke brill nv, leiden, ���6 | doi 10.1163/9789004305663_005

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on the Responsible Governance of Tenure of Land, Fisheries and Forest in the Context of National Food Security (un Guidelines) as an attempt to reduce adverse effects of large-scale investments in land on local populations through improved national governance of tenure. Decision-making processes leading to the phenomenon called the global ‘land-grab’ are highly complex involving national governments, foreign public and private investors as well as regulatory interventions by international institutions, such as the World Bank and the imf. My argument is that precisely by empowering and disempowering individuals, collective entities and institutions and their complex global interactions, general international law as a discursive medium is constitutive of the authority configuration around large-scale foreign investments in agricultural land. At the same time, it is used to contest the alleged negative effects of the global ‘land-grab.’4 This article attempts to reconstruct both the discursive and institutional environment, in which the global ‘land-grab’ has become possible and in which it is currently being contested. In part one of this article, I will briefly present the phenomenon of ‘landgrabbing’ and the two main conflicting interpretations of this dramatic increase in foreign investment in land predominantly in the Global South as well as the general approach of the two most recent intergovernmental standards. Part two examines briefly the extent to which international law and its institutions can be seen as enabling and stabilizing what is also being called the global ‘land rush.’ Part three focuses on the diverse strategies of how disregarded local populations and their representatives frame their opposition to large scale land deals in international legal semantics, comparing in this context the permanent sovereignty concept with the human rights approach and their respective repercussions in the recently adopted un standards. 2

The Phenomenon and the New Standards

The empirically proven global trend of land acquisition is complex and multidimensional, bringing with it risks as well as opportunities for local populations. Those who seek to acquire control of the land could be foreign states as well as 4 On resistance through advocacy-networks on the basis of international norms: M. Finnemore and K.A. Sikkink, “International Norm Dynamics and Political Change,” International Organization, 1998, 887–917. On local protest-movements against Land-Grabbing: A.E. Schneider, “What shall we do without our land? Land Grabs and Resistance in Rural Cambodia,” paper presented at the International Conference on Global Land Grabbing, 6–8 April 2011, organized by the Land Deals Politics Initiative (ldpi), Sussex.

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private foreign investors. A large proportion of investors are made up of states from all five continents, especially countries such as India, South Korea, China, Saudi Arabia and other states of the Persian Gulf region, as well as European and North American investment funds. Investors would lease, and to a lesser extent purchase, large swathes of farmland, especially in poor African, Latin American, Asian and Eastern European States, and use them for various purposes: partly to secure food supplies of the investor country and often as a strategy of profitable production of food or other agricultural products for sale on the global market. There are two political interpretations of this sudden jump in land acquisition.5 The first view, which is held prominently among members of international civil society, interprets these developments as a danger for the countries of the South:6 ‘Land-grabbing’ leads to the forced displacement of smallholders, upon whom hundreds of millions of people across the globe depend for supply and sustenance. The consequences are further impoverishment of these small-scale farmers and the related growth of slum settlements in the megacities of the South.7 In addition, local populations of countries which receive this type of investment rarely benefit from the resulting profits.8 Due to weak regulatory structures and dysfunctional public administration, large-scale foreign investment projects often overexploit soils and water resources (‘water–­grabbing’) in search for short-term profit.9 A general concern voiced by many critics of this trend is the loss of local decision-making power over vast areas of the 5 B. Engels et al., “Peripherie, Land – Konflikt, Politik, Profit,” Zeitschrift für Politik und Ökonomie in der Dritten Welt, 2011, 395, 497. 6 The ngo grain used the term Land Grabbing to great international public effect, grain, Seized: The landgrab for food and financial security (2008), at: http://www.grain.org/article/ entries/93-seized-the-2008-landgrab-for-food-and-financial-security. 7 According to the un Special Rapporteur on adequate housing, Miloon Kothari, the empirically proven global trend of large-scale rural exodus and migration to the mega-cities and to other more affluent countries is not or not predominantly the result of industrial urban development. Rather, it is often caused by rural poverty, which can be explained by lack of land ownership, insecure landholding and new forms of land use: unecosoc, Report of the Special Rapporteur on adequate housing as a component of the right to an adequate standard of living, Miloon Kothari, Commission on Human Rights, 61st Session, Provisional Agenda Item 10, para. 43 et seq., un Doc. E/cn.4/2005/48 (2005). 8 L. Kleemann et al., Economic and Ethical Challenges of “Land Grabs” in Sub-Saharan Africa, Policy Brief, 2013, 67; O. De Schutter, How not to think of Land-Grabbing cit.; grain, Land Grab Deals Data Set cit. 9 Discussing the problem of weak regulatory capacities in many host countries in the Global South and the resulting negative effects of many foreign investments: E. Kenti, “Sustainable Development in International Investment Dispute Settlement,” N. Schrijver, F. Weiss (eds), International Law and Sustainable Development, 2004, 309, 312.

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agricultural sector and its earnings, especially when the country in question is at the same time dependent on un food aid and the import of food from abroad, thus being exposed to price volatility in the global market. The second view on the matter, as taken by the World Bank, emphasizes the opportunities of foreign investments. Starting from the assumption that in the past decades, the agricultural sectors of the Global South have suffered from under-investment, increased investment in the starved agricultural sectors of these countries is interpreted as a chance for economic growth and thus greater affluence for the local populations, as well as an opportunity to improve agricultural infrastructure. Greater foreign investment in land is thus to be understood in the context of more ‘development.’ Associated risks can be minimized, such as through (self-) regulation of investors.10 Since the 1980s, the World Bank has been advocating economic growth through market liberalization for foreign investment as the central strategy for development in the Global South. Both the rai-Principles and the un Guidelines, adopted by the cfs in 2014 and 2012 respectively, scrupulously avoid taking sides in this controversy about the desirability of more grand-scale foreign investment in land. Instead they require investments of all sizes not to produce adverse effects on the environment, employees and local populations. Hence, the controversial decision by the cfs during the intergovernmental negotiations neither to include a moratorium nor concrete ceilings for the size of the notorious land deals in the two non-binding standard setting documents. Throughout the two instruments, investments in agriculture are generally considered positive for rural development as long as they are ‘responsible,’ which is defined as not conflicting with other recognized standards such as workers’ rights, environmental standards and the preservation of cultural heritage, as well as legitimate tenure rights and the food security of local populations.11 Both documents stress the value of small-holders and their investments for national food security without however, 10

11

This was the gist of the first reaction by the World Bank in 2009, expressed in the first rai document, which was however not negotiated in an open intergovernmental forum and therefore heavily criticized by international ngos and a number of states as insufficient, World Bank, fao, unctad & ifad, Principles for Responsible Agricultural Investment (rai) that Respects Rights, Livelihoods and Resources, Knowledge Exchange Platform for Respon­ sible Agro-Investment (rai) (2009), extended version available at http://siteresources .worldbank.org/INTARD/214574-1111138388661/22453321/Principles_Extended.pdf. Committee on World Food Security, Principles for Responsible Investment in Agriculture and Food Systems, paras 20, 21, 25, 27 and 28 (2014), at http://www.fao.org/fileadmin/templates/cfs/ Docs1314/rai/CFS_Principles_Oct_2014_EN.pdf; fao, Voluntary Guidelines on the Responsible Governance of Tenure of Land, Fisheries and Forests in the Context of National Food Security, Principle No. 1, 3 and 4 (2012), at http://www.fao.org/docrep/016/i2801e/i2801e.pdf.

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clearly privileging small investment over large-scale ones, and refer to human rights as general values guiding the implementation of the principles.12 For the Civil Society Mechanism within the cfs all of this was not enough. Its members had campaigned for a moratorium and for veto rights of local populations, proposals which met strong resistance by more market friendly actors in the cfs, such as inter alia the us government delegation. It seems worth mentioning in this context that the cfs sees itself as the most inclusive and thus also most representative institution in the field of food security and development, including not only civil society but also business representatives as well as other international institutions, such as the World Bank, in its intergovernmental standard setting processes. All of the mentioned non-state actors enjoy full participation- and speaking rights in all deliberations of the cfs on an equal footing with un member states except voting rights.13 Within the selforganizing cfs – Civil Society Mechanism representatives of affected communities play a dominant role hereby deliberately moving away from traditional ngo-participation to the concept of giving voice to affected local communities. For the purposes of this article, I shall for the moment leave the political and inner-institutional disputes over foreign investments in land on one side, and instead concentrate on the legal environment, in which these political, economic and institutional struggles take place. Somewhat paradoxically, the language of international law is on the one hand complicit in the structures that enable the global ‘land-grab’ and on the other hand serves as a discursive medium to challenge and contest the latter’s negative effects. 3 Complicity Institutions created by international law, such as the imf and the World Bank have since more than twenty years through various interventions opened up land markets in the Global South for foreign investments, be it through structural 12

13

fao, Voluntary Guidelines on the Responsible Governance of Tenure of Land, Fisheries and Forests in the Context of National Food Security, Principle No. 12.2 (2012); Committee on World Food Security, Principles for Responsible Investment in Agriculture and Food Systems op.cit., para. 39. For an overview of the cfs-structure: The Committee on World Food Security (cfs) (2013), at http://www.fao.org/fileadmin/templates/cfs/Brochure/cfs_brochure_EN.pdf. The cfs is a good example for a particularly ‘progressive’ model to integrate also local grass-roots movements as ‘affected’ groups into the work of International Organizations (ios), in order to enhance the legitimacy of the standard-setting process; on the symbiotic relationship between ios and civil-society participation, see J.E. Alvarez, “International Organizations: Then and Now,” The American Journal of International Law, 2006, 324, 333–334.

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adjustment programs affecting national agriculture or through simultaneously pushing for greater market access for foreign investors. In the view of many civil society organizations, neoliberal structural change, which was demanded of and imposed on highly indebted Third World countries since the 1980s had decreased public investment in the agricultural sectors14 and thus has led to the destruction of public agricultural infrastructure in many developing countries.15 Another issue is the current system of international trade law, which allowed the sale of highly subsidized European and American agricultural products in many countries of the Global South, thus sweeping away local competition.16 The affected countries as a consequence often entirely lost their ability to produce basic products, ending up completely reliant on global markets. The forced opening of national agricultural markets by the World Bank to foreign investors, who are often protected by a highly efficient bilateral investment treaty regime, have made the large-scale sales and leases of land possible. As a result, available land for the cultivation and use by the local population is in some countries dramatically decreasing.17 Besides these institutional interventions, general discursive structures provided by international law, such as the principle of territorial sovereignty, have helped to bring the explosive growth of land acquisitions about. In this context, sovereignty comes into play in two discursive articulations; the first one being its static dimension. Sovereignty in this discursive usage signifies the locus of ultimate authority, control or decision-making power over the territory and its inhabitants. It is the classic notion of sovereignty, which in the late 14

For reduced budgets for rural development, structural adjustments and negative repercussions for developing states and their administrative capacities see M. Windfuhr, J. Jonsén, Food Sovereignty, Towards Democracy in Localized Food Systems, 2005, 5 et seq.; S. Sassen, “Land Grabs Today: Feeding the Disassembling of National Territory,” Globalizations, 2013, 25, 41; W. Bello, De-Globalisierung, Widerstand gegen die neue Weltordnung, O. Nachtwei, P. Strotmann (trans.), 2005; A. Krueger, Economic Policy at Cross-Purposes: The United Stated and the Developing Countries (1993); for reduced aid, especially from the World Bank see fao, High-Level Panel on Resource Mobilisation for Food Security and for Agriculture and Rural Development, (World Food Summit, Rome, 2001). 15 Sassen, Land Grabs Today cit.; on structural adjustment P. Dann, The Law of Development and Cooperation: A Comparative Analysis of the World Bank, the eu and Germany, 2013, 83. 16 oxfam international, Rigged Rules and Double Standards: Trade, Globalisation And The Fight Against Poverty, 2002, 112 et seq.; Windfuhr, Jonsén, Food Sovereignty, op.cit., 6–12. 17 Hines describes how global processes of agricultural concentration threaten agricultural diversity, C. Hines, A Global Look to the Local. Replacing economic globalization with democratic localization, 2003.

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nineteenth century is attributed to a state, consisting of a clearly delineated territory, inhabitants and an effective government.18 Sovereign states in this sense are considered equals.19 With the aim of preserving the status quo this notion of sovereignty privileges individuals, groups and national institutions, who effectively control the territory and its inhabitants.20 Sovereignty in its static notion as an attribute of governments acting on behalf of their states in the Global South facilitates the global ‘land-grab’ in various, complex and unforeseen ways. In the second half of the twentieth century, the newly decolonized states sought to use the sovereignty concept of international law, which is European in origin, as a tool through which they could engage with other states in the international system on equal terms. The new governments would replace the colonial powers and claim to be the ultimate authority over their territory and the population. By accepting the uti possidetis doctrine, they became rulers over a specific territory, the boundaries of which had been the result of power struggles and negotiations between European colonial powers at the end of the nineteenth century.21 It is well known that these territorial boundaries as a result often did not correspond to the traditional boundaries between ethnic groups, clans or languages, often cutting across traditional nomadic routes. For the newly independent states, the claim to sovereign equality served the purpose of obtaining international recognition of their exclusive political control and legal jurisdiction over their own territories.22 They aspired to the connection between sovereignty and independence as generally stated by Max Huber in the 1928 Palmas Island Arbitration: Sovereignty in the relations between States signifies independence. Independence in regard to a portion of the globe is the right to exercise 18

19

20 21 22

Cf. the classic definition of the state in L. Oppenheim, International Law: A Treatise, 1920, 127; on the nexus between territory and sovereignty, see R. Aron, Guerre et paix entre les Nation, 1984 and more recently D.-E. Kahn, “Territory and Boundaries,” in B. Fassbender, A. Peters (eds), The Oxford Handbook of the History of International Law, 2012, 225. On the historical tensions between formal equality and substantive inequality in the notion of sovereignty see B. Kingsbury, “Sovereignty and Inequality,” The European Journal of International Law, 1998, 599–625. T. Pogge speaks (critically) of the ‘resource privilege’ granted to governments by international law, T. Pogge, Politics as Usual, 2010, 47–48. G. Nesi, “Uti possidetis Doctrine,” Max Planck Encyclopedia of Public International Law, 2011. S. Pahuya, Decolonising international Law. Development, Economic Growth and the Politics of Universality, 2011, 103 et. seq.

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therein, to the exclusion of any other State, the functions of a State. The development of the national organization of States during the last few centuries and, as a corollary, the development of international law, have established this principle of the exclusive competence of the State in regard to its own territory in such a way as to make it the point of departure in settling most questions that concern international relations.23 It is also well recognized that this prima facie exclusive competence of the state in regard to the use of its territory includes the right of state organs to enter into new legal obligations with private or public foreign entities which limit the same state’s capacity to dispose of its territory. In a formal sense state sovereignty enables and remains unaffected by the voluntary sale and lease of substantial parts of the territory through the government. Another factor, which is conducive to the global land-grab, is the historical fact that the newly decolonized states as public entities replaced the colonial power as the official owner of the land. Colonial rule generally did not allow for the development of indigenous (private) land titles. Hence, in particular in Africa most of the land, which can be used for agriculture, is formally state property. Thus, in sharp contrast to the development of property relations in Western states, formalized private ownership of agricultural land was a rare exception and state ownership became the rule. Smallholders in former African colonies generally do not possess formalized tenure or property over the lands they have cultivated or used for animal husbandry since centuries.24 Through their status as sovereign entities and owners of most of the land, official governments were and often still are in a position to enter into contractual relations with foreign investors for the notorious large-scale land deals. The land that is given by public officials to foreign investors often belongs to those parts of the territory, which are populated by the ‘other’ ethnic group or minorities currently not well represented in governmental functions. 23 24

Permanent Court of Arbitration (pca), Islands of Palmas Case, Netherlands v. usa, r.i.i.a. Vol. ii, 1928, 829, 838. The question whether or not informal tenure of smallholders should in the future be formalized by the respective governments has been controversially debated during the negotiations on the two cfs-standards. Critics see formalization of tenure as a first step towards the commodification of land, see for the critical stance De Schutter, How not to think of Land-Grabbing op.cit., 268 et seq. As a result, the following recommendation was adopted in the fao, Voluntary Guidelines on the Responsible Governance of Tenure of Land, Fisheries and Forests op.cit., para. 9: “States should provide appropriate recognition and protection of the legitimate tenure rights of indigenous peoples and other communities with customary tenure systems.”

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Territorial sovereignty plus the post-colonial heritage of state ownership over most of the land thus empowers these governments to welcome foreign investors and to lease land to them through investment contracts. At the same time, however, territorial sovereignty in its substance is affected. This is the case since a substantial portion of a state’s territory will often have been leased to foreign investors for a period of up to 99 years. This timeframe forms part of a standard clause in these land deals.25 While formally retaining ultimate jurisdictional control over these parts of the territory, foreign state entities or private investors gain the right to exploit the land and to dispose of its agricultural products, hereby effectively diminishing domestic control over vital land resources. Thus, while enabling the phenomenon of land-grabbing, the government’s formal authority and decision-making power over the territory itself contributes to the creation of a “structural hole in the tissue of national sovereign territory.”26 What will in the longer run be the implications for international law as a legal system, if the state-territory nexus will be considerably weakened by the forces of global market liberalization? What will replace the traditional state-territory nexus as the central ordering principle of international law? And how can ideals of democratic self-rule be realized, if all natural and cultural resources, including the land itself, have been commodified and are to a great extent owned or controlled by foreign entities acting as profit oriented investors in a globalized economic system? As to the international legal regime controlling a large number of these foreign investments, the effects of international investment law on the global ‘land-grab’ were controversially debated among cfs participants. While some governments denied any potentially negative effect of the investment law regime, representatives of the civil society mechanism and other states criticized the cementing role of the regime with regard to detrimental and irresponsible large-scale investments. According to this critical stance, governments, often through bilateral investment treaties (bits), had tied their hands and as a result were no longer able to regulate investments in a way that would turn them into ‘responsible’ ones.27 The textual result in the two most recent un 25 See on the typical clauses used in the Cotula, Land Deals in Africa op.cit. 26 Sassen, Land Grabs Today op.cit., 43. 27 Generally on this problem R. Suda, “The Effect of bits on Human Rights Enforcement and Realization,” O. De Schutter (ed.), Transnational Corporations and Human Rights, 2006, 73, 93; unctad, World Investment Report, 2003, 112; and unecosoc, Human Rights, Trade and Investments. Report of the High Commissioner for Human Rights, Commission On Human Rights, 55th Session, Provisional Agenda Item 4, para. 31(c), un Doc. E/CN.4/ Sub.2/2003/9 (2005); G. van Harten, Investment Treaty Arbitration and Public Law, 2007.

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documents is twofold: on the one hand we find a clause in the rai document clarifying that the principles should be interpreted in line with international and national legal obligations,28 explicitly including trade and investment treaties,29 and on the other a recommendation regarding the negotiation and design of bits and investment contracts: “States should maintain adequate domestic policy space to meet their human rights obligations when pursuing business-related policy objectives with other States or business enterprises, for instance through investment treaties or contracts.”30 It seems worth mentioning in this context that as the flipside of the static notion of sovereignty, the notion of responsibility has a long tradition in international legal discourse. In Vattel’s highly influential 18th century international law textbook, the sovereignty term is closely linked to the responsibility of the sovereign for promoting the proper use of agricultural lands for food-production.31 The assumption that sovereignty entails responsibility for the land and its inhabitants and that the continued exercise of such responsibilities strengthens a claim to territorial sovereignty has also been famously stated by the Permanent Court of Arbitration in the Palmas Island arbitration.32 Linking sovereignty with responsibility for the inhabitants of a particular territory is by now a classic entry point for international legal arguments that refer to the limits of state power set by international legal obligations, such as international human rights norms.

28

Committee on World Food Security, Principles for Responsible Investment in Agriculture and Food Systems, 2014, para. 13: “Nothing in the Principles should be read as limiting or undermining any legal obligations to which a State may be subject under international law.” 29 Committee on World Food Security, Principles for Responsible Investment op.cit., para. 33: “States should ensure, to the extent possible, that actions related to responsible investment in agriculture and food systems both at home and abroad, are consistent with their existing obligations under national and international law, and international agreements related to trade and investment.” 30 Ibid. 31 E. De Vattel, The Law of Nations, (English translation, 1797) Chapt. vii. 32 “If, as in the present instance, only one of two conflicting interests is to prevail, because sovereignty can be attributed to but one of the Parties, the interest which involves the maintenance of a state of things having offered at the critical time to the inhabitants of the disputed territory and to other States a certain guarantee for the respect of their rights ought, in doubt, to prevail over an interest which – supposing it to be recognized in international law – has not yet received any concrete form of development,” Max Huber, Islands of Palmas Case cit., 870.

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4 Contestation It will not come as a surprise that contestation and resistance against largescale foreign investments in agriculture in the Global South relies heavily on individual and collective entitlements granted by international law. Due to the rise of economic, social and cultural rights since the 1990s, rights claims in particular have become the new lingua franca in addressing experiences of injustice in the globalized economy. More surprisingly seems at first sight that mobilization against the global ‘land-grab’ at the same time, if not predominantly, makes use of a particular revitalized emancipatory and dynamic notion of the sovereignty concept. 5

Sovereignty as a Right to Resist the Polycentric Leviathan?

International ngos and representatives of affected local communities have challenged the right of governments to transfer large portions of land resources to foreign governments and foreign private investors by making sovereignty claims. Here the dynamic and emancipatory dimensions of the sovereignty term, which discursively work against the status quo, come to the fore. In its emancipatory dimension the sovereignty concept is amalgamated with the idea of self-rule and self-determination. The bearer of sovereignty in this discursive usage is a collective entity, the people or the nation. While this notion is deeply rooted in the philosophical tradition of the Enlightenment through Rousseau and Kant, it has found a more specific expression in international law and un history in the decolonization era. a Permanent Sovereignty over Natural Resources In the context of their struggles for decolonization, the G-77 countries within the un fought for what was termed ‘permanent sovereignty over natural resources.’33 In the 1960s and 70s the disputed right to permanent sovereignty over natural resources was to be seen as a product of newly acquired independence and was designed to repel the economic exploitation of mineral and other resources by European and North American companies. It might be worthwhile revisiting the innovative and experimental projects of world economic governance that were developed during this period, including a successful scheme of internationalizing the extraction of natural resources 33

On the concept Pahuja, Decolonising International Law op.cit., 95–171; N.J. Schrijver, Sovereignty over natural resources. Balancing rights and duties, 1997, 36–113.

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through a common un North–south trust fund that successfully ensured benefits for both investors and local populations for a number of un-led investment projects in the Third World. It was not mere coincidence that the newly independent states linked the permanent sovereignty claim to the concept of self-determination. Selfdetermination of the people and control over natural resources were merged into a dynamic concept that challenged the existing economic status quo.34 The aim was to politically and legally justify projects of nationalization through the new governments, and was closely related to the so-called ‘New International Economic Order’35 which, despite significant opposition by the most important industrialized countries, was proclaimed via a series of significant un resolutions by the group of G-77 states. During decolonization permanent sovereignty over natural resources was thus construed as a right to resist and end foreign economic domination. In a somewhat watered down version this idea even entered the International Covenant on Civil and Political Rights (iccpr) and the International Covenant on Economic, Social and Cultural Rights (icescr) in their common Article 1. As to the collective dimension, the drafters at the height of the decolonization era explicitly included the right of all peoples to self-determination and the “right to freely dispose of their natural wealth and resources.” Common art. 1 para 2, sentence 2 also stipulates the following: “In no case may a people be deprived of its own means of subsistence.” In retrospect it seems ironic that it was Saudi Arabia of all countries that in 1955 in the debate in the Third Committee of the General Assembly on the draft of art. 1 justified this reference to the ‘means of subsistence’ intending hereby to prevent a weak or penniless government from seriously compromising a country’s future by granting concessions in the economic sphere – a frequent occurrence in the nineteenth century. The second sentence of paragraph 2 was intended to serve as a warning to all who might consider resorting to such unfair procedures.36

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On the political evolution of this concept see N.J. Schrijver, “Natural Resources, Permanent Sovereignty over,” R. Wolfrum (ed.), Max Planck Encyclopedia of Public International Law, 2008. G. Sacerdoti, “New International Economic Order (nieo),” R. Wolfrum (ed.), Max Planck Encyclopedia of Public International Law, 2011. un Doc. A/C.3/SR.672, 25 November 1955, p. 240, 31 and 37 (M. Baroody), quoted after Schrijver, Sovereignty over Natural Resources op.cit., 55.

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Moreover, the identical provisions in art. 47 of the iccpr and art. 25 of the icescr establish a general rule of interpretation in favor of “the inherent right of all peoples to enjoy and utilize fully and freely their natural wealth and resources.” It is well known that the exact wording of common art. 1 was highly disputed between the newly independent states and Western capital exporting states.37 In the original draft of the article, the provision granted ‘permanent sovereignty over natural resources’ which met strong resistance by Western states. It was finally turned into the less controversial ‘right to freely dispose’ of natural wealth and resources and came with an investment friendly exception through the insertion of “without prejudice to any obligations arising out of international economic co-operation…and international law.” Given that in some African countries more than 70 percent of the land which can be used for agricultural purposes will now for several generations be in the hands of foreign investors, often at ridiculously low farmland rental rates,38 it would no longer seem far-fetched for the affected populations to invoke the rationale of the right of a people to “dispose of its natural wealth” in order not to “be deprived of its own means of subsistence”; in particular if it should become obvious that the population does not benefit from the investment projects in question. In view of the semantic ambivalences reigning in the field of the right to self-determination and the hard-fought Travaux Préparatoires regarding art. 1, it is not surprising that the un Human Rights Committee over the last fourty years did not really make an effort to integrate this collective dimension into its jurisprudence. In effect, the Committee in the past seems to have avoided implementing article 1 at almost any price. Hence, cases regarding ancestral lands of indigenous peoples were being dealt with by the Committee under the minority rights provision in art. 27 even though art. 1 infringements had been claimed.39 Moreover, the Committee interpreted claims of minorities under art. 27 as individual claims of group members in order to avoid the recognition of any notion of collective entitlements under the iccpr.40 37 38

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M. Nowak, un Covenant on Civil and Political Rights: ccpr Comentary, Art. 1, 2007, para. 36. The Economist, The surge in land deals: When others are grabbing their land: Evidence is piling up against acquisitions of farmland in poor countries, 2011, at http://www.economist .com/node/18648855: According to this article in Africa often for less than 2 us-Dollar per Hectar. un Human Rights Committee, Bernard Ominayak and the Lubicon Lake Band v. Canada, Communication No. 167/1984, 38th Session, ccpr/C/38/D/167/1984 (1990); Nowak, un Covenant on Civil and Political Rights op.cit., paras 40 and art. 27, para. 30. Ibid., para. 32.

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b Food-Sovereignty Arguably, the more recent ‘food sovereignty’ movement can at least partly, if not entirely, be interpreted in the tradition of the permanent sovereignty claim. I thus would propose to treat seriously the links made to the sovereignty concept by those demanding ‘food sovereignty’ 50 years on as an idea aimed to counter forced economic globalization.41 Critics seek to use the elusive concept of food sovereignty to counter international regulatory interventions with or without the complicity of the respective home states.42 A popular definition is as follows: Food Sovereignty is the Right of peoples, communities, and countries to define their own agricultural, labour, fishing, food and land policies, which are ecologically, socially, economically and culturally appropriate to their unique circumstances (…).43 The food sovereignty approach was established in the 1990s in response to the then prevalent neoliberal approach of the Bretton Woods system to development.44 Criticism focused on programs of structural adjustment demanded by the World Bank, which included the liberalization of agricultural markets for foreign investment, and the import of agricultural products and seeds from industrialized countries. The food sovereignty movement argues that prevalent international political and legal concepts have made the plight of the hungry in the Southern countries even worse, while furthering the interests of a handful of Western agricultural multinational companies.45 The food sovereignty approach claims the right of populations to decide over their own present and 41

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The understanding of state sovereignty was historically closely linked to the responsibility for agricultural development within the state’s territory, De Vattel, The Law of Nations op.cit. Discussing contestation and resistance in ‘distributed administrations’ R.B. Stewart, “Remedying Disregard in Global Regulatory Governance: Accountability, Participation, and Responsiveness,” The American Journal of International Law, 2011, 211, 232. The definition was elaborated during the wfs (ngo/cso Forum for Food Sovereignty 2002: Food Sovereignty: A Right For All, Political Statement of the ngo/cso Forum for Food Sovereignty, 8–13 June 2002). On Food Sovereignty see now P. Rosset, “Food Sovereignty and Alternative Paradigms to Confront Land Grabbing and the Food and Climate Crises,” Development, 2011, 54. Windfuh, Jonsén, Food Sovereignty op.cit., 6–12. E. Holt-Giménez, Loren Peabody, From Food Rebellions to Food Sovereignty: Urgent call to fix a broken food system, Institute for Food and Development Policy (ed.), Food First Backgrounder no. 1 (food first ed., 2008) 14.

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future food supply. It encourages national and local self-determination on issues of food security, including regaining the country’s ability to feed its population alongside or against global regulatory frameworks and associated decisions of national governments. Similar to the 1960s and 1970s permanent sovereignty claim, the bearer of sovereignty is not the state but the people or to be more precise the affected populations. Those who are negatively affected by externalities of the prevailing global economic order should be given back their right of having a say in political decision-making over the regulation of their own food supply. Institutional implications remain vague, but what is clear is the democratically inspired emphasis on participation in decision-making on the local level. Put into effect, it would amount to a right of local communities to opt out of or to veto the implementation of foreign investments in land, which in one way or another endanger collective food security, the environment and traditional livelihoods. Sovereignty claims in their dynamic notions aspire to a collective right to end external domination and to establish self-rule. This holds true for both the old permanent sovereignty claim as well as for the current food sovereignty movement. The difference is that external domination in the food sovereignty and land-grabbing discourse originates from one’s own executive branch, international institutions and foreign public and private investors and their complex interactions. This is also an important difference compared to the era of decolonization where external domination and resources exploitation was mainly exercised by a handful of colonial powers and their extractive industries.46 Today the polycentric Leviathan is a complex network of faceless national and international bureaucracies, regulatory frameworks and standards, as well as globally operating company headquarters serving and taking advantage of liberalized global markets. Or as Margulis put it “Land Grabbing is facilitated by ever more extensive and rapid flows of capital, goods and ideas across borders and these flows occur through axes of power that are far more polycentric than the North–south imperialist tradition.”47 The rise of this decentralized and hybrid regulatory constellation is questioning the very basis of the modern international legal order based on sovereign nation states and their democratic and emancipatory potential. To a certain extent civil society calls for the recognition of the food sovereignty principle have been taken up in the 2014 rai Principles and the 2012 un 46 Sassen, Land Grabs Today op.cit. 47 M.E. Margulis, N. McKeon and S.M. Borras, Jr., “Land Grabbing and Global Governance: Critical Perspectives,” Globalizations, 2013, 1.

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Guidelines on the Governance of Tenure. Both documents foresee a principle of prior consultation and participation of those directly affected by the decisions regarding the investment. According to the general principle of implementation contained in the un Guidelines, owners of land and tenure rights who are affected by investments shall be included in the decision-making process. States are to ensure “active, free, effective, meaningful and informed participation,”48 herewith replicating a standard for affected (non-indigenous) local communities, which has emerged mainly from World Bank safeguard policies and has become what is called ‘agreed language’ in intergovernmental un development and food security fora. However, both the wording of the 2012 un Guidelines and the 2014 rai Principles fail to entirely match the demands by civil society who, instead of ‘participation,’ had called for ‘free, prior, and informed consent’ the so called fpic principle, which was granted in the two documents exclusively to indigenous peoples.49 This controversial standard, which was introduced by the un Declaration on the Rights of Indigenous Peoples in somewhat ambiguous language,50 has been taken up only for indigenous peoples by both documents. Canada strongly objected to inserting any reference to fpic, thus blocking consensus on the rai Principles until the very last moment of the negotiations. Reducing ‘free, prior and informed consent’ to ‘active, free, effective, meaningful and informed participation’ however, turns a potential right to resistance into a mechanism of inclusion. Mere participation rights for affected local communities thus lead to a process ‘of being drawn in’ which ‘can perform the exercise of power and control over an individual.’51 Even though it seems clear that participatory rights for affected communities help to give 48

Committee on World Food Security, Principles for Responsible Investment in Agriculture and Food Systems, op.cit. para. 29(iii); fao, Voluntary Guidelines on the Responsible Governance of Tenure of Land, Fisheries and Forests in the Context of National Food Security, 2012, part 3.B.3. 49 un General Assembly, United Nations Declaration on the Rights of Indigenous Peoples, g.a. Res. 61/295, 61st Session, Agenda Item 68, Art. 10, 11(2), 19, 28(1), 29(2), 32(2), u.n. Doc. A/61/L.67 and Add.1 (2007). 50 On fpic G. Pentassuglia, “Towards a Jurisprudential Articulation of Indigenous Land Rights,” The European Journal of International Law, 2011, 165–202; T. Ward, “The Right to Free, Prior, and Informed Consent: Indigenous Peoples’ Participation Rights within International Law,” Northwestern Journal of International Human Rights, 2011, 54–84. 51 Discussing the ambivalences of participation-standards in conservation-induced displacements: D. Lustig, B. Kingsbury, “Displacement and Relocation from Protected Areas: International Law Perspectives and Rights, Risks, and Resistance,” Conservation and Society, 2006, 404, 413.

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their representatives a voice in planned large-scale investment projects, this procedural inclusion without veto rights comes with a price: those who actively participate will find it more difficult to protest categorically from the outside. 6

Human Rights

The relationship between human rights and the exploitation of natural resources by foreign entities is by no means a straightforward one. One reason is the trend in the investment law community to equate rights of investors with human rights, building on the existing practice of particular fundamental rights regimes, which give corporate actors standing as rights-holding entities.52 Rights could thus potentially be invoked by affected community members as well as by investors. For investors may according to this position be able to recast their investment law claims as human rights claims against governments which attempt to regulate large-scale investments in land. Another reason for the complexity of the rights-issue is the above mentioned disputed collective dimension of rights claims under common Art. 1 of the two un covenants. In the remainder of this contribution, I will focus on individual rights claims contesting the process of the global ‘land-grab.’ Large-scale investments in agricultural land can lead and have led to violations of individual human rights set out in the two Covenants: the right to an adequate standard of living, which includes the right to adequate food; violations of social rights of employees, as well as violations of the freedom from discrimination. Evictions and displacements also can be violations of the right to adequate housing, the right to physical integrity and the right to life.53 From a legal perspective, we are referring to violations of universal, regional and national human rights standards, which the states involved at each level may or may not have pledged to protect. As a result of intensive ngo-lobbying during the negotiations within the Committee on World Food Security, both the un Guidelines and the rai Principles have incorporated human rights as general principles for the 52

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The worrying trend of the ‘humanization’ of investors cannot be dealt with here adequately, see on this problem with further references J.E. Alvarez, “Are Corporations “Subjects” of International Law?,” Santa Clara Journal of International Law, 2011, 1, 17–19. On land-grabbing and human rights see O. De Schutter, “The Green Rush: The Global Race for Farmland and the Rights of Lands Users,” Harvard Journal of International Law, 2011, 503–559.

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governance of tenure. States for instance have the duty to “protect tenure right holders against the arbitrary loss of their tenure rights, including forced evictions that are inconsistent with their existing obligations under national and international law.”54 Incriminating only the ‘arbitrary’ deprivation of tenure rights in this standard is in line with previous un documents in the area of development-induced displacements and evictions, such as the un Guiding Principles on Internal Displacement and the un chr (Commission on Human Rights Guidelines on Forced Evictions. According to these documents, protection against forced evictions is not an absolute right: developmentinduced evictions are not ‘arbitrary’ if they are justified “by compelling and overriding public interests.”55 Not only in this context technical rights-­ language inevitably comes with justifiable limitations. As Doreen Lustig and Benedict Kingsbury have argued in the context of Indian conservationinduced displacements “Rights models tend to degrade into subjective balancing formulae at the point of application.”56 Even if one would counter this argument by insisting idealistically on a deontological ‘rights as trumps’ understanding of human rights, the realities of a technical culture of rightsapplication can hardly be denied.57 54

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fao, Voluntary Guidelines on the Responsible Governance of Tenure of Land, Fisheries and Forests in the Context of National Food Security, 2012, para. 3.A 1.2.: “They should protect tenure right holders against the arbitrary loss of their tenure rights, including forced evictions that are inconsistent with their existing obligations under national and international law.” The rai-Principles arguably incorporate these human rights related standards in the Voluntary Guidelines on the Responsible Governance of Tenure of Land, Fisheries and Forests in the Context of National Food Security by referring to them: Committee on World Food Security, Principles for Responsible Investment op.cit., paras 25, 29; see on the prohibition of forced evictions unecosoc, Report of the Special Rapporteur on adequate housing op.cit. unecosoc, Guiding Principles on Internal Displacement, Addendum to the Report of the Representative of the Secretary-General, Mr. Francis M. Deng, Commission on Human Rights, 54th Session, Agenda Item 9(d), Principle 6, 2(c), un Doc. E/CN.4/1998/53/Add.2 (1998), at http://daccess-dds-ny.un.org/doc/UNDOC/GEN/G98/104/93/PDF/G9810493. pdf?OpenElement; M. Kothari, Basic Principles and Guidelines on Development-based Evictions and Displacement, para. 8, Annex 1 to unga, Report of the Special Rapporteur on adequate housing as a component of the right to an adequate standard of living, Miloon Kothari, Human Rights Council, 4th Session, Agenda Item 2, un Doc. A/HCR/4/18 (2007). Both documents had not been negotiated in intergovernmental fora but only adopted as Annexes to resolutions of the un-Commission on Human Rights. Lustig, Kingsbury, Displacement and Relocation from Protected Areas cit., 412; Cf. M. Koskenniemi, “Human Rights Mainstreaming as a Strategy for Institutional Power” Humanity An International Journal of Human Rights, Humanitarianism, and Development, 2010, 47–58. Cf. Lustig, Kingsbury, Displacement and Relocation from Protected Areas op.cit., 415.

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In sum, the language of international law provides legitimacy to – and at the same time can be used to contest the contentious large-scale foreign investments in agricultural land in the Global South. Both through its institutional manifestations as well as through central concepts, such as the sovereignty term and the notion of human rights, it is present in the current land-grabbing discourse and has entered the most recent un standards on the issue. The discursive function and use of the sovereignty concept in the debate over the global land-grab can be summarized as follows: in its static dimension, state sovereignty enables and justifies action by governments in the affected countries to identify, commodify, lease and sell large portions of their land to foreign entities, which can be states or private investors. At the same time, they hereby erode the very basis of their decision-making authority, the fundamental nexus between government, territory and inhabitants. As a reaction to the rise of external interventions into traditional livelihoods and the loss of means to ensure their subsistence, affected communities challenge the right of governments and international institutions to foster these forms of external domination. Their call for food sovereignty is reminiscent of the debate on permanent sovereignty in the 1960s and 70s, and mobilizes dynamic dimensions of the sovereignty claim, which are linked to notions of collective self-rule and self-determination. Historically this claim, which has been endorsed in nonbinding and binding un documents, explicitly included the right of peoples to safeguard their own means of subsistence. More generally, sovereignty claims are claims to decision-making authority, whereas human rights claims refer to fundamental experiences of injustice. Whereas modern sovereignty claims are advanced in the name of collective entities, human rights claims are voiced in the name of the individual, usually the victim of an alleged violation. Despite relevant language in common Art. 1 of the two principal human rights covenants, attempts in the 1960s and 70s by the decolonized world to inject a collective economic dimension into international human rights law has for better or worse persistently been thwarted by the jurisprudence of the un Human Rights Committee. In other words, whereas sovereignty claims defend, contest or aim to gain ultimate decision-making authority for a collective entity, rights claims denounce the individualized effects of specific authoritative decisions as unjust. In this sense, rights claims are politically more modest since they do not challenge existing power constellations as such. As long as decision-­ making authorities respect fundamental rights their position as the bearer of decision-making power is not challenged. Through their focus on individual violations, the rights discourse is also less capable of addressing structural causes of fundamental experiences of injustice. It is this blindness to the root

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causes of structural injustices that diminishes the revolutionary appeal and emancipatory potential of the human rights discourse significantly. By using a universalist language, however, rights claims on the other hand are much more difficult to dismiss than particular claims to authority and self-rule. They find their evident moral justification in the unjust violation itself. In its application, however, technical rights language comes with limitation clauses and a latent tendency to end up in balancing exercises. Moreover, the rights discourse is still struggling with deducing clear obligations of political actors from structurally induced experiences of injustice, in particular if – like in the case of the global land-grab – there are various loci of decision-making, involving a number of internal and external actors and their interactions. For the strength and resilience of the globalized Leviathan lie in its diffuse and polycentric loci of authority and its evasive responsibility structures.

chapter 4

Land Grabbing and International Human Rights: The Jurisprudence of the Inter-American Court of Human Rights on the Rights of Indigenous Peoples Elisa Ruozzi 1 Introduction Land grabbing is a complex phenomenon involving different actors and a wide range of situations, which it would be impossible to comprehend and assess under a single subset of international law norms. In the light of this premise, the aim of this article is to describe and analyze land grabbing in the context of international human rights law and, more specifically, of the jurisprudence of the Inter-American Court of Human Rights (IACtHR) relating to the rights of indigenous peoples. Since the term ‘land grabbing’ is not explicitly employed by the IACtHR, the first part of this article will describe what kind of situation is deemed to constitute land grabbing in the IACtHR case law. Secondly, it will set out the rights recognized by the Court in favour of indigenous populations as well as the corresponding duties upon States. This analysis will deal, first of all, with the right to property as applied by the Court in this context, underlining, in particular, its evolutionary approach as well as the ambiguities still characterizing its jurisprudence. The article will then focus on the link between the right to property and other rights covered by the American Convention on Human Rights (achr), such as the right to life and the right to cultural and spiritual dimension. Finally, the relevance of indigenous peoples as non-State actors will be underlined, by assessing the contribution made by the ‘Inter-American doctrine’ to the progressive recognition of their collective rights and to their potential status as subjects of international law. 2

‘Land Grabbing’ in the Jurisprudence of the IACtHR: A Definition

Land grabbing is capable of assuming a variety of forms; as a consequence, it would be hard to define it in a unequivocal way. However, as a starting point of the analysis, the following non-legal definition is helpful:

© koninklijke brill nv, leiden, ���6 | doi 10.1163/9789004305663_006

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land grabbing is essentially control grabbing. It refers to the capturing of power to control land and other associated resources like water, minerals or forests, in order to control the benefits of its use.1 This expression is found nowhere in the case law of the IACtHR; therefore, a definition can only be given in relation to the context where this jurisprudence arose, that is, the rights of indigenous peoples. Because of the peculiar historical and anthropological features of the territories of the States which are party to the achr, the IACtHR had the chance to develop extensive case law on the point. It is therefore by analyzing this jurisprudence that ‘land grabbing’ can be given a meaning under international human rights law categories. A preliminary point to be dealt with concerns the definition of indigenous peoples. It is not possible here to enter into the complex debate regarding this point;2 however, for the purposes of this article, it is important to note that the Court adopted an extensive interpretation of the term, including populations who are not indigenous to the region they inhabit but who settled during the colonization period.3 The reasons for this lie in the peculiar social structure of the group, its strong spiritual relationship with the ancestral territory, and the presence of a tribal economy, making them a community whose characteristics are different from those of the national community.4 However, the indigenous or tribal nature of the group whose claims are taken into consideration might not be the only qualifying feature. In a recent 1 J. Franco, S. Borras Jr, A. Alonso Alonso-Fradejas, N. Buxton, R. Herre, S. Kay, and T. Feodoroff, The Global Land Grab (Sept. 21st, 2014, 10:00 am) http://www.tni.org/primer/global-land -grab. 2 According to art. 1 of the ilo Convention n.169 concerning Indigenous and Tribal Peoples in Independent Countries, ‘tribal peoples’ are defined as: “peoples […] whose social, cultural and economic conditions distinguish them from other sections of the national community, and whose status is regulated wholly or partially by their own customs or traditions or by special laws or regulations” and ‘indigenous peoples’ as: “peoples […] who are regarded as indigenous on account of their descent from the populations which inhabited the country, or a geographical region to which the country belongs, at the time of conquest or colonisation or the establishment of present state boundaries and who, irrespective of their legal status, retain some or all of their own social, economic, cultural and political institutions.” 3 Inter-American Court of Human Rights, Case of the Saramaka People v. Suriname, Judgment of 28 November 2007, Case n. 172, para. 79. 4 Ibid., at paras. 81–84. See also. Inter-American Court of Human Rights, Case of the Afrodescendant communities displaced from the Cacarica river basin (Operation Genesis) v. Colombia, Judgment of 20 November 2013, Case n. 270, para. 85, where the Court did not even deal with the issue.

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case concerning a community of afro-descendants who had been displaced from their traditional territories, the Court remarked on their identity as internally displaced persons,5 underlying their ‘special vulnerability and defenselessness,’ accentuated by their rural origin.6 This not only enables the Court to assess compliance with the rights guaranteed by the achr in the light of international humanitarian law,7 but also makes vulnerability the common denominator of the groups which come under the Court’s protection as well as the basis of the State’s obligations.8 Land grabbing includes not only land in strict terms but also associated natural resources. As affirmed by the Court in the Saramaka case, the right to use and enjoy the territory would be ‘meaningless’ in the context at issue “if said right were not connected to the natural resources that lie on and within the land.”9 Relevant elements of the concept which is at the centre of our analysis are further constituted by the legal recognition of the indigenous community on the one hand and the existence of title to land on the other. By this premise it is not meant that, as a precondition for land grabbing to take place, communities must necessarily be deprived of legal recognition and/or title to land; however, these categories can be useful in order to fully appreciate the legal reasoning followed by the Court to safeguard the respect of rights. Legal recognition of the indigenous community falls under art. 3 of the American Convention (right to juridical personality), and it plays a relevant role in the jurisprudence relating to indigenous rights, since it forms the essential precondition for the enjoyment of all other rights.10 In the context at issue, the right to juridical personality has been considered in two different 5 IACtHR, Afro-descendant communities case, para. 284. 6 Ibid., at para. 315, 317. 7 Ibid., at para. 349, where the Court applies the United Nations Guiding Principles on Forced Displacement, according to which: “[p]roperty and possessions left behind by internally displaced persons should be protected against destruction and arbitrary and illegal appropriation, occupation or use.” 8 The situation of vulnerability suffered by indigenous or tribal groups is underlined by the Court in virtually all cases: see IACtHR, Saramaka case, para. 174; IACtHR, Afro-descendant communities case, para. 315; IACtHR, Case of the Xákmok Kásek Indigenous Community v. Paraguay, Judgment of 24 August 2010, Case n. 214, para. 250; Inter-American Court of Human Rights, Case of the Kichwa indigenous people of Sarayaku v. Ecuador, Judgment of 27 June 2012, Case n. 245, para. 264. 9 IACthR, Saramaka case, para. 122. 10 Inter-American Court of Human Rights, Case of the Sawhoyamaxa Indigenous Community v. Paraguay, Judgment of 29 March 2006, Case n. 146, paras. 188–190.

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perspectives: as a right of individual members of the indigenous community and as a right of the indigenous community as a whole. The first aspect implies the duty of the State to provide to each individual member of the community concerned the right to recognition of personality; this right is especially owed to those “persons in situations of vulnerability, exclusion and discrimination.”11 However, it is the second aspect that is of special relevance to the rights of indigenous communities. As underlined by the Court in the Saramaka case, when art. 3 of the Convention is applied to a community, the question is “of a different nature,” as lack of recognition of the people as a juridical personality makes them ineligible under domestic law to obtain communal title to land.12 The issue of the collective dimension of indigenous rights will be specifically analyzed in part 4 of this article; however, for the purposes of the present part, it suffices to observe that, even though land grabbing might well happen when the indigenous community is fully recognized as a legal entity,13 the lack of official recognition will be the first burden to overcome, as it prevents the community from invoking any other right guaranteed under national law. Closely linked to legal personality is the existence of a title to land assigned to the indigenous community. Even in this case, there is no direct and unambiguous relationship between the existence of a title and land grabbing; while in some cases communities have been deprived of land upon which they retain a legitimate title,14 in other situations national law does not provide any recognition at all15 or it merely recognizes an ‘interest’ in land.16 Nevertheless, it is evident that the absence of title makes appropriation of land by the State or other entities more likely to happen, as it can be carried out with no blatant violation of national provisions relating to private property. Notwithstanding this, further constitutive elements of land grabbing in the context of IACtHR jurisprudence can be identified in both the actors involved and in the form through which indigenous peoples are deprived of land. Entities materially carrying out economic activities which are at the origin of land grabbing mainly comprise non-State actors – such as private companies, 11 Ibid., at para. 189. 12 IACtHR, Saramaka case, para. 167. 13 See, e.g., IACtHR, Sarayaku case, para. 55. 14 Ibid. at para. 149, where the Court states that “there is no doubt regarding the Sarayaku People’s communal ownership of their territory.” 15 Inter-American Court of Human Rights, Case of Moiwana Community v. Suriname, Judgment of 15 June 2005, Case n.124, para. 86(5). 16 IACtHR, Saramaka case para. 99.

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individual investors and the Church17 – to which a concession18 for exploration and extraction of natural resources or a property title19 have been granted by the State. The State can also be involved through the presence of State-owned companies that might sign a partnership contract with private companies to which a concession is then assigned.20 However, economic activities are not the only origin of land deprivation; land deprivation can sometimes be a consequence of acts of violence or extrajudicial executions carried out by paramilitary groups21 or the Army,22 or of public interest reasons, such as the creation of a natural reserve.23 On the basis of these elements, it can therefore be concluded that, in the context of international protection of human rights, the definition of land grabbing can include any action capable of depriving indigenous communities of their land and associated natural resources. 3

The Content and Scope of Indigenous Peoples’ Right to Land and its Relationship with Other Rights of the American Convention

3.1 Indigenous Right to Property or Property Rights? Before analyzing the jurisprudence of the IACtHR, it is important to recall some background ideas regarding land right claims by indigenous peoples. Generally speaking, these claims are based on the assumption that, before colonization, indigenous peoples had already settled and taken control of the natural resources according to their customs and traditions. 17

In both the Yakye Axa and the Sawhoyamaxa cases, missions established by the Anglican Church covered land traditionally occupied by indigenous populations : Inter-American Court of Human Rights, Case of the Yakye Axa Indigenous Community v. Paraguay, Judg­ ment of 17 June 2005, Case n.125, para. 50.10 ss.; IACtHR, Sawhoyamaxa case, para. 73.1 ss. 18 IACtHR, Saramaka case, para. 118. 19 IACtHR, Xákmok Kásek case, para. 69. 20 For example, the partnership contract signed between the State Oil Company of Ecuador and the consortium formed by the Compañía General de Combustibles S.A. and Petrolera Argentina San Jorge S.A (IACtHR, Sarayaku case, para. 64). 21 Inter-American Court of Human Rights, Matter of Pueblo Indígena de Kankuamo, Order of the Court of 5 July 2004, para. 2, available at http://corteidh.or.cr/index.php/en/provisional -measures; Afro-Descendant Communities at para. 111. 22 IACtHR, Moiwana case, para. 86(15); Inter-American Court of Human Rights, The Case of the Communities of the Jiguamandó and the Curbaradó, Order of the Court of 6 March 2003, para. 2, available at http://corteidh.or.cr/index.php/en/provisional-measures. 23 IACtHR, Xákmok Kásek case, para. 80.

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As a consequence, the ‘title’ they claim, being an original one, is not to be granted but rather simply recognized by the State, on the basis of a pre-existent and autonomous source of law.24 For this reason indigenous land rights are recognized under international law independently from the existence of national laws establishing them; as they are ‘precolonial’ rights, they need not be acquired by the State and cannot be estinguished, unless this results from the clear will of their legitimate owners.25 The emergence of what has been defined as the ‘recognition principle’ has the effect of limiting the role of the State;26 conversely it requires the respect of the indigenous conceptualization of property,27 which can differ widely from the ‘Western’ one28 and which the IACtHR has ‘redefined’29 in order to take into account intangible elements such as the relationship between man and nature, as well as its collective dimension. It is exactly the adherence to this special idea of property which represents one of the major judicial challenges for the IACtHR. The Right to Land and to Natural Resources in IACtHR Jurisprudence The right to land and to natural resources has been guaranteed by the Court mainly through the provision devoted to the protection of property30 (art. 21) but also through provisions relating to procedural rights. As far as art. 21 is concerned, what characterizes the right to property in this context with respect to ‘classical’ private property protection lies in the broad

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G. Otis, A. Laurent, “Le défi des revendications foncières autochtones: la Court Européenne des Droits de l’Homme sur la voie de la décolonisation de la propriété?,” Revue Trimestrielle des Droits de l’Homme, 2012, 43, 45–46, 70. 25 Ibid, at 49. 26 Ibid, at 52. 27 N. Bankes, “Indigenous Land and Resources Rights in the Jurisprudence of the InterAmerican Court of Human Rights: Comparisons with the Draft Nordic Saami Convention,” German Yearbook of International Law, 2011, 231, 244. 28 A. Geslin, “La protection internationale des peuples autochtones: de la reconnaissance d’une identité transnationale autochtone à l’interculturalité normative,” Annuaire Français de Droit International, 2010, 657, 685. 29 Bankes, La protection internationale op. cit., 244. 30 The text of art. 21 provides: “Everyone has the right to the use and enjoyment of his property. The law may subordinate such use and enjoyment to the interest of society. 2. No one shall be deprived of his property except upon payment of just compensation, for reasons of public utility or social interest, and in the cases and according to the forms established by law. 3. Usury and any other form of exploitation of man by man shall be prohibited by law.”

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and evolutionary notion contained in the Convention,31 capable of comprehending the special relationship between indigenous communities and their territory, which forms the “fundamental basis of their cultures, their spiritual life, their integrity and their economic survival.”32 Notwithstanding this, it is important to note that, when art. 21 is actually applied, such special relationship cannot be presumed, but needs to be demonstrated, even though on the basis of a broad formula. According to the Sawhoyamaxa jurisprudence: such relationship may be expressed in different ways, […] and it may include the traditional use or presence […]; settlements of sporadic cultivation; seasonal or nomadic gathering, hunting and fishing; the use of natural resources associated with their customs […].33 The scope of this formula is in turn limited by the fact that the relationship must be ‘possible,’ meaning that the said activities are not carried out exclusively because the community is prevented from doing so for reasons beyond its control.34 A further relevant point concerns the scope of the right to natural resources. In the Saramaka case, after stating that the “connectedness between the territory and the natural resources necessary for [indigenous peoples’] physical and cultural survival is precisely what needs to be protected under Article 21,” the Court delimited the range of these resources in a twofold way. On the one hand, natural resources that are covered include those which are “traditionally used and necessary for the very survival, development and continuation of such people’s way of life”;35 on the other hand, the scope of the right to natural resources is defined as the right to ‘use and enjoy’ such resources,36 thus implying a looser connection than ownership or possession.37 31

See J.M. Pasqualucci, “The evolution of international indigenous rights in the InterAmerican human rights system,” Human Rights Law Review, 2006, 281, 296 underlining how, during the preparatory work for the Convention, the adjective ‘private,’ which was initially included, was deleted in English but not in other languages. 32 Inter-American Court of Human Rights, Case of the Mayagna (Sumo) Awas Tingni Community v. Nicaragua. Merits, Judgment of 31 August 2001, Case n.79, para. 149. 33 IACtHR, Sawhoyamaxa case, para. 131. 34 Ibid., at para. 132. 35 IACtHR, Saramaka case, para. 122. 36 Ibid., at para. 158. 37 Bankes, La protection internationale op. cit., 251. The author contrasts the limited scope of the right to natural resources emerging from the expression ‘enjoy and use’ with the

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In order to guarantee that the activities carried out by the State and impacting on natural resources do not impair community survival, some requirements have been established by the Court. The State must ensure the participation of the population in decisions regarding the planned activity, a ‘reasonable’ benefit sharing from any such plan, and a prior environmental and social impact assessment.38 The State also has a duty not only to consult but also to obtain the community’s free, prior, and informed consent, according to its customs and traditions, regarding large-scale projects that would have a major impact within the territory.39 The approach followed by the Court with respect to natural resources has been criticized in many respects as being unduly deferential to the State. The criteria for determining which natural resources are ‘indispensable’ to the survival of the group have not been identified, nor those for defining a project as having a ‘major impact.’ Equally unclear is the question whether benefit sharing would cover only ‘indispensable’ resources, or their totality.40 These problems are particularly pertinent with regard to subsoil natural resources as, in the majority of legal systems, ownership of them is vested in the State.41 The ultimate aim of the application of art. 21 lies in the right of indigenous peoples to have access to land, either to the one claimed or to ‘alternative’ land, and the corresponding obligation on the State will articulate differently according to the situation of the community with respect to the claimed land. As clearly illustrated in the Sawhoyamaxa case, where populations possess their land but they lack real title, the State is obliged to provide such a title and to officially recognize and register that property, because traditional possession has effects equivalent to a full property title. A different situation arises when the community is the legitimate owner but lacks possession due to acts of violence which forced its members to leave the territory. The obligation of the State in this case consists of guaranteeing the existing right, unless land has been lawfully transferred to third parties in good faith, in which case the statement of the Court according to which “‘Saramakas’ right to use and enjoy their traditionally owned lands necessarily implies a similar right with regards to the natural resources.” 38 IACtHR, Saramaka case, para. 129. 39 Ibid., at para. 134. 40 M.A. Orellana, “Saramaka People v. Suriname,” American Journal of International Law, 2008, 841, 846. 41 On this point see S. Errico, “The Controversial Issue of Natural Resources: Balancing States’ Sovereignty with Indigenous Peoples’ Rights,” S. Allen, A. Xanthaki (ed.), Reflec­ tions on the un Declaration on the rights of indigenous peoples (Hart Publishing, 2011), 329, 335 ss.

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community is entitled to restitution or to obtain other land of equal extension and quality.42 However, the relative nature43 of the right to ancestral lands implies that some balancing with competing claims by third parties has to occur. The dispute will be decided by the State on a case-by-case basis, not only assessing the impact of land deprivation on the community’s survival44 but also ensuring that the restriction on private property is proportional and subject to fair compensation.45 Even though the existence of a conflict between the right of private individuals and the right of the community does not automatically imply that this latter will prevail46 and it is incumbent upon the State to take such a decision, the Court is competent to verify the respect of human rights in the settlement of the dispute.47 In this context, for example, the Court has affirmed the insufficiency of evaluations based on mere land productivity and agrarian law48 as well as the primacy of the American Convention over potentially conflicting bilateral commercial treaties.49 Redress measures therefore require that States carry out delimitation, demarcation and titling of the territory of the community and, in the meanwhile, abstain from carrying out actions that might lead their agents or third parties to affect the existence, value, use or enjoyment of the property.50 On the basis of an evolutionary interpretation of art. 21 of the American Convention – also read in the light of domestic law of some oas States and of the ilo Convention n. 169 concerning Indigenous and Tribal Peoples in Independent Countries51 – and of a general principle of international law,52 the Court states the obligation to carry out this process through appropriate consultation with the population concerned. More precisely, for a consultation process to be considered valid and compliant with international standards, it must be undertaken in good faith; respect community’s customs and traditions; occur during the early stages of development of a project and thus prior to its realization; be aimed at reaching an agreement; involve an environmental impact assessment; and be informed, 42 IACtHR, Sawhoyamaxa case, paras. 127–128. 43 Pasqualucci, The evolution op. cit., 298. 44 IACtHR, Yakye Axa case, para. 143. 45 Ibid., at para. 143 and para. 145. 46 Ibid., at para. 146. 47 IACtHR, Sawhoyamaxa case, para. 136. 48 Ibid., at para. 139. 49 Ibid., at para. 140. 50 IACtHR, Awas Tingni case, para. 153. 51 IACtHR, Sarayaku case, para. 161. 52 Ibid., at para. 164.

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i.e., guarantee that the members of the community are aware of potential risks and benefits.53 One of the most sensitive issues regarding the articulation of the right to consultation concerns its scope and, notably, the possibility that this right might amount to a ‘veto power’ in the hands of indigenous communities. As has been correctly remarked, the jurisprudence of the Court regarding the need for a consensus is not univocal, but rather takes into account the gravity of the impact of the economic activity on the concerned population.54 As regards, instead, natural resources, the definition of redress measures reflects the ambiguity that characterizes the scope of communities’ rights over them: the ‘delimit, demarcate and title’ formula is replaced by more general language regarding use, enjoyment and possession of the territory.55 Notwithstanding the role played by art. 21 in the guarantee of the right to property, the recognition of procedural rights is equally indispensable, among which are the right to judicial protection (art. 25),56 the right to a fair trial (art. 8), and the recognition of legal personality (art. 3) both of individual members of the community57 and of the community as such.58 In this context, it is interesting to observe how the duty of adopting criteria centred on community needs in the identification of ‘suitable’ land, which is part of the right to property, also arises in the context of a procedural provision such as art. 25, read in conjunction with art. 1(1)59 and art. 2.60 In assessing national provisions limiting the possibility of land expropriation in favour of indigenous populations to those cases involving land that is not being ‘exploited rationally,’61 the Court states the inadequate character of any 53 54

Ibid., at para. 177–178. M. Fasciglione, “Sfruttamento delle risorse naturali e diritto di consultazione delle popolazioni indigene nella recente giurisprudenza della Corte interamericana dei diritti dell’uomo,” Diritti umani e diritto internazionale, 2013, 187, 191. 55 IACtHR, Saramaka case, para. 194; IACtHR, Afro-descendant communities case, para. 459. 56 IACtHR, Sarayaku case, para. 263. 57 IACtHR, Sawhoyamaxa case, para. 186 ss. 58 IACtHR, Saramaka case, para. 159 ss. 59 According to art. 1 para 1 (“Obligation to respect rights”), States undertake to respect the rights and freedoms recognized in the Convention and to ensure to all persons subject to their jurisdiction the free and full exercise of those rights and freedoms. 60 Art. 2 of the Convention (“Domestic legal effects”) sets out States’ commitment to adopt such legislative or other measures as may be necessary to give effect to those rights or freedoms. 61 It is interesting to compare the meaning of the adjective ‘rational’ in this sentence with the one emerging in the case of the Afro-descendant communities, where logging companies

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approach exclusively based on the perspective of land productivity,62 together with the obligation of carrying out technical and scientific surveys regarding the land claimed for restitution.63 In this sense, the Court’s concern for a thorough fact finding about the community’s situation applies not only to national administrative procedures but also to its own judicial activity. In the recent case concerning the Sarayaku people, for the first time, a delegation of the Court carried out a field visit to the community in order to assess the legal and socio-environmental issues raised in the case.64 The Cultural Dimension of the Right to Land and its Relationship with the Right to Life One of the most remarkable characteristics of the right to property as established by the jurisprudence of the IACtHR concerns its close ties with noneconomic values, such as the right to life and the right to one’s own cultural dimension. The cultural element is part of internationally agreed definitions of indigenous or tribal peoples, identified through, inter alia, their cultural institutions, customs and traditions. As previously mentioned, in the Saramaka case the Court justified the decision to apply its jurisprudence regarding indigenous populations to a non-indigenous community based on the fact that the latter shared similar characteristics with indigenous peoples. These characteristics include social, cultural and economic traditions different from other sections of the national community, in the identification with the ancestral territories and in the presence of community norms, customs, and traditions.65 In other terms, the cultural dimension is a feature capable of assimilating a community to indigenous peoples, prevailing over other factors such as the geographical or historical origin of a group. 3.3

are accused of exploiting the territory “irrationally, by mechanical means” (IACtHR, Afrodescendant communities case, para. 341). In other terms, the Court seems to suggest, a rational use of the territory is the one that respects community traditions and customs, as well as the characteristics of their environment, whereas rationality seen in terms of mere productivity is not relevant for the purposes of indigenous land rights. 62 IACtHR, Xákmok Kásek case, para. 146. In the same case, the Court also justifies the community’s refusal of alternative land offered by the State on the grounds that this land must, at least, have a certain ‘agro-ecological suitability’ and be submitted to a study to determine its potential for being developed by the Community (Ibid.,. at para. 118). 63 IACtHR, Sawhoyamaxa case, para. 107. 64 IACtHR, Sarayaku case, para. 18. 65 IACtHR, Saramaka case, para. 79.

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A more specific aspect of the cultural dimension is the capacity of linking the community to the territory: indigenous and tribal peoples maintain ‘cultural, intangible and spiritual ties’66 with the ancestral territory they have traditionally used and occupied; their land and the associated natural resources are part of their social, ancestral, and spiritual essence, not only due to the presence of sacred sites but also by reason of the intrinsic sacred value of the territory itself.67 This connection is indispensable in order to guarantee their physical and cultural survival, as well as the continuation of their ‘worldview,’ consisting of their ‘distinctive cultural identity, social structure, economic system, customs, beliefs and traditions.’68 Coherently, cultural and traditional activities are also relevant in order to substantiate claims for land restitution which, as previously mentioned, need to be based on the ‘unique relationship’ with the traditional land.69 The intimate connection between the possibility of using and occupying ancestral land and cultural identity also finds its basis on the fact that, very often, the community meets most of its nutritional needs through its traditional activities and is therefore not willing to accept to depend on the State.70 The violation of the right to property has direct and profound impacts on these aspects, also considered in an intergenerational perspective, as nonmaterial cultural heritage – such as male and female initiation rites, shamanism, and language71 – is transmitted from one generation to the next and is constantly recreated by the members of the indigenous community.72 The relevance of the spiritual component has been particularly observed by Judge Cançado Trindade in its separate opinion in the case Moiwana Community where, while dealing with the situation of survivors of a violent military operation prevented from returning to their traditional land, he underlined the relationship between uprootedness – meant as the loss of one’s own “place of birth, mother-tongue, cults, family and culture”73 – and the right to life, dignity, freedom, and security.74 The lack of response by the State and the consequent existence of a long period of time during which members of the community, being separated from their land, are unable to give a proper burial to their 66 IACtHR, Sarayaku case, para. 149. 67 IACtHR, Saramaka case, para. 82. 68 IACtHR, Sarayaku case, para. 146. 69 IACtHR, Sawhoyamaxa case, para. 131. 70 Ibid., at para. 154. 71 IACtHR, Xákmok Kásek case, paras. 178–179. 72 Ibid., at para. 212. 73 IACtHR, Moiwana case, para. 15. 74 Ibid., at para. 16.

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dead75 determines, in the Judge’s opinion, a violation of a universal juridical conscience76 based on the idea that humankind77 comprises not only living beings (titulaires78 of the human rights) but also the dead. From a stricter legal point of view, the author of this opinion substantiates his statements by quoting Grotius who, in his treatise De Jure Belli ac Pacis, dedicates a chapter to the right of burial, affirming that this right has its origin in the ‘voluntary law of nations’ and on the equality of all human beings.79 However, the most original part of the opinion concerns the conceptualization of ‘spiritual damage’ as an aggravated form of moral damage, giving rise to non-pecuniary forms of reparation.80 Whereas moral damages are based on the neminem laedere principle to the benefit of the living,81 spiritual damages, being based on a principle of humanitas,82 would have an intergenerational projection, and affect both living and dead members of the community.83 If culture is an inherent component of the right to property, since they are closely linked to the very ‘survival’ of indigenous peoples, it logically follows that the rights enshrined in art. 21 are also connected to the right to life. The violation of this right ranges from purely intangible situations – as a prejudice to their way of living – to extremely concrete ones, such as those illustrated in the Sarayaku case, where members of the community are permanently exposed to a situation of physical risk due to the placing of explosives on their territory.84 However, in most cases the link between land deprivation and right to life has to be considered in terms of the impact of the former on everyday community life: indigenous groups are prevented from carrying out the economic 75

As illustrated in the Judgement, according to Moiwana’s customs and traditions, specific rituals have to be followed upon the death of a community member; more p ­ recisely, it is very important to have possession of the physical remains as the corpse has to be treated in a particular manner. Failure to comply with these procedures is considered a moral transgression angering the spirit of the dead and also offending ancestors (id. at paras. 98–99). 76 Ibid., at para. 55. Emphasis in the text. 77 Ibid., at para. 56. Emphasis in the text. 78 Ibid. 79 Ibid., at para. 60. Cf. Pasqualucci, The evolution op. cit., 309, who analyzes burial rights in the framework of freedom of religion. 80 IACtHR, Moiwana case, para. 71. 81 Ibid., at para. 73. 82 Ibid., at para. 72. 83 Ibid., at paras. 77–78. 84 IACtHR, Sarayaku case, para. 249.

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activities their subsistence is based on (family-based hunting, farming, and fishing) and from having access to traditional health systems, finding themselves exposed to a situation of vulnerability. Upon a closer analysis of the jurisprudence, it can be observed that the right to life has been dealt with by the Court in two different ways: as an integral part of the right to property85 and therefore as a right which is subject to limitations, and also in the framework of the provision explicitly recognizing it, that is, art. 4 of the Convention. It is in this context, and especially in the recent Xákmok Kásek case, that the components of this right have been illustrated in detail. After having recalled that art. 4 of the Convention also requires States to take positive measures to protect life,86 the Court engaged in a thorough analysis of the specific elements which compose such a right, classifying them under two headings: the right to a decent existence and the deaths of some members of the community. As far as the first heading is concerned, the reasoning is particularly interesting by reason not only of the identification of its constitutive elements (right to water, right to food, right to health and education) but also of their definition. The right to water includes both a quantitative and a qualitative dimension, the latter implying a ‘tolerable level of risk,’87 whereas the right to food is described in terms of ‘accessibility, availability, and sustainability.’88 Violation of the right to a decent existence also derives from State’s failure to guarantee access to health services and from the absence of measures that respect traditional customs and practices.89 Finally, this right includes the ‘basic education of indigenous communities’; States are thus required to “promote this right from an ethno-educational perspective,” that is, to take positive measures to ensure that the education is culturally acceptable from an ‘ethnically differentiated perspective.’90 85 IACtHR, Saramaka case, para. 121. 86 IACtHR, Xákmok Kásek case, para. 187. 87 Ibid., at para. 195. 88 Ibid., at para. 198. 89 Ibid., at par.208. The impact of land deprivation on health has been specifically illustrated in the Sawhoyamaxa case. On the one hand, indigenous communities face several difficulties in accessing health assistance, including the lack of financial means, difficulties in reaching health centres and lack of official documents; on the other hand, they cannot resort to their traditional medicine since they lack access to natural resources and related traditional practices (IACtHR, Sawhoyamaxa case, para. 175). 90 Inter-American Court of Human Rights, Xákmok Kásek at para. 211. On this point see J.  Schönsteiner, A. Beltrán y Puga and D.A. Lovera, “Reflections on the Human Rights

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The analysis carried out by the Court regarding the right to life is striking for a number of reasons. First of all, it has the effect of widening the scope of obligations upon States, giving a broad, and at the same time detailed, meaning to the ‘positive obligations’ often mentioned in human rights jurisprudence concerning socio-economic rights.91 Second, in exploring this issue, the Court often resorts either to language clearly inspired by the environmental context (the ‘tolerable level of risk’ of water is an example) or to concepts elaborated by the un Committee on Economic, Social and Cultural Rights (as it happens in the case of the right to food and the right to education). This perspective finds confirmation in the second limb of the right to life (the deaths of members of the community), where the State’s violation of the right to life is identified in the situation of special ‘vulnerability’ these individuals are subject to by reason of the violation of the rights falling within the first category.92 On the basis of a broad interpretation of art. 4, founded more on the idea of quality of life than of ‘life’ in the strict sense, the former aspect is deemed to impact the latter. 4

The Collective Nature of the Right to Property and the Progressive Recognition of Indigenous Peoples as Subjects of International Law

A further distinctive feature of the right to property as codified by the IACtHR in the context of indigenous rights is its collective nature, which is inextricably linked to the progressive role assumed by its titulaire (the indigenous community) as a subject of public international law. The explicit and full recognition of this element is a relatively new achievement of the IACtHR jurisprudence. While admitting, from the very first cases, the “communitarian tradition regarding a communal form of collective property of the land,”93 as well as the legal status “guaranteed to the Indigenous Com­ munity” by the State,94 the Court often seems to hesitate between a collective and an individual approach. This is particularly apparent from the p ­ rovisions Challenges of Consolidating Democracies: Recent Developments in the Inter-American System of Human Rights,” Human Rights Law Review 2011, 362, 383. 91 G.A. Cavallo, “La justiciabilidad de los derechos sociales ante los jueces interamericanos (i),” Diritti umani e diritto internazionale 2010, 517, 532. 92 IACtHR, Xákmok Kásek case, para. 227. 93 IACtHR, Awas Tingni case, para. 149. 94 IACtHR, Yakye Axa case, para. 83–84.

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on reparation, whose beneficiaries (the ‘injured parties’) are generally identified as the members of the community95 and not the community itself. Such an ambiguous attitude led Judge García Ramírez, in his separate opinion in the case Awas Tingni, to underline that the approach taken by the Court in the case “does not in any way imply a disregard or denial of other related rights […] such as […] collective rights,” affirming “an intimate and inextricable link between individual and collective rights.”96 In its subsequent judgements, the Court goes a step further, by stating that, under art. 21, collective forms of property and possession deserve ‘equal protection’ with respect to the classic notion of property, as disregard for specific versions of use and enjoyment of property would render protection under art. 21 ‘illusory.’97 In parallel, the issue of collective legal personality progressively acquires relevance: as previously mentioned, in the Saramaka case the Court underlines the specificity of collective juridical personality, as: individual recognition fails to take into account the manner in which members of indigenous and tribal peoples in general […] enjoy and exercise a particular right; that is, the right to use and enjoy property collectively in accordance with their ancestral traditions.98 Coherently with this approach, the Court, though identifying the ‘injured party’ in the members of the community, “does not find it necessary […] to individually name” them, “given the[ir] size and geographic diversity […], and particularly the collective nature of reparations […].” However, a certain reticence towards an exclusively collective approach can still be seen in the subsequent sentence, where the possibility of identifying the community’s members is underlined.99 If, until this point, the reasoning is developed within the boundaries of the right to property, the concurring vote of Judge Eduardo Vio Grossi in the Xákmok Kásek case (where the injured party is still identified in the members of the community)100 widens this perspective, by remarking that the rights 95 IACtHR, Moiwana case, Separate opinion of Judge Cançado Trindade, para. 176; IACtHR, Yakye Axa case, para. 208; IACtHR, Sawhoyamaxa case, para. 204; IACtHR, Awas Tingni case, para. 166. 96 IACtHR, Awas Tingni case, Concurring opinion of Judge García Ramírez, para. 14. 97 IACtHR, Sawhoyamaxa case, para. 120. 98 IACtHR, Saramaka case, para. 168. 99 Ibid., at paras. 188–189. 100 IACtHR, Xákmok Kásek case, Judgment of 24 August 2010, Concurring vote of Judge Eduardo Vio Grossi, para. 278.

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contested were both the individual rights of the members of the community and the collective rights of the latter.101 Quoting the un Declaration on the rights of indigenous peoples102 as well as the jurisprudence of the un Committee on Economic, Social, and Cultural Rights,103 the Judge draws the contour lines of a ‘process of change’ experienced at the same time by general international law104 and by the ‘Inter-American legal doctrine.’105 The outcome of such a process would allow a broader understanding of art. 1 of the Convention, so that the obligation to respect and guarantee to all persons the exercise of the rights established would also include the communities. These rights not being ‘merely of an individual nature,’ they could only be enjoyed and exercised collectively106; coherently, the term ‘person’ contained in the Convention should include not only members of the indigenous peoples, considered individually, but also the indigenous peoples as such.107 The collective approach to rights, and notably to the right to land, is definitively codified in the Sarayaku case, where the Court “considers the injured party to be the Kichwa Indigenous People of Sarayaku,”108 whom every provision regarding restitution is referred to. In particular, it is interesting to compare this case, where compensation for pecuniary damage is paid to the Association of Sarayaku people109 with the Saramaka and Xákmok Kásek judgements, where the amount of money is allocated to the members110 and to the leaders111 of the community, respectively. 5

Concluding Remarks

In the light of the elements analyzed so far, it is possible to draw some observations regarding land grabbing in the context of the Inter-American system for the protection of human rights. A first remark concerns the very definition of land grabbing which, in the context of the IACtHR jurisprudence, acquires a larger meaning than the one 101 Ibid., at para. 12. 102 Ibid., at para. 18. 103 Ibid., at para. 20. 104 Ibid., at para. 17. 105 Ibid., at para. 21–23. 106 Ibid., at para. 26. 107 Ibid., at para. 27. 108 IACtHR, Sarayaku case, para. 284. 109 Ibid., at para. 317. 110 IACtHR, Saramaka case, para. 199. 111 IACtHR, Xákmok Kásek case, para. 318.

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generally given in a geopolitical context. If the latter is mainly focussed on the loss of land as a consequence of economic activities, in the framework of the jurisprudence on indigenous rights the term can acquire a wider meaning, comprising any situation where a community’s rights connected to land are violated. As regards the substantive content of the right to land and to natural resources, the approach of the IACtHR stands out in the human rights landscape due to its full recognition of indigenous land rights, granted independently from the existence of any national provision, and also to the precise articulation of consultation obligations and of the constituent elements of the right to life. As far as this latter is concerned, the wide scope and detailed content of the obligations stemming from it confirm the existing process of crossfertilization not only among international judicial institutions but more generally among different subsystems of international law, as well as the capacity of the Inter-American system to advance the justiciability of socioeconomic rights. The value assigned to the collective nature of property rights not only reflects the reality of the socio-anthropological structure of American States but above all constitutes an essential contribution to the strengthening of the role of non-State actors in international law. If it is reasonable to imagine that this last aim can only be reached in the medium to long term, in the short term the IACtHR jurisprudence could ‘inspire’ other human rights and regional tribunals to adopt a more enlightened view of collective rights.

chapter 5

Water Grabbing and Water Rights: Indigenous ‘Sovereignty’ V. State Sovereignty? Marta Bordignon, Roberta Greco and Giada Lepore 1 Introduction The issue of the grabbing of natural resources has been mainly acknowledged in relation to the appropriation of developing countries’ lands by foreign stakeholders, but it should also be associated with the appropriation of freshwater resources. As a matter of fact, the recent boost of agricultural production – due to an increasing demand for food and biofuel, joined with water scarcity problems – has led several countries to secure their water resources at home, and private and state owned investors to invest into farmlands abroad. Indeed, when it comes to agriculture, “land is only a small part of the equation (…) and without water, land has absolutely no value to the investors.”1 Appropriation of water resources, often referred to ‘water grabbing,’ may be defined as: the take of control or the diversion by ‘powerful actors’– such as States and multinational corporations – of waters in detriment of local communities whose livelihoods depend on these resources.2 Notwithstanding the negative impacts generated by resources grabbing on the Human Rights of affected communities, national governments (in particular, those of developing countries) have often been unwilling or unable to protect or enforce Human Rights at home, driven by the need to attract foreign investments. In line with the principle of Permanent Sovereignty over Natural Resources (psnr)-which draws from the concept of ‘territorial sovereignty’- States have been free to choose how to manage their natural resources. In fact, psnr entails the States’ exclusive power to exploit and control over goods and

1 C. Smaller, “A Global Thirst: How Water is Driving the New Wave of Foreign Investment in Farmland,” Investment Treaty News, 2010, at http://www.iisd.org/itn/2010/12/16/a-global-thirst -how-water-is-driving-the-new-wave-of-foreign-investment-in-farmland/. 2 L. Mehta et al., “Introduction to the Special Issue: Water Grabbing? Focus on the (Re)appropriation of Finite Water Resources,” Water Alternatives, 2012,193-207, at http://www.water -alternatives.org/index.php/alldoc/articles/vol5/v5issue2/165-a5-2-1/file.

© koninklijke brill nv, leiden, ���6 | doi 10.1163/9789004305663_007

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resources within their territory.3 The right to self-determination – including economic self-determination- and the right to development provides the basis for the recognition of such a principle. The most important instrument in this regard is the United Nations General Assembly Resolution 1803 (xvii) on psnr, that states: “The right of peoples and nations to permanent sovereignty over their natural wealth and resources.” However, psnr is not an ‘absolute’ right: in the view of un General Assembly it must be exercised in the interest of national development (and well being of the people) and in conformity with the rights and duties of the state under International Law.4 How and to what extent has thus psnr been constrained by International Law? In order to answer such a question and to assess the different limits to State sovereignty, we must take into consideration the essential natural resource for human life that water represents. The first step is to introduce the issue of water grabbing, which, although being an increasing global phenomenon, is still poorly discussed and too often tightly linked with land grabbing, instead of being considered as an ‘autonomous’ issue (Section 2). On the contrary, in addressing such a blurred topic we sought to frame the discussion in a comprehensive way. Thus, the third section briefly describes the relevant rules belonging to different international legal regimes that could deal with such a phenomenon, in particular, in reference to International Water Law, International Economic Law and International Human Rights Law. The resulting legal framework, although highly frag­men­ ted and incoherent, still seems to provide some safeguards to address the problem. The forth section identifies the most vulnerable groups potentially affected by water grabbing in order to point out their role with respect to sovereignty. This part will thus analyse indigenous peoples rights and the so called ‘inherent sovereignty’ arising from the recognition of their right to property, right to land and access to water, and the right to free, prior and informed consent (fpic). 3 F.X. Perez, “The Relationship between ‘Permanent Sovereignty’ and the Obligation not to Cause Transboundary Environmental Damage,” Environmental Law, 1996, 1190–1193, at http:// www.iew.unibe.ch/unibe/rechtswissenschaft/dwr/iew/content/e3870/e3985/e4139/e6395/ sel-topic_3 perrezpermsovereign_ger.pdf., explaining that “permanent sovereignty is an economic concept dealing with the economic rights of sovereign nations in their natural resources, with the goal to establish a new international economic order, and may be called ‘economic sovereignty.’” 4 unga, Res. 1803 (xvii), (14 December 1962), un gaor, 17th Sess., Supp. No. 15, un Doc. A/5217, at 1 e 3.

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The final stage of the research is aimed at understanding the way sovereignty faces the challenges posed by Investment Law and Human Rights with respect to water grabbing. In particular, the fifth section will focus on water privatisation in favour of foreign investors and the conflict that may arise between States’ right to control and manage its resources and its Human Rights obligations undertaken in International Law. 2

Water Rights and the Appropriation of Water Resources

Appropriation of water resources can be perfectly legal according to domestic laws, which may grant water rights on ground and surface water to the private sector. Water rights, designed as a set of entitlements “to make use of the water from a stream, lake, or irrigation canal,”5 specify the rights to access, the obligations and the limits related to the use of the asset.6 Such rights may be presented as “a form of property rights.”7 Indeed, although surface water is often public, in some countries – such as the United States, Brazil, Chile, Mexico, Australia and South Africa – it has been subjected to private ownership.8 However, when it comes to water, the traditional notion of property does not properly describe a situation of domain over the resource: thus, according to Hildering, ownership of water would be better understood as the “control over and the right to use water.”9 The World Bank points out that in recognizing water rights there is a need of “clarifying that (…) a water right is usufructory – it is a right to use, not a right to own water.”10 The granting of water rights is highly controversial. Advocates of privatization of water resources argue that in regions where water is scarce “the introduction of enforceable and transferable water rights, for at least a portion of a 5 6

7

8 9 10

Water Right Definition, Oxford Dictionaries.com, http://www.oxforddictionaries.com/ definition/english/water-right. R.C. Griffin et al., “Introduction,” J. Maestu (ed.), Water Trading and Global Water Scarcity: International Experiences (Routledge, 2013) 1, 4; See also J.W. Dellapenna, The myth of markets for water, Ibid. 199, 209. A.D. Tarlock, “Water Transfers: A Means to Achieve Sustainable Water Use,” E. Brown Weiss, L. Boisson de Chazournes and N. Bernasconi-Osterwalder (eds), Fresh Water and International Economic Law (Oxford University Press, 2005) 35, 41. World Bank, “Water Resources Sector Strategy – Strategic Directions for World Bank Engagement,” 1 January 2004, 1, 24. See A. Hildering, “Water as an Economic Good,” L. Boisson de Chazournes and S.M.A. Salman (eds), Water Resources and International Law (Brill, 2005) 209, 212. World Bank, Water Resources Sector Strategy, op.cit., 1, 16.

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jurisdiction’s water resources, may make a social contribution”11 as it may induce people to allocate water resources for the highest-value uses. The World Bank contends that: “The essence of this change is that water rights (of individuals and communities, including traditional users) enjoy the same legal certainty as land and other property rights.”12 Opponents to private water entitlements and markets focus on the different status of water, for the role it plays in human survival, compared to other property rights. It is argued that conferment of water rights fails to balance reasons of efficiency with those of equity. In particular, concern is expressed for those people who will not be able to pay for the access to water. According to Mehta “the poorly defined nature of water rights can lead to conflicts over access. For example, if rich farmers’ land rights allow them to overexploit communal tanks, it can undermine their poor neighbour’s right to water. Similarly, if a transnational corporation acquires rights to provide water in a certain area, it can affect a poor community’s right to access safe and adequate water.”13 At the international level, it is debated whether the allocation of water rights to foreign government or private investors may entail a form of ‘grabbing’ of developing countries’ water resources. Usually, water rights are not granted to foreigners as such, but they are in conjunction with land acquisition. Indeed, water rights are generally conferred to the owner of the land surrounding the water sources or watercourses; access to water may be implied – the owner of the land retains also the right to use the waters flowing within it – or explicitly granted by specific provisions of a land deal.14 Further, access to 11 12

13

14

Griffin et al., “Introduction,” op.cit., 1, 4. World Bank, Water Resources Sector Strategy, op.cit., 1, 7, 16, 24. It is contended that: “[O]nce established, such rights give rise to a series of fundamental and healthy changes. First, those requiring additional resources (such as growing cities) will frequently be able to meet their needs by acquiring the rights of those who are using water for low value purposes. Second, there are strong incentives for low-value water users to voluntarily desist, making reallocation both politically attractive and practical. Third, the establishment of formal water rights gives rise to strong pressures for improving the data required to manage the resource. And fourth, this reduces the pressures of a ‘race to the bottom’ since those who have rights have a powerful interest in sustainability” (at 16). L. Mehta, “Problems of Publicness and Access Rights: Perspectives from the Water Domain,” I. Kaul, P. Conceição, K. Le Goulven and R.U. Mendoza (eds), Providing Global Public Goods: Managing Globalization (Oxford University Press, 2003) 556, 569. Land deal may be defined as a contract signed between the host State and the foreign investor which leases or purchases the land. See generally J. Skinner and L. Cotula, “Are Land Deals Driving ‘Water Grabs’?,” International Institute for Environment and Development Briefing, 2011, at http://pubs.iied.org/pdfs/17102IIED.pdf; See also L. Cotula,

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groundwater resources is usually reserved to the owner of the above land. Thus, the purchase or the long-term lease of agricultural lands may entail gaining water rights. After the food crisis that took place in 2007–2008, acquisition of foreign agricultural lands became an issue of growing interest among food importing countries. Concerned by the rise of food prices and by some crop export bans, some countries, such as China, Saudi Arabia, South Korea, resolved to purchase/lease thousands of hectares abroad, or to back private investors to do so.15 Following this crisis, countries poor in water resources acquired land and farmland abroad on which to grow agricultural high-value water products in order to import food to feed their population. As food production implies the use of high quantities of water, accounting for 70% of the world’s water utilization,16 the importation of food cultivated abroad also amounts to importing the “virtual water” needed to produce it and incorporated therein. It has been noted that “water scarcity is a major driver of international flows of investment in agricultural land.”17 Indeed, land deals without access to water resources are of no value for the investors who aim at producing food or bio-fuel. The allocation of water rights following the acquisition of land property rights risk affecting local and indigenous people who do not rely on contractual rights, but on local customs. Land deals are mostly signed in underdeveloped or developing countries, with a major impact on Africa, where local peoples often lack the knowledge and expertise for acquiring registered rights on water resources. Given the relation between land property rights and water rights “the landless may benefit significantly less than the landed in terms of access to drinking water and irrigation.”18 This may greatly reduce the quantity of water available to local, downstream, as well as indigenous peoples for drinking, domestic use, agriculture and other economic activities.

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Human Rights, Natural Resources and Investment Law in a Globalised World. Shades of Grey in the Shadow of the Law (Routledge, 2012). C. Smaller, H. Mann, “A Thirst for Distant Lands. Foreign Investment in Agricultural Land and Water,” 2009, 6, at http://www.iisd.org/sites/default/files/pdf/2009/thirst_for_distant _lands.pdf. M. Antonelli, F. Greco, “Non Tutte le Gocce d’Acqua sono Uguali,” M. Antonelli, F. Greco (eds), L’Acqua che Mangiamo. Cos’è l’Acqua Virtuale e Come la Consumiamo (Edizioni Ambiente, 2013) 23–32. P. Woodhouse, “Foreign agricultural land acquisition and the visibility of water resource impacts in Sub-Saharan Africa,” Water Alternatives, 2012, 208–209, at http://www.water -alternatives.org/index.php/volume5/v5issue2/166-a5-2-2/file. Mehta, “Problems of Publicness and Access Rights,” op.cit., 569.

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That said with regard to the so called ‘water grabbing’ connected to land and water property rights, it is our point that foreign appropriation of water resources in detriment of local population may be regarded as a wider phenomenon which can even be disconnected from the control over land. The following paragraphs will then briefly describe the legal framework to tackle the ‘grabbing’ of water resources by considering three relevant domains of International Law capable of addressing the issue, namely: International Economic Law, International Water Law and International Human Rights Law. 3

A Fragmented Legal Framework to Face Water ‘Grabbing’

Starting with International Economic Law, the scarcity of water resources has contributed to the ‘commodification’ of water, which is being sold as a product in the form of bottled water or traded across countries by transfer of bulk water. Transnational trade of bulk water19 has been suggested as a way to solve at least the more urgent needs of some water-stressed countries that, by means of water imports, can compensate their lack of water availability.20 Yet, transnational transfer of bulk water has raised concern for its prospective environmental and human impact. In this respect, reference can be made to the Sun Belt case in which a u.s. company, Sun Belt Water Inc., challenged Canada under nafta Chapter 11 claiming that its investments in the water sector had been affected by the Province of British Columbia’s water protection legislation. In particular, the Province, after having issued licenses to export bulk water from Canada to the United States, imposed a permanent moratorium on such an export.21 Indeed, trade in high amounts of water may risk depleting domestic water resources or altering the availability of water for local people.22 19

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According to Brown Weiss, bulk transfer of water may be defined as “[R]emoval [of water] by human-made diversions, including canals, tanker ships, trucks, o pipeline.” See E. Brown Weiss, “Water Transfer and International Trade Law,” Brown Weiss, Boisson de Chazournes and Bernasconi-Osterwalder (eds), Fresh Water and International Economic Law op. cit., 63, 66–67. F. Costamagna, F. Sindico, “The Linkages between Access to Water and Water Scarcity with International Investment Law and the wto Regime,” P. Cullet, A. GowllandGualtieri and R. Madhav, U. Ramanathan (eds), Water Governance in Motion, towards Socially and Environmentally Sustainable Water Laws (Cambridge University Press, 2010) 267, 274–277. nafta, Sun Belt Water Inc. v. Her Majesty the Queen in Right of Canada, Notice of Intent to Submit a Claim to Arbitration of 27 November 1998. Hildering, “Water as an economic good,” op. cit., 228.

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In the long run, the exporter country may face water shortage; hence the call to ban water export in the name of public interest. In such a scenario, the question arises whether the General Agreement on Tariff and Trade (gatt), which forbids trade restrictions, might prevent such a decision: if bulk water were considered a tradable good, once it entered into commerce, the gatt rules would become applicable. Therefore, unless the conditions listed under exceptions rules were met – such as those of article xx (b) (g) – the State would be prohibited to ban water export in detriment of its domestic needs. In any case, the status of bulk water under international economic law is not yet clear and the applicable legal regime is still unsettled.23 Given that no decisive answer has been provided in order to establish at what point water is transformed into a product, it is thus uncertain whether bulk transfer of water across nations should be subject to the gatt rules.24 Moving on to International Water Law, water ‘grabbing’ may result from the diversion of natural waterways by local, regional or State authorities or by private actors – physical or legal persons – upon authorization released by public authorities. Several reasons may determine the alterations of rivers. Among the most common there are the construction of hydroelectric power plants or dams. Whatever the cause, the diversion of rivers may deplete traditional water sources of local communities and indigenous peoples under the jurisdiction of other States. Some substantive and procedural principles of customary International Law consistent with the recognition of the rights of all relevant stakeholders have recently come into being, namely: the equitable and reasonable utilization of watercourses, the obligation not to cause significant harm and the general duty to cooperate, including a duty of consultation and negotiation.25 The aforementioned customary principles of International Watercourses Law, almost universally recognized, have been codified by the un Com­mis­sion of International Law26 under the un Convention on the Law of Non-Navigational Uses of Watercourses (hereinafter un Watercourse Convention)27 – which, in 23 24 25 26 27

E. Brown Weiss, “Water Transfer and International Trade Law,” op.cit, 63. Ibid., 70; L. Boisson de Chazournes, Fresh Water in International Law (Oxford University Press, 2013), 84–88. P. Cullet, “Water Law – Evolving Regulatory Framework,” P. Cullet, A. Gowlland-Gualtieri, R. Madhav and U. Ramanathan (eds), Water Governance in Motion, op. cit., 26, 27–31. unga, Res. 2669 (xxv) (8 December 1970). Convention on the Law of the Non-Navigational Uses of International Watercourses (adopted 21 May 1997, entered into force 17 August 2014),arts. 5–8. About the Convention, see: A.Tanzi, M. Arcari, The United Nations Convention on the Law of International

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turn, has inspired several transboundary watercourse agreements28 – and by the unece Helsinki Convention, already binding upon European States,29 which has recently been opened to accession to all Members of the United Nations.30 While the Watercourse Convention gives special regard to vital human needs both in determining the equitable utilization of watercourses and in enacting preventive measures,31 a Protocol to the latter expressly requires States to pursue the aim of providing “[a]ccess to drinking water for everyone.”32 Some authors have thus argued for the progressive integration of International Water Law and Human Rights Law.33 Indeed, it remains to be considered whether a right-based approach may be more effective than an environmental and economic approach to water for addressing the problem water ‘grabbing.’ Unsustainable extraction of water resources for industrial or agricultural needs, as well as excessive increase in water tariffs by water suppliers, may also be regarded as appropriation of waters which can impair individual access to water resources or services. In this respect, the emergent human right to water seeks to provide some form of protection.

28

29 30

31

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Watercourses (Springer, 2001); S.C.McCaffrey, The Law of International Watercourses – Non-Navigational Uses (Oxford University Press, 2nd ed., 2007). S.C. McCaffrey, “The codification of universal norms: a means to promote cooperation and equity?,” L. Boisson De Chazournes, C. Leb and M. Tignino (eds), International Law and Freshwater: The Multiple Challenges (Edward Elgar Publishing, 2013) 125, 133. Convention on the Protection and Use of Transboundary Watercourses and International Lakes (adopted 17 March 1992, entered into force 6 October 1996), arts.2, para.2(a)(c), 9. Amendments to arts 25 and 26 of the Convention on the Protection and Use of Trans­ boundary Watercourses and International Lakes (adopted 28 November 2003, entered into force 6 February 2013). Convention on the Law of the Non-Navigational Uses of International Watercourses, art. 10, para. 2, (adopted 21 May 1997, entered into force 17 August 2014). According to the Statement of Understanding pertaining to certain Articles of the Convention, in determining vital human needs “special attention is to be paid to providing sufficient water to sustain human life, including both drinking water and water required for production of food in order to prevent starvation.” See, un Report of the Sixth Committee convening as the Working Group of the Whole, para. 8. Protocol on Water and Health to the Convention on the Protection and Use of Trans­ boundary Watercourses and International Lakes (adopted 17 June 1999, entered into force 4 August 2005), art. 6. A. Tanzi, “Reducing The Gap Between International Water Law and Human Rights Law: The unece Protocol on Water And Health,” International Community Law Review, 2010, 267, 271; C. Leb, “The Right to Water in a Transboundary Context: Emergence of Seminal Trends,” Water International, 2012, 640, 648, at http://www.tandfonline.com/doi/full/10.1080/ 02508060.2012.710950#.U7C4v2NeFYc.

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Recognized, inter alia, by the General Assembly34 and the Human Rights Council,35 such a right has been defined by the Committee on Economic, Social and Cultural Rights (the Committee) – in its well-known General Comment No. 15 on the right to water – as the entitlement to “sufficient, safe, acceptable, accessible, and affordable amount of water for personal and domestic uses.”36 As for the enforceability of the right at issue – apart from relevant cases before national courts and international human rights bodies37 – it is worth mentioning the recent entry into force of the Optional Protocol to the Inter­ national Covenant on Economic, Social and Cultural Rights (icescr),38 which establishes a mechanism of bringing complaints against states for the violations of the rights provided for in the Covenant. Given that communications are addressed to the Committee – which has clearly considered the right to water as embedded in the right to the highest attainable standard of health (Art. 12, para. 1 of the icescr) and to the right to an adequate standard of living (Art. 11, para. 1 of the icescr) – there is grounds to argue that, should a complaint for infringement of the right to water be submitted, the Committee would consider the complaint within the scope of its jurisdiction. In brief, it seems that International Human Rights Law provides a better legal framework to address the problem of water ‘grabbing,’ in particular from the perspective of the emergent human right to water. In this regard, the ratification of the Optional Protocol to the icescr would help to strengthen this emerging right, as the Committee is currently the only universal body which might address violations of such a right. 4

Indigenous Peoples, Water Grabbing and Right to Water

After having sketched an analysis of the relevant legal framework related to water grabbing, this section is aimed at widening the perspective to the 34 35 36 37

38

unga, Res. 64 (28 July 2010). hrc, Res. 15 (30 September 2010). cescr, General Comment No. 15 (2002), The right to water (arts. 11 and 12 of the International Covenant on Economic, Social and Cultural Rights) (20 January 2003), 2. For reasons of space we cannot report here such cases. In this regard, see, inter alia: L. Boisson de Chazournes, Fresh Water in International Law, op. cit., 153–155; I.T. Winkler, The Human Right to Water: Significance, Legal Status and Implications for Water Allocation (Hart Publishing, 2012) 237–272. unga, Res. 63 (10 December 2008).Optional Protocol to the International Covenant on Economic, Social and Cultural Rights (entered into force 5 May 2013). For a detailed overview of the Optional Protocol, see: M. Odello, F. Seatzu, The un Committee on Economic, Social and Cultural Rights: The Law, Process and Practice (Routledge, 2014).

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involvement of indigenous peoples in the protection of their rights in relation to the access to water. In particular, through the attempt to define indigenous rights at an international level, and the analysis of the concerned legal framework, it will be demonstrated how and to what extent State sovereignty might be limited or otherwise affected by indigenous claims of such a sovereign rights over national resources. As reported by the un Department of Economic and Social Affairs, indigenous peoples are about 370 million people spread across more than 70 countries worldwide, and although estimated as less than 6% of the world’s population, they make up 15% of the world’s poor and about one-third of the world’s 900 million extremely poor rural people.39 However, it is very difficult to give an exhaustive definition of indigenous people to date, as demonstrated by the current doctrinal debate on the more adequate approach for identifying the people concerned in a given country context.40 Although the un Working Group on Indigenous Peoples41 – composed of States’ representatives and indigenous organizations – surprisingly refused to formally define them, the Draft Declaration of Indigenous Peoples Rights recognizes their “right to identify themselves as indigenous and to be recognized as such.”42 Ultimately, the only binding instrument providing for a definition of indigenous peoples is the ilo Convention No. 169,43 which in Article 1, para. a identifies them as people […] whose social, cultural and economic conditions distinguish them from other sections of the national community and whose status is regulated wholly or partially by their own customs or traditions or by special laws or regulations. In order to outline the concepts supporting the idea of the existence of an ‘indigenous sovereignty,’ the relevant International Law norms and principles 39

undesa, “State of the World’s Indigenous Peoples,” 2009, un Doc. st/esa/328, Sales No. 09.vi.13. 40 F. Lenzerini, “Reparation for Indigenous Peoples in International and Comparative Law: an Introduction,” F. Lenzerini (ed.), Reparations for Indigenous Peoples: International and Comparative Perspectives (Oxford University Press, 2007). 41 The un Working Group on Indigenous Peoples elaborated a draft of the Declaration on the Rights of Indigenous People that was endorsed by the un General Assembly in September 2007. [unga, Res. 61/295, un Doc. A/RES/61/295 (13 September 2007)]. 42 un Doc. E/cn.4/Sub.2/1997/14, para.129. See also un Doc. E/cn.4/Sub.2/1996/21, paras. 153–154. 43 ilo Indigenous and Tribal Peoples Convention n.169, adopted in 1980 and entered into force in 1991. Only 22 countries, mostly from Latin America, have ratified the Convention.

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should be analysed, and in particular both the principle of terra nullius and the recognition of the right to self-determination to indigenous people, intended as self-government. Following the International Court of Justice advisory opinion concerning the principle of terra nullius,44 the judicial doctrine developed by some national Courts – such as the us, Canadian, Australian, South African and Colombian ones – has recognized to tribal communities the power of ‘exercise their rights’ over their lands, defined as ‘inherent sovereignty.’ This concept is grounded on the fact that the tribes were inhabitants before the colonization took place and on the recognition of their right to property, right to land, access to water and right to give free, prior and informed consent (fpic). Regarding the right to self-determination, instead, it should first be considered that States had always strongly opposed (and continue to oppose) this right, especially referring to its external connotation,45 in favour of indigenous peoples, as it is clearly stated in Article 1 of the ilo Convention No.169.46 To this regard, due to the worries of African States for the recognition of external self-determination or secession, the provisions related to internal selfdetermination in the final version of the un Declaration on Indigenous Peoples (Article 3) should be addressed together with Article 4, that guarantees the “right to autonomy or self-government in matters relating to internal and local affairs.”47 Finally, and more recently, the International Law Association (ila) has adopted a Resolution that for the first time overtook the original dichotomy between State and individual – as stated in the French Universal Declaration of Human and Citizens’ Rights, 1789 – based on the concept that the rights termed as ‘collective’ are the ones essential for fully realising themselves and their life (as Indigenous Leaders always emphasized: ‘individual culture’ does not exist).48 Furthermore, the ila Resolution also specifies a number of rights that have become part of International Customary Law, including the right to self-­ determination, the right to autonomy and to internal and local self-government, 44 45

46

47 48

icj, Western Sahara, Advisory opinion of 16 October 1975, icj Reports, 1975, 12, para. 81. International Law refers to the external connotation of the right to self-determination as the aspiration to form an independent State. Moreover, this aspect of self-determination requires action from and imposes obligations on States and the International Community to support and facilitate the aspirations of independence. Pursuant to the ilo Convention No.169, art. 1: “[t]he use of the term ‘peoples’ in this Convention shall not be construed as having any implications as regards the rights which may attach to the term under international law.” Art. 3 states: “[Self-determination is defined as the right to] freely determine their political status and freely pursue their economic, social and cultural development.” ila, Res. 5/2012, (August 2012), Conclusion No.1.

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alongside the State obligation to “recognize, respect, safeguard, promote and fulfil the rights of indigenous people to their traditional land, territories and resources.”49 In particular, the latter Resolution refers to the special and spiritual link of these peoples to the areas where they live. As a matter of fact, once adopted, the un Declaration, as well as the ilo Convention and the ila Resolution, have formed a common ground for national legislators in defining a shared content of a new International Customary Law, especially regarding rights and status of indigenous peoples. Indigenous peoples, indeed, should be considered as holders of both collective rights and duties under International Law. This has been proved, at regional level, on one side by the jurisprudence of the Inter-American Human Rights Commission in its lawsuit Mayagna (Sumo) Community of Awas Tingni v. Nicaragua (2001),50 and, on the other side, by the collective character of the rights of indigenous peoples over their land as stressed by the African Commission on Human and Peoples’ Rights.51 Finally, a considerable number of soft law instruments dealing with various issues – such as the one already mentioned – proclaim the duty of States to respect the autonomy of indigenous peoples, implying a more or less limited recognition of sovereignty in their favour. Given the concepts analyzed above, the legal basis for ‘indigenous sovereignty claim’ should not be grounded neither on the invalidity of the terra nullius principle nor on the principle of self-determination, although that would imply a lack of coherence between the international system and domestic law. Indeed, several scholars have discussed about the (co-) existence of ‘parallel’ sovereignty or a ‘third’ sovereignty of indigenous peoples,52 however, Inter­ national Law does not support those kinds of claims, as proved by the fact that legal opinions about the co-existence of State and tribal communities’ sovereignty are quite fragmented. Nevertheless, some norms referring to indigenous tribes are being crystallized through both States’ practice and opinion juris, as well as through the interest of the main International Organizations. For instance, according to the interpretation of Article 27 of the International Covenant on Civil and 49 50

Ibid., Conclusion No.7. iachr, Mayagna (Sumo) Community of Awas Tingni v. Nicaragua, Judgment of 31 August 2001, (Ser. C) No. 79. 51 See achpr, Decision Regarding Communication 155/96 of 27 May 2002, Case No. achpr/ comm/A044/1, para.63. 52 S. Wiessner, “Indigenous Sovereignty: A Reassessment in Light of the un Declaration on the Rights of Indigenous Peoples,” Vanderbilt Journal of Transnational Law, 2008, 114. F.  Lenzerini, “Sovereignty Revisited: International Law and Parallel Sovereignty of Indigenous Peoples,” Texas International Law Journal, 2006, 155.

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Political Rights (iccpr) given by the former un Human Rights Committee in its General Comment No.23, an individual claim for the violation of the right to self-determination is not allowed, because of the collective nature of this right (Art. 1 of iccpr).53 Further, the un Committee clarified that States shall refrain from any act which may negatively impact the indigenous right to enjoy the environment where they live, in particular regarding the full exploitation of natural resources, the use of land and the access to water.54 In this way, the State’s right to exercise its sovereignty is limited from performing activities which may affect indigenous peoples rights. Indeed, as it has been affirmed at a regional level by the jurisprudence of the Inter-American Human Rights Commission and the African Commission on Human and Peoples’ Rights,55 indigenous peoples should be considered as holders of both collective rights and duties under International Law. As far as the national level is concerned, the right of self-governance is recognized by some Latin American systems and in particular, in the Colombian, the tribal territories are considered as territorial State entities, with a high level of autonomy with respect to self-government and the exploitation of resources, including the indigenous peoples rights to preserve their distinct identity and to govern their administrative affairs.56 Moreover, some Latin American Constitutions directly attribute the right to water to all their citizens, including tribal communities (e.g. Bolivian Consti­ tution Art. 30 i; Mexican Constitution Art.2; and Venezuelan Constitution Art.119); otherwise, an indirect reference to the right to water among the fundamental principles recognized at constitutional level is provided in the Colombian, Argentinean and Ecuadorian Constitutions (respectively: Art. 96.2c and Art. 246; Art. 75(1); Art.1). Since the recognition of indigenous autonomy may create serious obstacles to the exercise of some governmental prerogatives – such as the exploitation of natural resources – the adjustment of domestic law and the acceptance of rules which often go against States’ own interests confirm their willingness to conform to this international obligation. Although it is not provided by International Customary Law, a certain degree of sovereignty assured to indigenous peoples 53 54

55 56

unhr Committee, Lubicon Lake Band v. Canada, Communication of 26 March 1990 No. 167/1984, un Doc. Supp. No. 40 (A/45/40) at 1 (1990). unhr Committee (50th Session), “General Comment 23,” Article 27, 1994, Compilation of General Comments and General Recommendations Adopted by Human Rights Treaty Bodies, un Doc. hri/gen/1/Rev.1 at 38. iachr, Mayagna (Sumo) cit., achpr, Decision Regarding Communication 155/96, cit. The Colombian Constitution recognizes collective property rights; in particular, collectively owned and inalienable resguardos (art. 329).

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could arise by limiting the State exercise of its ‘full’ sovereignty, pursuant to its own Constitution and domestic provisions. These restrictions cannot overcome a limit which ensures that indigenous peoples have an equitable degree of effective – and not factually void – sovereignty. In conclusion, the so-called ‘minimum rights’ entailed by indigenous peoples recognized and protected by International Law could be summarized as follows: (a) the right to live in, and maintain ownership of, their traditional lands (including natural resources) with no external interference; (b) the right to maintain their own identity and to enjoy, manifest, preserve and transmit to future generations their own culture; (c) the right to self-government of their internal affairs according to their own customary law, including the right to use their own traditional judicial procedures; and (d) the right to effective participation, at all levels of decisionmaking, in decisions which may affect them. Finally, when this ‘essential core of effective sovereignty’ is not satisfied, there is a violation of International Law by the territorial government. This tentative reconstruction of indigenous sovereignty takes into consideration the fact that it should be exercised within the wider area of the sovereignty of the territorial State. In this sense, indigenous sovereignty could be considered ‘parallel’ to the State one, since national government may interfere with its exercise only in certain conditions and cases, but, in any event, to a limited extent. Apart from the mere legal perspective, it is worth considering how the representatives of tribal communities around the world have diversely expressed their concerns about the interconnection between indigenous peoples rights and water ‘grabbing.’ The concluding declaration of the 3rd Water Forum held in Kyoto in March 2003 (Indigenous People Kyoto Water Declaration) argued that indigenous people pledged to “recognize, honor and respect water as sacred and sustaining of all life.” From a legal perspective, the Declaration affirmed the free exercise of the right of self-determination in order to preserve life and access to water. Furthermore, it also referred to an indigenous permanent right of sovereignty over natural resources and “the exercise of authority to govern, use, manage, regulate (…) water sources, without interference” (para. 11). The Declaration thus confirmed the right of tribal populations to be consulted at all levels (by State and local Authorities, ngo s, etc.) and to be involved in all decision-making processes regarding the activities that could affect them (para. 16). Moreover, in a 2012 Law endorsed by the Bolivian Parliament,57 for the first time the recognition of the Mother Earth rights (Pachamama) together with the Human Rights was expressed: among the other rights listed, the right to a 57

Law No. 300, 15 October 2012.

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clean water was also recognised, as requested by the Pacto de Unidad, a Bolivian association that represents more than 3 million people and the 36 Bolivian indigenous groups. As mentioned, the General Comment No.15 of the Committee on Economic, Social and Cultural Rights58 highlighted the non-discriminatory dimension of the human right to water. The obligation provided by this norm requires that States assure a certain conduct or result through the implementation of a national water strategy, paying attention to the most vulnerable and disadvantaged groups and communities within their territory.59 Among the already identified constraints that could arise, it is possible to single out the prohibition and prevention of discrimination in access to water, the adoption of targeted water programs in favor of vulnerable groups and the prevention of diseases linked to polluted water. Furthermore, the strict link between the territorial rights of indigenous peoples and the full enjoyment of the surface and subsoil resources is mostly confirmed by the ancestral belonging of the tribal communities to the Mother Earth for their vital dependence on natural resources. Finally, the increasing number of cases addressing Human Rights (especially right to water and to land) and indigenous peoples demonstrate that water needs and rights are being excluded by planning and decision-­making processes dealing with investments and economic development projects, that are controlled by private and public economic actors.60 Since the right to water has been granted to tribal communities through the State’s duty to secure access to their ancestral lands, the State thus must adopt effective measures to secure these rights, which are necessary for enabling indigenous peoples to claim their rights over natural resources and to recognize their ancestral possession. As stated in the Report of the Inter-American Human Rights Commission61 (iachr), the State’s failure in adopting such measures, in addition 58

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escr Committee, “General Comment No. 15 The Right to Water” (arts 11 and 12 of the International Covenant on Economic, Social and Cultural Rights),(20 January 2003), para.12c(iii). Ibid., para.16a. iachr, Yake Axa indigenous community v. Paraguay, Merits, Reparations and Costs, Judgment of 27 June 2005; iachr, Sawhoyamaxa indigenous community v. Paraguay, Merits, Reparations and Costs, Judgment of 29 March 2006; iachr, Pueblo Indígena Kichwa De Sarayaku v. Ecuador, Merits, Reparations and Costs, Judgment of 27 June 2012. unhr Commission, Poma Poma v. Perù, Comm. 1457/2006 of 9 April 2009, un Doc. ccpr/C/95/D/1457/2006. iachr, “Indigenous and Tribal Peoples’ Rights over their ancestral lands and natural resources. Norms and jurisprudence of the Inter-American Human Rights System,” (30 December 2009), oea/Ser.L/v/ii. Doc. 56/09.

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to violating Artt. 1 and 2 of the Inter-American Convention on Human Rights, could also lead to the lack of an adequate safeguard mechanism to ensure the legitimate and safe exploitation of natural resources without damaging the environment. In more specific terms, even if domestic legislations reserve for State sovereignty over living and water resources, the iachr provisions define a mandatory compliance with these requirements. In conclusion, the right to property, interpreted as the free access to water sources and the right to a territory together with the use of its natural resources, is the fundamental legal basis for the development of indigenous communities, their economic survival and social integrity. Thus, the State contemporary practice favourable to the recognition of indigenous autonomy may demonstrate that the idea of ‘indigenous sovereignty’ as parallel to the State one (in the sense that the territorial State can regulate, but not preclude, its exercise), has emerged in the international legal order. In this manner, more relevance has been given to an International Customary rule binding States to guarantee a certain degree of ‘sovereignty’ to indigenous peoples. Although such sovereignty is to be exercised within the sphere of the territorial State, it actually arises as a shifting or a sharing of competences, providing indigenous peoples with some important sovereign prerogatives previously allocated to the State and that, at least in theory, could be opposed to the State under general International Law. 5

State Sovereignty and Access to Water

In the globalized economy, water is viewed as a ‘merchandise’ instead of an essential natural resource for human existence. As a matter of fact, water is becoming a globalized commercial industry: according to the global water indexes, the size of the global water market is currently close to $460 billion with an annual growth rate of 4-5%.62 Moreover, the economic law of supply and demand has made the ‘global water scarcity’ a lucrative investment opportunity, with the rise of new players (such as water-targeted investment funds and transnational water corporations) in the business of water.63 62

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Global Water Market 2014 identifies the best global opportunities for private sector participation and investment. The report explores emerging opportunities in water markets: it analyses market structures, governments’ water policies and strategies, and provides data and future trends on water and wastewater industries and utilities. The Report is available at http://www.snetglobalwaterindexes.com/market.html. As reported by un Department of Economic and Social Affairs, “International Decade for Action ‘Water For Life’ 2005–2015” “[A]n increasing number of region is chronically short

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The greater part of transnational business involves international investment agreements (iia), the vast majority of them Bilateral Investment Treaties (bit). By providing for rights and guaranteeing investors against the unilateral interference of the host State (such as: the stabilisation clause; most favoured nation-treatment; compensation for expropriation; fair and equitable treatment; protection and security), investment agreements are often considered ‘asymmetrical’ in their obligations, since a same amount of ‘duties’ is not usually attributed upon the investor.64 Expropriation, fair and equitable treatment and an ‘umbrella clause’ may indeed play a crucial role in affecting the State’s power of regulation at the expenses of public interests, in particular with regard to protection and fulfilment of human rights.65 With regards to water grabbing, iia have mainly involved large-scale land acquisitions, agribusiness industries, water infrastructure (such as hydroelectric plants and dams), and water services privatizations.66 Yet, while these investments have increased, the impact of this water plunder had been devastating: insufficient, expensive and unsafe drinking water, forced resettlement of local communities, dispossession of indigenous peoples’ resources, and climate

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of water: by 2025, 1,8 billion of people will be living in countries with absolute water scarcity and two/third of the population could be under conditions of water stressed,” at http://www.unwater.org/downloads/escarcity.pdf. However, it has to be remarked that this asymmetry derives from a deliberative choice of the contracting parties (namely the investor and the State): nothing indeed would prevent the latter from insisting on the inclusion of direct human right obligations upon the investors; however, most of the time, foreign investors exercise a significant leverage on the state during negotiations. Furthermore, domestic laws regulating investments, land rights, water rights and environmental protection in developing countries are often unclear and insufficient, and when the law does exist, its enforcement and implementation is conditioned by weak enforcement mechanisms and the economic interests of the government, as the governments’ actions are often driven by both the need to attract foreign investment in their countries and the lack of adequate technology and infrastructure, which often impede to provide the water related services, such as access to potable water and adequate sewerage. J. Wong, “Umbrella Clauses In Bilateral Investment Treaties: Of Breaches Of Contract, Treaty Violations And The Divide Between Developing And Developed Countries In Foreign Investment Disputes,” George Mason Law Review, 14, 2006, 135, 138. An interesting analysis of the inherent asymmetry of bit has been developed by T. Allee, C. Peinhardt, “Delegating Differences: Bilateral Investment Treaties And Bargaining Over Dispute Resolution Provisions,” International Studies Quarterly, 2010, 1–26. See generally S. Kay, J. Franco, “The Global Water Grab,” Trasnational Institute (March 2012), at http://www.tni.org/sites/www.tni.org/files/download/watergrabbingprimer -altcover2.pdf.

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changes have strongly affected human rights of vulnerable groups living in developing countries. How then to reconcile the State’s obligations contracted under iia with the duty to protect and fulfil human rights, and in particular, access to water? And when human rights obligations clash with the ones stemming from iia, what are the repercussions on States’ sovereignty? As a matter of fact, one of the most debated implications of this asymmetric relation is the impact that those (albeit voluntary) ‘limitations’ of sovereignty may have on human rights. The State may face the dilemma of being liable for not taking measures under Human Rights Law or of being challenged by the investor for taking such actions. In the former scenario, the State may be called before a Human Rights Court; in the latter, the host State, as a respondent, may raise a human rights defence to justify the exception to the fulfilment of its obligations towards the foreign investor.67 Generally speaking, when a dispute between the investor and the host state arises, human rights have limited impact: sometimes human rights are taken into consideration because the investor claimed a violation of its rights (such as the right to property or non-discrimination, etc.), while in other cases, the tribunals allow for an amicus curiae. However, in very few cases are human rights addressed by Investment Tribunals. The traditional reluctance of investment tribunals to acknowledge human rights issues is mainly due to the fact that investment tribunals are instituted by the parties to adjudicate a single and limited dispute (and not to pronounce on hierarchy issues in International Law).68 As far as access to water and privatizations are concerned, in the disputes here analysed, States have suspended their obligations under the concession or leasing contract with the foreign investor based on the protection of the human right to water and health. In particular, in Azurix v. Argentina, the investor claimed before the icsid the Province’s omission to fulfil its obligations with regard to the completion of infrastructure works, which resulted in an algae bloom in the reservoir and water contamination. Argentina was accused of the omission of necessary works and also of having encouraged 67

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For an in-depth study of the development of International Investment Law and Human Rights Law within the practice of Investment Tribunals, see P.-M. Dupuy, J.E. Viñuales, “Human Rights and Investment Disciplines: Integration in Progress,” M. Bungenberg et al. (eds), International Investment Law (C.H. Beck, 2015). Also, the investor does not need to exhaust local remedies (nor the intervention of the home state). In this sense, dispute settlement mechanisms have been defined as “tailor made mechanisms.” See M. Fitzmaurice, M. Panos, “Uniformity Versus Specialization (1): The Quest for a Uniform Law of Inter-State Treaties”(2013), C.J. Tamset al. (eds), Research Handbook on the Law of Treaties (Edward Elgar, 2014) 341.

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consumers to not pay water bills. The respondent claimed there was a conflict between its investment obligations and human rights obligations, namely consumers’ public interest. The Tribunal stated that the issue was not fully argued in the case and therefore (the eventual) incompatibility could not be assessed.69 In Suez v. Argentina, the investor filed an icsid claim by stating that Argentina had violated the provision of ‘fair and equitable standard’ through the freezing of water prices charged to consumers. The government responded arguing that the ‘state of emergency’ caused by the financial crisis had required it to put in place policies and measures to protect peoples’ right to water. In 2010 icsid Tribunal rejected the Government’s defence by holding: “[A]rgentina’s human rights obligations and its investment treaty obligations are not inconsistent, contradictory, or mutually exclusive,” and hence, the state “[c] ould have respected both the obligations.”70 In both cases, the States’ defence includes the argument that human rights obligations required it to adopt implementation measures inconsistent with its investment duties, and by defining the priority of public interest protection as a ‘state of necessity.’71 Namely, in the first case the human rights argument was rejected (not on the merit) because the relation between the human rights obligation and the breach of the agreement was not fully explained, and any eventual incompatibility between human rights and treaty obligations could not be assessed. In the second one the tribunal recognized the existence of a ‘human rights issue’ by rejecting the conflict of incompatibility: in other words, the tribunal held that human rights and investment obligations may collide, but both must be respected equally.72 Ultimately, it is worth mentioning the 69 70 71

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icsid AzurixCorp. v Argentine Republic, Award of 14 July 2006, icsid Case No. ARB/01/12, para. 124. Sociedad General de Aguas de Barcelona, S.A. and Vivendi Universal S.A. v. Argentina, Award of 30 July 2010, icsid Case No. arb/03/19, para. 262. For the sake of brevity, the paper will briefly consider only two cases; for an in-depth analysis of the most important water-related investment disputes see F. Marrella, “On the Changing Structure of International Investment Law: the Human Right to Water and icsid Arbitration,” International Community Law Review, 2010, 335; see also H.L. Bray, “icsid and the Right to Water: an Ingredient in the Stone Soup,” icsid Review, 2014. A progressive recognition of the relevance of human rights in investment disputes has been developing also in other (non water-related) cases. E.g., in Siemens v. Argentina, Argentina claimed that the “the human rights so incorporated in the Constitution would be disregarded by recognizing the property rights asserted by the claimant given the social and economic conditions of Argentina.” The Tribunal objected that, since the argument had not been developed and elaborated by the parties, it could not bear any relationship to the merits of the case. Siemens A.G. v. The Argentine Republic, Award of 6 February 2007,

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Saur v. Argentina case where the tribunal determined that “human rights in general and the right to water in particular are included within the general principles of international law.”73 This faint ‘acknowledgement’ might seem like headway towards reducing the conflict between states’ human rights and investment obligations (and also towards a ‘rebalancing’ of investors’ power upon States).74 However, investment disputes still present common elements revealing a severe imbalance between the parties: (i) the practice of ‘best forum shopping’ adopted by the investors; (ii) the fact that host governments cannot have access to the same means of protection as investors, acting as ‘claimants’; (iii) the significant political and financial costs which the State may incur during the arbitration process; (iv) the lack of review mechanism (appellate body), and (v) the absence of stabilising elements such as precedents, which creates uncertainty upon the proceedings.75 If States have the obligation to protect, respect and fulfil human rights of all individuals within their territory, when it comes to economic, social and cultural rights (such as the access to water), those obligations require States to undertake positive actions in order to guarantee the progressive realization of such rights. In the context of the use and management of natural resources, there may be cases in which such obligations clash with those stemming from Investment Treaties concluded by States. However, the protections guaranteed to foreign investors seem to undermine States’ capability to enact domestic regulations for the protection of Human Rights and public interests, with the

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icsid Case No. arb/02/8, para. 79. In the Sempracase, the Tribunal recognized the potential conflict between human rights and investment obligations under the ‘state of necessity’ that may be invoked under customary International Law. However, in the case in exam, the Tribunal rejected the claim since the State was considered as having contributed to provoke the ‘state of necessity’ Sempra Energy International v. The Argentine Republic, Award of 28 September 2007, icsid Case No. ARB/02/16, paras 344–354. saur International sa v. Republic of Argentina, Award of 22 May 2014, icsid Case No. arb/04/4. For a description of the emerging criteria within the practice of Investment Tribunals that may contribute to ‘re-balance’ investors’ private interests and states’ public interests, see A. Tanzi, “Reducing The Gap Between International Investment Law And Human Rights Law In International Investment Arbitration?,” Latin American Journal of International Trade Law, 2013, 831, at http://www.derecho.unam.mx/revista_ldci/pdf/Art_6_Inglés.pdf. M. Jacob, “Investment Agreements and Human Rights,” inef Research Paper Series(March 2010) at http://www.humanrights-business.org/files/international_investment_agreements _and_human_rights.pdf (arguing the deficiencies of the investment dispute settlement procedures).

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result of invading those areas and functions traditionally belonging to States’ sovereignty. Numerous solutions have been proposed, accompanied by a call for a stronger harmonisation among the different branches of International Law; however, no single solution may fit all needs, and no change in International Law could be immediately effective and remove the conflicts analysed. As the majority of commentators suggest, there are several recommendations urging a new way of conceiving investment law: the inclusion of Human Rights clauses within the agreements’ framework would allow the investment tribunals to take into due consideration eventual policies undertaken by States in protection and fulfilment of those rights. While this solution is certainly preferred, the adoption of single corrective measures could guarantee faster results and greater effectiveness: a deeper interaction between arbitrators (who have most of the times commercial and trade law backgrounds) and Human Rights advisers would enhance the awareness of the former with regard to Human Rights and public interests. Moreover, broader participation and greater transparency would allow also ngo s and Human Rights organizations not just to file amicus curiae with the aim of informing arbitrators of Human Rights considerations, but it would also allow public opinion and ngo s to monitor national governments’ actions in promoting and defending public interest in a given contract negotiation. Indeed, piercing the veil of the typical confidentiality characterizing the negotiation stages of investment agreements would not just give to these proceedings a stronger ‘public’ legitimization, but it would also allow public participation during the conclusion of the contract, as it frequently happens in international fora (suffice it to mention the strong influence ngo s have had within the processes of drafting most of the un Human Rights treaties).76 Ultimately, the un Principles on Responsible Contracts, aimed at integrating the management of Human Rights risks into State-investor contract negotiations, provide for a set of ‘key areas’ where Human Rights should be considered, both during the negotiation and performance of the agreement.77 76

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In this regard, it is worth mentioning the adoption of the new uncitral Rules on Transparency in Treaty-based investor-State Arbitration (entered into force on 1 April 2014), providing for a set of procedural rules that will guarantee transparency and accessibility to the public of treaty-based investor-State arbitration. Report of the un Special Representative of the Secretary-General on the issue of human rights and transnational corporations and other business enterprises, J. Ruggie, “Principles for Responsible Contracts: Integrating the Management of Human Rights Risks into State-Investor Contract Negotiations: Guidance for Negotiators,” 25 May 2011, un Doc. A/ hrc/17/31/Add.3, 2011.

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Under this perspective, State sovereignty, in its most basic and traditional sense, is being redefined: from one side, as the discussion over the principle of psnr has demonstrated, States are now widely understood to be instruments at the service of their peoples, and not vice versa.78 This is especially true with regard to vulnerable or minority groups such as indigenous peoples, whose relationships with land, water and natural surroundings plays a main role in their lives and in their spiritual connection with their motherland. Investment Law and Human Rights Law are the branches of International Law that have most contributed to imposing new limitations on sovereign States. Though often considered as ‘conflicting’ bodies, they share a great number of values and principles: both are indeed conceived as a protection against the state arbitrium and both share important values and legal principles, such as the protection of individual, the right to property and non-discrimination.79 However, those branches have been evolving and developing under Inter­ national Law as parallel lines, and the different concepts which characterize them represent the concrete limitations currently faced by traditional sovereignty. Both economic forces driven by globalization and the value of universal human dignity put the States in a bind: if they cannot remain isolated from economic markets behind their borders, on the other hand they build their legitimacy and survival through the recognition of Human Rights values like democracy, freedom and social justice.80 78

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A. Cassese, “The Self-Determination of Peoples,” L. Henkin (ed.), The International Bill of Human Rights: The Covenant on Civil and Political Rights (Columbia University Press, 1981) 103. psnr, as argued by Cassese, “[i]s not merely a reaffirmation of the right of every state over its natural resources; it clearly provides that the right over natural wealth belongs to peoples.” See also, E. Duruigbo, “Permanent Sovereignty and Peoples’ Ownership of Natural Resources in International Law,” George Washington International Law Review, 2006, 38. Duruigbo affirms that “[t]he right of people to sovereignty over natural resources necessarily imports an entitlement to demand that governments manage these resources to the maximum benefit of the people,” at 65. On the ‘shared origins’ of human rights and investment disciplines, see Dupuy, Vinuales, “Human Rights and Investment Disciplines,” op.cit. As stated by Petersman: “Empirical studies confirm that most national parliaments no longer effectively control many developments of iel, notably the obvious ‘governance failures’ to protect general citizen interests in enhancing consumer welfare through open ‘social market economies’ based on non-discriminatory conditions of competition, monetary stability, respect for human rights and transnational rule of law for the benefit of citizens” in E.U. Petersmann, “Human Rights, Trade and Investment Law and Adjudication: the judicial task of administering justice,” Discussion Paper biicl Conference, (9 September 2011), at http://www.biicl.org/files/5636_ernst-ulrich_petersmann.pdf.

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6 Conclusions Over the last decades the concept and centrality of state sovereignty has been facing complex hurdles: at international level the need to address global challenges such as Human Rights, environmental protection, mass migration, and trade, increasing the limitations on the traditional construction of sovereignty. The research carried out over all the issues concerning right to water, access to water and water grabbing represents the lens through which the study over the current limitations on State sovereignty has been conducted. It has been demonstrated that national States are not free to dispose of their natural resources: as a matter of fact, on one side, States are responsible for the protection and the fulfilment of Human Rights, while on the other, they face the limits posed by Investment Law. In the first case, the analysis of access to water – where water is conceived not just as a basic resource for human survival, but also as an essential element of the spiritual connection with the Mother Earth – has shown how, especially regarding indigenous peoples, the erosion of sovereignty has led to a shifting or a sharing of competences, providing indigenous peoples with some relevant prerogatives previously allocated to the State. In the second case, the issue of access to water has been analysed from the perspective of privatization of water services, in order to demonstrate how the investors’ role under International Investment Law might definitely undermine the sovereign power of policy making and public interest regulation. In conclusion, water grabbing thus represents a case in which sovereignty is not eroded, but ‘otherwise allocated’: a shift of powers is ongoing amongst States, International Organizations and Institutions, and private actors (whether they are embodied in corporations or local communities and vulnerable groups). The result is the creation of a new balance of power, wherein States maintain their primary role by acting as a ‘strategic mediator’ in enforcing the rules of the international community.

chapter 6

Right to Water and Access to Water Resources in the European Development Policy Marco Borraccetti 1 Introduction Water is a non-replaceable source of life1 that continues to remain inaccessible to millions of people. Given the urbanization and population growth, water use is projected to increase by 50% by 2025, by which time roughly 5.5 billion people – two thirds of the projected global population – will live in areas facing moderate to severe water stress.2 The need for water will increase sharply not only with the increase in world population but also with the rise in living standards in emerging countries, creating strong tensions with the quantities available, which are likely to decrease due to squandering, exploitation and climate change.3 While in March 2012 the un Secretary General announced that the Millen­ nium Development Goal on water has been achieved,4 the reality is much more complex. Furthermore, the goal was not achieved in terms of sanitation. For a long time the right to water was not seen as an autonomous fundamental right; rather, it was taken into consideration as component of the right to health, housing or education. The basic human need for water can be ensured while competing with other water uses, such as agriculture and industry, which seem more advantageous from an economic perspective.5 1 Freshwater represents 2.5% of the entire water on Earth: A. Steta, “La bataille de l’eau,” Problèmes économiques, 2012, 53; I. Winkler, The human right to water: significance, legal status and implications for water allocations (Hart Publishing, 2012) 376; F. Sultana, A. Loftus (eds.), The Right to Water. Politics, governance and social struggles (Routledge, 2011) 270. 2 European Commission, “Communication on Decent life for all: Ending poverty and giving the world a sustainable future,” 27 February 2013, com (2013) 92 final, 4. 3 European Commission, “The world in 2025. Rising Asia and socio-ecological transition,” 2009, 18; European Report on Development, Confronting scarcity: managing water, energy and land for inclusive and sustainable growth, 2012, 3, 14: “the provision of public goods – or indeed its absence – can have considerable trade-offs, social costs or missed opportunities for natural resource management and development.” 4 un Secretary General, The Millennium Development Goals Report, 2012, 4. 5 Winkler, The human right to water op. cit., 16.

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The importance of the eu role in promoting sustainable development is strictly connected to the action in countries where the European aid has the possibility to influence and to condition the action of local governments. In terms of access to water, several factors have to be taken into consideration: drinking water, access facilities, morphological, geographical and cultural barriers, and gender barriers. In addition, discussions on access to water resources need to take into account the access to sanitation.6 This chapter deals with the attention given by the eu development policy on the right to and access to water. First, the analysis will focus on the nature of this right, as recognized firstly by the international legal order and secondly by the eu legal order. The analysis will then move onto the guarantee of its effectiveness and, finally, the new perspectives in the context of the eu action in the field of cooperation and development. 2

The Right to Water and Sanitation: The International Background

2.1 The Recognition of the Right to Water The right to water was recognized as a fundamental right in 2001, when the Committee of Ministers working on the European Charter on Water Resources expressly asserted “the right to a sufficient quantity of water for basic needs,” identifying its source in the international legal instruments for the protection of human rights.7 In the following years things swiftly changed because of the recognition of the right to water, as adopted by the World Bank, States and ngos, as well as by the European Parliament (2003). Such right recognized that “access to water in sufficient quantity and of appropriate quality is a fundamental human right,” pointing out that each Member State has a “duty to guarantee everyone access to water fairly and without discrimination.”8 6 S. Perez, “Les problèmes de l’eau et l’Union européenne,” Annuaire européen d’administration publique, 2010, 311. 7 coe, Committee of Ministers, “Recommendation on the European Charter on Water Resources,” 17 october 2001, Rec(2001)14, point 5. The footnotes to the declaration quoted the Universal Declaration of Human Rights, in parti cular art. 25; the International Covenant on Economic, Social and Cultural Rights, art. 11; and the London Protocol on Water and Health, in particular art. 5, paras. k and l. 8 European Parliament, “Resolution on the Commission Communication on water management in developing countries and priorities for eu development cooperation, com (2002)132,” 4 September 2003, oj C76E/430.

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That interpretation was reaffirmed by the un Committee on Economic, Social and Cultural Rights and confirmed by the un Report on human development,9 which connected water resources development with other policies, such as industry or food, in the light of the relationship between poverty and lack of water resources. Moreover, the lack of access to water depends on the availability of resources in terms of with power relations, political processes and institutional structures that generate inequality, consigning large segments of humanity to lives of poverty, vulnerability and insecurity.10 The path to the recognition of the fundamental nature of the right to water was accomplished in 2010 when the Resolution on The human right to water and sanitation was adopted by the un General Assembly, specifying that “safe and clean drinking water and sanitation as a human right […] is essential for the full enjoyment of life and all human rights.”11 Nevertheless, in many international fora the right to water was not recognized as fundamental right by the majority of the stakeholders; in addition, at the national level, only a minority of countries decided to include it in their constitutions.12 After the declaration of the un Committee of Human Rights and the Resolution of the un General Assembly in 2010, the States expressed for a second time (Rio 2012) their commitment on the recognition of the right to safe water and sanitation as a fundamental right. However, while on a general level many international actors recognized the importance of the human rights approach to the development,13 a similar approach in the field of water has barely been recognized.14 9

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un, Committee on Economic, Social and Cultural Rights, “General Comment No. 15 on the right to water,” 11–29 November 2002; undp, “Human Development Report 2006, Beyond scarcity: power, poverty and the global water crisis,” 2006; E. Fantini, “Lotta alla povertà e diritto all’acqua,” Aggiornamenti sociali, 2007, 755. undp, “Human Development Report 2006, Beyond scarcity: power, poverty and the global water crisis,” op. cit., 134, 201; N.J. Bandarra, “Un development durable pour la Méditer­ ranée,” Revue du Marché commun et de l’Union européenne, 2009, 298. un General Assembly, “Recognizing access to clean water, sanitation as human right,” Res. 64/292 (28 July 2010). For example, the South African Constitution, Section 27(2). Only four countries in Europe had such a provision: France, Belgium, Netherlands and the uk. The full list of countries can be found at: http://www.righttowater.info/progress-so-far/national-legislation-on -the-right-to-water/. For example, the Italian position at the 2013 High Level Dialogue on Migration and Develop­ ment and the Communication from the Commission, “Maximising the Development Impact of Migration. The eu contribution for the un High-level Dialogue and next steps towards broadening the development-migration nexus,” com (2013) 292, 21 May 2013. For instance, in the eu system, the guidelines adopted by the European Commission in 1999 are still in force.

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2.2 The Right to Water: A Definition The right to water is the fundamental right of any individual to a minimal amount of good-quality water for their health and their daily needs; it is based on the assertion of the unavoidable and essential need of every man and woman for water,15 and it is “the only human right that combines three factors that single out from other human rights and their link to water use: a) it requires direct access to water for its realisation in all circumstances; b) water for personal and domestic uses cannot be substituted with any other resource, and c) water used for the realisation of the right to water does not allow for any savings in the required amount, whereas this may occur in many other sectors of water use.”16 The un Commission on the Economic, Social and Cultural Rights has identified the right to water as essential for leading a life in human dignity – it is one of the most fundamental conditions for survival – in particular for the realization of the right to an “adequate standard of living including adequate food, clothing and housing.”17 At the international level, the right has also been defined as necessary for the satisfaction of basic or vital human needs.18 The abovementioned 2006 Report stated that “access to water” means water availability by domestic connection with water supply, public fountains, wells, protected sources or stormwater collection. For the first time in an official report, a parameter of reasonableness was introduced: the availability of at least 20 litres of water per person, per day, with no cost for those too poor to pay, obtained from a source located within a 1 km or 30-minute walk from the family home.19 In any case, the indicator shows some limits because it measures the availability of drinking water sources, but not the number of actual (real) users. It does not therefore consider the situations where people prefer to use (­unprotected) 15

Perez, “Les problèmes de l’eau,” op. cit., 314; C. Baron, “L’eau en Afrique: disponibilité et accès,” Futuribles. Analyse et prospective, 2010, 46. 16 Winkler, The human right to water op. cit., 208. 17 un Committee on Economic, Social and Cultural Rights, “General Comment No. 15 on the right to water,” op. cit. 18 Convention of Geneva relative to the Treatment of Prisoners of War (adopted 12 August 1949), art. 20, 26, 29, 46 and its two additional protocols (1977): protocol I, relating to the Protection of Victims of International Armed Conflicts (8 June 1977), art. 54, 55; protocol ii, relating to the Protection of Victims of Non-International Armed Conflicts (8 June 1977), art. 5, 14; also, Convention on the Rights of the Child (adopted on 20 November 1989, entered into force on 2 September 1990), art. 24, and un Convention on the Law of the Non-navigational Uses of International Watercourses (adopted on 21 May 1997, entered into force on 17 August 2014), art. 10; Winkler, The human right to water op. cit., 135; Perez, “Les problèmes de l’eau,” op. cit., 315. 19 undp, Human Development Report 2006, “Beyond scarcity: power, poverty and the global water crisis,” op. cit., 8, 47 and 142.

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alternative sources for reasons of proximity or economic reasons related to the cost of the water, or for reasons of discrimination or social conflicts. In addition, the number of functioning supply points does not always accord with estimates because the sustainability of facilities – especially smaller facilities – often depends on the technical and economic capacity of users to support management and maintenance costs. In these cases, the capability of local communities to organize and to mobilize resources and to ensure the proper functioning of the common good is essential.20 Furthermore, the close interconnections between water, energy and land make clear that the management of each of them cannot be considered in isolation, but must be seen as part of an integrated system.21 That explains why the sustainability of projects plays a considerable and decisive role in the development support planning. However, the technical approach, although essential, could be misleading because of the risk of ignoring injustice and inequalities that are related to the access to water. Shortages could also derive from political and institutional processes. Some people – notably the poor – are systematically excluded from access because of their poverty, by their limited legal rights or by public policies that limit access to the infrastructures that provide water for life and for livelihoods. In short, “scarcity is manufactured through political processes and institutions that disadvantage the poor.” The pattern in many countries is that the poor get less, pay more and bear “the brunt of the human development costs associated with scarcity.”22 This affects the development of a territory, strongly influencing the opportunities for the population23 and possibly diminishing or reducing the possibility of choice. ­

3

The Integration of the Right to Water into the eu System

3.1 The Right to Water and the eu Primary Law The right to water and sanitation has an international origin,24 and its assertion and interpretation will be decisive for its inclusion in the eu legal order. 20 21 22 23 24

Fantini, “Lotta alla povertà,” op. cit., 760. European Report on Development, “Confronting scarcity: managing water, energy and land for inclusive and sustainable growth,” op. cit., 5. undp, Human Development Report 2006, “Beyond scarcity: power, poverty and the global water crisis,” op. cit., 2. Fantini, “Lotta alla povertà,” op. cit., 762: the autor focuses on the attitude to fight more against poor people rather than causes of poverty. According to A. Wolf, the number of international treaties on the cross-border water management justifies the definition of ‘hydro-diplomatie.’ See Steta, “La bataille de l’eau,”

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No references to water, water resources and sanitation are included either in the eu Treaties or in their Protocols and Declarations or in the Charter of Fundamental Rights of the European Union. It is only through the interpretation of their provisions that we are able to identify them as fundamental rights and it can arise from two perspectives. The first perspective is aimed at protecting the people’s right and it derives from the interpretation of art.1 of the Charter, according to which dignity is inviolable. In this case, having regard to the provisions of international law, access to water resources is considered an instrument to safeguard human life, in the full respect of human dignity. The application of the Charter is uncontestable: according to its art. 51, the Charter should apply exclusively “in the application of the law of the Union.” The right to water falls within the field of the eu development policy, in accordance with art. 208 tfeu; it also falls within the matter of general cooperation with third countries and of humanitarian aid (title iii of the Treaty), in addition to its external action. From a second perspective, the provisions on the development cooperation and on the sustainable development must be considered: in this case, emphasis will be placed on the fact that water is considered one of the appropriate assessors of the development of sustainability and its environmental impact. 3.2 The Right to Water and the eu Secondary Law The legislative framework on water resources is complicated, due to the array of legislation on water, environmental protection, agricultural policy, health protection and anti-pollution policies. Furthermore, with regard to the organization and management of water services, competition rules have to be followed. Finally, considering the cross-border nature of water and the potability factor, a regional management approach is required.25 eu legislation and documents containing references to water and water resources differ in terms of nature and legal value. The management of water resources is strongly connected to different profiles of the eu policies. From the consumer’s point of view, water is a private good; however, water has also a collective nature, which depends on the existence of local resources and of distributors, frequently operating in closed markets26 with a controlled distribution.

op. cit., 55. For an in-depth analysis of the international legal foundations of the right to water, see Winkler, The human right to water op. cit., 37. 25 Perez, “Les problèmes de l’eau,” op. cit., 316. 26 Ibid.

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The eu favours today an across-the-board approach between the two profiles, with a prevalence of environmental provisions and the duty of protection. The Water Framework Directive27 was aimed at developing an integrated policy on water, including a sustainable water management within other policies of the Union, such as transport, agriculture and fisheries, in order to establish the basis for a further integration of policy areas and to ensure a sustainable and ecological balance between all of them.28 It was the final result of a global approach, based on the sharing of different situations and interests, needs and actors, and is a successful model that should be considered in terms of the eu’s assistance to developing countries. The Communication of the Commission on water management in developing countries29 supports the priorities of the eu development cooperation,30 highlighting where and how policies surrounding water and development are integrated into the eu’s development priorities; it is an extremely useful instrument to understand the European ‘water framework.’ Although the access to water was not expressly affirmed as a fundamental right, water was recognized as a vital resource for human life. The Commission highlighted the need to guide the eu action taking into account water resources management as a “problem common to all sectors, to insert into […] development policies […] to fight poverty.” This type of management was not the final objective, but it was rather one of the instruments in the fight against poverty or, better, of the action and efforts to eradicate it.31 The Communication developed the relation between water management and sustainable development, stressing their importance for the economic, social 27

28 29 30

31

Directive 2000/60/EC of the European Parliament and of the Council establishing a framework for Community action in the field of water policy (eu Water Directive) (2000), oj L327/1; see J. Sohnle, “The themes of the Water Framework Directive in the concert of international norms,” era Forum, 2008, 423. Perez, “Les problèmes de l’eau,” op. cit., 315. European Commission, “Communication on Water management in developing countries” op. cit. Council Conclusion, “Draft resolution on Water management in developing countries: Policy and priorities for eu Development Cooperation,” 30 May 2002, 9696/02, para. 2. According to the Council: “Water is to be seen as a component of ec development priorities, in particular regional integration and cooperation, equitable access to social services, food security and sustainable rural development.” According to the European Report on Development, “Confronting scarcity: managing water, energy and land for inclusive and sustainable growth,” op. cit., 6: “As the world moves towards absolute scarcities in some of these resources, the poor are the first to experience the pressure on their livelihoods.”

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and environmental plan. According to it, access to water resources and their management are elements of outstanding importance for the European development policy. However, the Communication was not the first water-related document issued by the Commission: it had been preceded (1998) by the Guidelines on the development cooperation with regard to water resources,32 and was followed by the European Parliament’s Working Paper (2000).33 In particular, the 1998 Communication considered water supply in terms of a social perspective, addressing environmental concerns;34 there was an increasing sensitivity towards the improvement of the existing infrastructure, before the possibility to design new schemes.35 Evaluations are regularly carried out to examine their results in terms of relevance, rationality, efficiency, impact and sustainability. Hence, the need for a project-integrated approach has been affirmed: involvement of the stakeholders concerned, at all levels of responsibility and in all stages of project conception and implementation; capacity building, in particular to ensure the sustainable management of resources and services, operation and maintenance of systems; and the raising of awareness of social and environmental needs, impacts and costs.36 Nevertheless, some doubts still exist, given the report of the European Court of Auditors that – ten years later – highlighted significant gaps in the implementation of the EU-funded projects in this field.37 Although not included among fundamental rights, water is still considered fundamental to human life, and the access thereto is included among the essential services, which have to be guaranteed to the population. The recognition 32 33 34 35 36 37

European Commission, “Towards sustainable water resources management – A strategic approach” (1998). European Parliament, Directorate General for Research, “Working Paper – Water and Development in Developing countries” (2000). European Commission, “Communication on Water management” op. cit., 7. Ibid., 8. Ibid., 8, 9. European Court of Auditors, “European Union development assistance for drinking water supply and basic sanitation in sub-saharian countries” (2012), Report 13/2012: “the Commission did not make good use of those procedures to increase the likelihood that projects will bring lasting benefits”; “the entities running the facilities did not carry out regular checks to ensure that the water quality meets the minimum standards required for human consumption” (point 22); finally: “in the most of completed projects, the absence of ex post monitoring or evaluations did not allow a useful assessment of the sustainability of results” (point 60).

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of proper and sustainable management of water as an instrument to fight poverty38 has not only an economic perspective but must also be considered according to “the notion of vulnerability and such factors as access to adequate food supplies, education and health, natural resources and drinking water, land, employment and credit, information and political involvement, services and infrastructures.”39 This means that the role and the importance of water had been considered in relation to other issues such as health, sanitation, food security,40 and agricultural and industrial production. In brief, following an integrated approach, the local institutions, which in the low-income areas have the management responsibility, must be supported by the regional entities, or rather by river basin organizations,41 in particular to strengthen the integrated management of waters, thereby preventing any type of conflicts.42 At local level, particularly in low-income areas, the support given to water users’ associations or community-based organizations involved in managing water and sanitation services can contribute to strengthening and safeguarding water security and reducing poverty. Progress towards an inclusive green economy through sustainable consumption and production patterns and resource efficiency, including in particular low-emission energy systems, is therefore essential.43 Therefore, taking into account an integrated perspective, “land use and energy have direct implications for water quantity and quality.”44 To identify the three main priorities for water management, the Commission pointed out the need for a fair distribution, the importance to guarantee a 38

39 40 41

42 43 44

European Commission, “Communication on Water management,” op. cit., 11. One of the main aspects of the access to water in the fighting against poverty is the respect of equal opportunity: it means full access to water for all people beyond their social status, their gender, whether or not their vulnerable position in the society. European Commission, “Communication on Water management,” op. cit., 9. Ibid., 10, which created the idea of importing ‘virtual water.’ According to the European Report on Development, “Confronting scarcity: managing water, energy and land for inclusive and sustainable growth,” op. cit., 8, “few national governments have prepared such policies, and real ‘integration’ has remained elusive. Lack of significant and sustained investment on the part of government and donors is one problem, especially since such investment does not generate ‘quick wins’ and easily measurable results.” European Commission, “Communication on Water management,” op. cit., 10. European Commission, “Communication on Decent life for all,” op. cit., 4. European Report on Development, “Confronting scarcity: managing water, energy and land for inclusive and sustainable growth,” op. cit., 8.

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r­ easonable quality of life, and the importance of its safeguard since water must be used in a sustainable way. To this end, institutions must play a greater role in the international context, where the sensitivity to the problem has already begun to be developed. Therefore, three priorities remain: to ensure a supply to every human being of sufficient good-quality drinking water and an adequate means of waste disposal; the equitable and sustainable transboundary water resources management; a cross-sectoral coordination to ensure fair and appropriate distribution of water between users of different kinds.45 2003 could have been the year of change: for the first time, the European Parliament had declared, by way of resolution, the existence of a right to water as a fundamental right.46 The Resolution highlighted the lack of attention to women’s access to water, the gradual depletion of water resources, and the dangerous situation connecting to the risk that the increasing scarcity of resources could cause armed conflicts. Injury directly resulting from intensive agriculture and dam construction as well as from industrial pollution and deforestation has been taken into account. However, the Resolution remained an isolated document in the recognition of a fundamental right to water. Nevertheless, the strengthened connection between water and development continued, mainly due to the existence of international agreements with other regional organizations,47 which are the basis for operational tools. In 2007 the European Parliament reaffirmed the centrality of the access to water and sanitation with a resolution, approved on 1 February 2007, on the integration of sustainability in European development policies, noting that “the issue of water and sanitation is a key development issue,” both in rural and in urban areas. The Union has been called upon to act in order to decentralize water management to local levels so as to involve users and decision makers in the formulation of water policies at a level as close as possible to the citizens’ needs, and in order to improve access to this resource.48 45 46

47

48

European Commission, “Communication on Water management,” op. cit., 15. European Parliament, “Resolution on the Commission Communication on water management in developing countries and priorities for eu development cooperation, com (2002)132,” op. cit., 430. acp-ec Council of Ministers Decision 1/2004 (2004/632/ec) on the use of the reserve of the long-term development envelope as well as resources from the Investment Facility of the ninth European Development Fund for the establishment of an acp-eu Water Facility (2004) oj L289/68. European Parliament, “Resolution on mainstreaming sustainability in development cooperation policies,” 1 February 2007, oj C250E, points 54–56.

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The Resolution recognized sustainable development as one of the fundamental objectives of the Union49 and as a general principle of the Treaties: it is a binding obligation to be observed in the development of the Union’s policies.50 The right to water is not recognized as such, but rather included in sustainability, which must characterize each type of project, both from a structural and an ecological perspective,51 including the vulnerability of water resources to climate change, over-abstraction and pollution. Introducing and recognizing such an important innovation and such an important revolution, the resolutions were considered as an appropriate basis to continue being developed into a new European model. For this reason, the Communication issued in 2011 by the Commission to increase the impact of the European development policy must be considered another missed oppor­ tunity:52 in fact, there were no provisions and references to water and sanitation services, probably due to cultural reasons or because of the conviction that the goals were achieved. A fortiori, it was surprising that even the European Parliament had not reacted to this omission, despite having had the opportunity. The Resolution of 23 October 2012, Opinion on the Communication from the Commission53 on an agenda for change, was a total failure, without any reference to the right to water and with barely a mention to the problem of land grabbing and soil resources. A surprising situation, bearing in mind the leading role of the ep in the recognition of the right to water.54 The disappointment was partially counterbalanced by the Council Conclusions of 20 December 2012,55 in which it was confirmed that the water sector – access, drinking water and food safety – should continue to represent one of the main

49 50 51 52 53 54 55

The principle of sustainable development is recognized as a primary objective of the eu since 1993, when the Treaty of Maastricht entered into force. European Parliament, “Resolution on mainstreaming sustainability in development cooperation policies,” op. cit., point B. Ibid., points 21–22. European Commission, “Communication on Increasing the impact of eu development policy: an Agenda for change,” 13 october 2011, com (2011) 637 final. European Parliament, “Resolution on an Agenda for Change: the future of eu development policy,” 23 October 2012. European Parliament, “Resolution on the Commission Communication on water management,” op. cit., 430. Council Conclusions on the “European Court of Auditors’ Special Report No 13/2012: European Union Development Assistance for Drinking-Water Supply and Basic Sanitation in Sub-Saharan Countries,” 20 December 2012, 18063/12.

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aspects of the development cooperation, mainly for low-income groups, especially in fragile countries and post-conflict situations.56 However, the importance of the document is in the fact that it confirmed the right to safe drinking water and sanitation as a fundamental right,57 providing the eu external action with a particular attention to vulnerable groups.58 According to the Council, the European External Action Service (eeas) should be more involved,59 even in the control of the sustainability clause that should be included in all funding agreements for sustainable service delivery. Unfor­ tunately, no relevant information on the eeas action on that point appeared. In any case, its involvement does not mean that the Union would replace the Member States in that field, both for political (the development cooperation is one of the instruments of national foreign policies) and financial reasons. On the contrary, the eeas action should be simultaneous and comple­mentary to any national actions, with a leading and coordinating role: the eu action could provide an added value in third countries associated with a partnership60 (i.e., the donors’ coordinator), an effort that has recently emerged61 but which could face some obstacles considering the peculiar internal organization of the eeas and of the eu delegations,62 with officers seconded by national diplomacies 56 57 58 59 60

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Council Conclusions on the “European Court of Auditors’ Special Report No 13/2012,” op. cit., para. 9. Ibid., para. 15, 5. Ibid., para. 17, point 7. Ibid., para. 16. Union action should be better sustained by Member States and by the Institutions; according to the European Parliament, “the linkage between the European Neighbourhood Policy (enp) policy framework and eu support under the European Neighbourhood Partnership Instrument (enpi) has been insufficient and the enpi’s record is also mixed when it comes to assistance relevance and effectiveness: These have been undermined by the complexity and the length of the programming process”: see European Parliament – Directorate General External Policies, “Improving the eu’s aid to its neighbours: lesson learned from the enpi, reccomendations for the eni” (2012). For example, see the Declaration by the High Representative Catherine Ashton on behalf of the European Union on the International Day of the World’s Indigenous People, 9 August 2010, ip/10/1038, where she pointed out that the access to water is strongly connected to human rights and human dignity. The risk of a low-level cooperation exists. According to the ep, “cooperation between eu Delegations and eu Member States engaged in fragile and conflict-affected States has in many cases remained at the level of information sharing, with very few examples of joint objective-setting, joint programming or clear division of roles to enhance synergies and avoid gaps and duplications”; see European Parliament – Directorate General External Policies, “eu development cooperation in fragile states: challenges and opportunities”

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and by the European institutions, in particular the Commission and the Council. This action is in line with what has been stressed by the eu High Representative who recognized the importance of the access to water and of the water resources, stating that the obligations arising from a right of access to water services and sanitation are closely related to the human rights, such as housing, food and health. In particular, the connection between drinking water and human rights was pointed out, taking into account the right to a sufficient standard of living and to the dignity of the person.63 4

The Effectiveness of the Right to Water

The recognition of the access to water as a fundamental right needs a concrete implementation, in order to ensure its effectiveness. In general, the eu initiatives on water are characterized by a fundamental rights approach, because of the recognized nature of the right to water; a large number of activities have been supported, such as the acp-eu Water Facility Agreement for the realization of projects and infrastructures,64 with particular attention to rural and poor areas. In particular, the acp-eu agreement paid special attention to gender equality, women’s participation in management and in development projects as well as in education; for that matter, the impact of water insecurity and injustices are clearly gendered, where women and girls spend countless hours fetching water for productive needs.65 Furthermore, economic, social and cultural rights are included in the Annual Action Plans on Human Rights and Democracy.66 Pertaining to the practical application of this right, until 2011 the most important document was the Water Project Toolkit,67 developed by the European Water Initiative (euwi) launched at the Johannesburg Summit in 2002 in response to the decrease in

63 64 65 66 67

(2013), 6. On the eeas organization, see M. Gatti, “Coherence vs. Conferred Powers? The case of the European External Action Service.” in L.S. Rossi, F. Casolari (eds), The eu after Lisbon: Amending or Coping with the Existing Treaties?, (Springer, 2014), 241. Perez, “Les problèmes de l’eau,” op. cit., 312; Declaration of 09.08.2010, IP/10/1038. Agreement between the eu and Africa-Caribbean-Pacific (acp) Countries. Sultana, Loftus (eds.), The Right to Water op. cit., 9. Council of the eu, “eu Strategic Framework and Action Plan on Human Rights and Democracy,” 11855/12, 25 June 2012. European Commission, “Water Project Toolkit – Water resources management for ­sustainable development,” at http://www.aquaknow.net/en/water-project-toolkit.

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investment in water and sanitation services.68 The political position reaf­ firmed that the comprehensive human rights approach had not yet been fully integrated. The Toolkit placed strong emphasis on the equality between genders and on the participation of women in the decision-making process, on the prevention of the spread of hiv, and on the analysis of the distribution of water and its costs. The contents clearly incorporated the 2003 European Parliament Resolution, in which it was pointed out that in many eu policies there was a lack of attention to women’s access to water, to water shortage, to the danger resulting from armed conflicts, and to damage caused by intensive agriculture, construction of dams, industrial pollution and deforestation. 4.1 Financial Instruments The eu water facility for acp countries deserves special attention: its specific nature has the purpose to intervene in the field of water resources in order to ensure safe drinking water supply through the use of financial resources, with particular attention to most vulnerable people and low-income groups.69 The role of financial instruments is essential for the realization of the right to water. Some of them have an eu origin; others have their sources in international agreements signed with regional organizations or groups of States. They are financial tools for the realization of development policies and for that reason they have a general approach, without mentioning expressly the right to water (only in some cases is the right to access to natural resources mentioned). They have, however, all include(d) actions for the implementation of the right to water. The European Development Fund (edf) is the main instrument for the development cooperation in the acp countries and in the overseas countries and territories (octs). The Treaties of Rome70 had envisaged the edf for the 68

69

70

The European Union Water Initiative is an attempt to focus increased attention on waterrelated issues; it aims to improve coordination among the eu Member States on support for water and sanitation. The euwi is based on a participative multi-stakeholder approach; there are four working groups with a regional focus that guarantees the permanent contact with regional representatives, such as those in Africa, Latin America, the Mediterranean region and Asia – see European Union Water Initiative, Annual Report 2012, 4, www.euwi.net. European Commission, “Communication on the future development of the eu Water Initiative and the modalities for the establishment of a Water Facility for acp countries,” com (2004) 43 final, 26 January 2004. Consolidated Version of the Treaty on the Functioning of European Union (2012) oj C326/47, art. 199.3, 199.4.

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creation of technical and financial grants, originally for colonized African countries and with which an historical link remains. The edf is not included in the general budget of the Union because the financial support comes from the Member States; it has its own financial rules and a specific managing Committee. In 2013, aid to acp countries and octs was financed by the edf: the agreement is normally concluded for a period of five years and with a cycle that follows the partnership agreements or conventions. The second financial instrument supports the eu development cooperation and replaces the different geographical and thematic instruments created over the years, in order to improve the development assistance. Under its scope the eu provides for financing measures aimed to support geographical cooperation with countries, territories and regions included in the list of beneficiaries of public aid to development set forth by the Committee of the Organization for Economic Cooperation and Development (oecd). The programme stressed that the development cooperation policy builds upon the objectives of the Millennium Development Goals (mdgs); the general framework of the eu action in that field is defined by ‘the European consensus.’ In any case, this instrument reaffirms the same goals: the fight against poverty, a sustainable economic and social development, and the harmonious and gradual integration of the developing countries in the global economy. Accordingly, eu aid is granted through geographic and thematic programmes and measures for countries in Africa, the Caribbean and the Pacific. Finally, one should consider the financial instrument for the promotion of democracy and Human Rights in the world and the Instrument for Stabi­ lity (ifs). The first one71 includes among its objectives and its conditions the respect for human rights and fundamental freedoms in countries and regions where they are at risk. To achieve this, it was decided to support civil society in its role of promoting human rights and democracy, in its action in favour of a peaceful conciliation of interests and its function of representation and participation policy; to support actions related to human rights and democracy in areas covered by the eu guidelines; to strengthen international and regional frameworks for the protection of human rights, justice, the rule of law and the promotion of democracy; and to have a greater confidence in democratic electoral processes, thus enhancing the reliability and transparency, in particular through election observation missions. 71

Regulation n. 1889/2006 of the European Parliament and of the Council “on establishing a financing instrument for the promotion of democracy and human rights worldwide,” 20 December 2006, oj L386/1.

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In a different manner, recognizing that the guarantee and promotion of equitable access to natural resources has a potential connection with situations of armed conflict, the second instrument (idf) finances the models of development cooperation and financial, economic and technical cooperation adopted by the eu in cooperation with third countries in order to restore stability in situations of emergency, crisis or emerging crisis, and to enable development and cooperation policies in an effective way. In situations of crisis or emerging crisis, especially in situations that may lead to an armed conflict, the Instrument for Stability should enable contribution to the protection of democracy, public order and security of persons, human rights, and fundamental freedoms. 4.2 The ‘Right to Water’ Privatization The increasing aid for water privatization has been the most important change in the development policy in recent years.72 That change was encouraged not only by international financial institutions but also by the eu development agencies, in some situations with conditional loans; however, it met a strong resistance from trade unions and civil society. The discrepancy between the recognition of the right to water and the eu’s action ‘on the ground’ seems to be in contrast with its fundamental nature as perceived by European citizens, as it has been recently demonstrated with the initiative on the right to water as a human right (eic).73 Given the actions taking place, especially in Africa, there is no significant relationship between access to water and the presence of public-private partnerships, nor an automatism between privatization and benefits for the population, although it probably helps to create a competitive environment appropriate for improving the final results. However, it is more probable that the important aspects are not competition or private-sector participation, but rather the participation of resource users in the decision-making process, as well as the level of democracy in relation to the participation of the civil-society decisionmaking. In any case, considering water as a commodity contributed to undermining the practical implementation of this specific and particular right: the use of market typical instruments, as privatization and commercialization, led to conflict with the 72 Winkler, The human right to water op. cit., 36: “the discussion about the reallocation of water resources often focuses on how to maximize economic benefits.” On ‘market environmentalism,’ see K. Bakker, “Common versus Commodities. Debating the human right to water,” in Sultana, Loftus (eds.), The Right to Water op. cit., 20. 73 Available at: http://www.right2water.eu/.

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right to access to water, as those who cannot afford the established payment/ fee are more likely to be excluded.74 This does not necessarily imply that water has to be provided free of charge, but requires appropriate provisions for ­people living in extreme poverty without any income. The Commission was and still is well aware of the problem and has dedicated part of its water communication to the so-called “water management ladder”75 model, which argues that when the demand and competition is low (i.e., when access is comparatively easy), there is a “low cost” situation (the cost is low), and both the institutional and technical system is comparatively simple. Where there is a situation of increasing demand, technical arrangements are firstly sought to increase the production; in this case, a sound management is required. Nevertheless, an increasing demand could generate a cross-sectoral competition and – at the same time – some environmental concerns might occur. The new situation will require a new approach, based on the implementation of demand management strategies. The need to achieve the ‘best possible use’ of water becomes progressively inevitable, requiring the design of appropriate institutional arrangements. The resource management will be linked to the environmental protection with a possible increasing of costs both from an economic and environmental perspective. In the future, the main responsibility has to be attributed to the governments,76 and the possibility to reach an acceptable level in the supply will be increased by providing appropriate assistance. For this purpose, an important role will be attributed to the application of the principle of subsidiarity even in water services administration, in the sense that it is important that water services are managed as closely as possible to the recipients. A transparent legislative and administrative framework should be required: the provision of compulsory participation of local authorities and, in addition, of local communities has to be provided for. The technical challenge will aim to reduce the demand by increasing the efficiency of the services, giving it a value for each use, tending towards the pricing of the services and the imposition of sanctions in order to prevent water degradation. It is important to remember that with an increasing d­ ifficulty 74 75 76

Sultana, Loftus, The Right to Water op. cit. European Commission, “Communication on Water management,” op. cit., 16. Sultana, Loftus,The Right to Water op. cit., 2: “the right to water risks becoming an empty signifier used by both political progressives and conservatives who are brought together within a shallow post-political consensus that actually does little to effect real change in water governance.”

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in supply and a consequent increase in costs, the weakest parts of the society will be penalized: an increased management difficulty is closely related to the poverty of the potential beneficiaries and will require additional effort for transparency and the recognition of fundamental rights.77 5

Future Perspectives

In conclusion, it is interesting to identify the future guidelines that could be followed in order to ‘respect, protect, fulfill’ and to strengthen the effectiveness of the right to water and the right to access to water resources, considering the overwhelming scientific evidence and consensus claiming that the unsustainable use of natural resources is one of the greatest long-term threats to humankind. The effects of environmental degradation and climate change are already being felt, posing risks to agriculture and food and water supplies, with a significant impact on livelihoods.78 For that reason, the inclusion of the environment as a priority would be fundamental in the new model of water management planning.79 The post-2015 goals will be even more attentive to human rights, with an approach on investment and cooperation that will include necessarily water and sanitation. In general, the human rights approach should also characterize the evaluations of the actions implemented in developing countries, with the inclusion of those characterized by the involvement of public and private sectors; otherwise, there will be a risk of prejudice to vulnerable sections of the population. The protection of vulnerable people will therefore be guaranteed by a different approach that requires legal and institutional reforms in the field of water resources management. This can be done by ensuring the participation of the civil society organizations, representing also local communities, in the decision-making and water-management processes, to ensure not only the realization 77

78 79

According to the European Report on Development, “Confronting scarcity: managing water, energy and land for inclusive and sustainable growth,” op. cit., 11, 12: “the public sector needs to encourage the proper valuation of ecosystem services in policy and planning processes. This will aff ect consumer patterns, steer private investment, foster supply and incentivise innovation,” considering that “higher resource prices disadvantage the poor, who already lack access to water, energy and land, while efficient pricing can have strong distributional consequences.” European Commission, “Communication on Decent life for all,” op. cit., 4. C. Baron, “L’eau en Afrique,” op. cit., 44.

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of this fundamental right but also to raise the stakeholders’ awareness, in order to make the most from the European support. From the eu perspective, the starting point is the 2012 Report of the (euwi),80 which shows that water concerns are always brought to the attention of the eu institutions, insomuch as it emerged strikingly in the Council ‘environment,’81 where the need to include water in relevant eu policies was stressed, as well as the need to strengthen eu policy and implementation frameworks for sustainable water management in developing countries, highlighting the importance of the “catalytic” role of water supply in inclusive growth and for sustainable development. It was stated in Rio, during the 2012 Conference, that the access to water must be recognized as a fundamental right. This position was followed by the eu itself, not only in the context of the implementation and the development of its general policies, but also at a regional level, where the euwi promotes the eu political action; thus, the agenda for change has to be enriched with much more specific objectives, taking into account the possibility of a new parliamentary resolution on the access to water and sanitation.82 Furthermore, from a legal perspective, the eu action will need to highlight (for example, by way of conditionality clause) the environmental paradigm and the vulnerable section of the population. Therefore, actual deficiencies should be rectified, offering to the developing countries and to their populations the possibility of access to infrastructures, to water resources and to prevent any form of discrimination, both in a physical way (i.e., close to the distribution of fresh water) and in an equitable way (i.e., without discrimination in terms of age or between sex or religion), thereby protecting vulnerable sections of the population. In addition, part of the eu actions should be focused on the access to water resources by persons with disabilities, including a rights approach in water and health assistance programmes for the protection of this group of persons, according the United Nations Convention on the Rights of Persons with Disabilities.83 A new model of organization is also required, in light of the Court of Auditors’ Report, for: better evaluation and the need to ensure that full use is made of the results of monitoring, verification and evaluation work, and that 80 81 82 83

euwi, Annual Report 2012, at: www.euwi.net. Council of the eu, Environment, 11110/12, 11 June 2012. European Parliament, Directorate General External Policies, “The rights to water and sanitation in development cooperation: the state of play and the European Union” (2012). Convention on the Rights of Persons with Disabilities and its optional Protocol (adopted on 13 December 2006, entered into force on 3 May 2008), A/res/61/106.

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recommendations made in the reports are considered and carried out, working with governments, local authorities and civil society in order to improve ownership and sustainability of projects; trying always to adopt technologies adapted to the specific country conditions and the capacity of the beneficiary country; trying to drive national and local government on the adoption of legislation recognizing the access to the fundamental right to water for the population and envisaging its involvement in water supply management. The fact that water management needs an integrated and pluralistic approach has been clearly demonstrated.84 84

C. Baron, “L’eau en Afrique,” op. cit., 55.

part 3 

The Environmental Context

∵

chapter 7

Tackling the Grabbing of Genetic Resources and of Associated Traditional Knowledge through the Nagoya Protocol Francesca Romanin Jacur Introduction Biologic and genetic resources play a crucial role in maintaining the sustainable livelihoods of indigenous and local communities. Misappropriation and misuse of these resources and of associated traditional knowledge held by indigenous people and local communities are serious violations of human rights and cause adverse impacts on environmental protection. The Nagoya Protocol on Access to Genetic Resources and the Fair and Equitable Sharing of Benefits Arising from their Utilization (abs) to the Convention on Biological Diversity (cbd) aims at improving the legal certainty in this field and at strengthening the mutual trust between providers and users of these resources, be they States or non-state actors. To achieve these purposes, as its self-explanatory but rather complex title tells, the Protocol creates a multilevel regulatory framework that regulates access to genetic resources and associated traditional knowledge held by indigenous and local communities and ensures the adequate sharing of the benefits deriving from their use. This multilevel regulatory system is enacted through national and sub-national authorities, with the participation of local communities, and operates under the supervision of the Protocol’s treaty-bodies. In this context, the requirements to obtain the prior informed consent (pic) of the holders of these resources and knowledge and to reach an agreement between providers and users on the terms governing the sharing of the benefits arising from their use (so-called ‘mutually agreed terms’ or mat) could play a crucial role in limiting the risk of genetic resources and associated traditional knowledge grabbing. After describing the main characters of genetic resources grabbing (Part 1), this chapter illustrates the principles and rules set by the cbd that apply to the inter-State dimension of abs (Part 2). It then examines the complex legal framework developed by the Nagoya Protocol and analyzes its provisions regulating the intra-State relationships between the State and its communities and the private users and beneficiaries of genetic resources (Part 3). Following on this point, Part 4 considers the contractual agreements on abs. Final remarks highlight the innovative reach of the Protocol’s provisions.

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The Value of Genetic Resources and Traditional Knowledge and their Grabbing Challenges

Biologic and genetic resources are great assets for biodiversity conservation and play a crucial role in maintaining the sustainable livelihoods of indigenous and local communities. These resources may be wild, such as plants found in wilderness, but also cultivated, such as seeds grown and developed by farmers.1 Besides their local beneficial effects, at the global scale, they are fundamental in connection with food security and public health and contribute to climate change mitigation and adaptation. Genetic resources are also commercially valuable in many economic sectors: they are utilized to develop medicines and cosmetics by the medical and pharmaceutical industries and they serve as basic materials for food production, forestry, and the development of biobased sources of energy. Consequently, a broad range of users, including universities, non-commercial researchers and companies from different industrial sectors, are interested in genetic resources for research, development and commercialization purposes. A fundamental element used in combination with genetic resources is the traditional knowledge of indigenous and local communities. Traditional knowledge includes the wisdom on how to derive benefits from the inherent qualities of the resources, as well as practices relevant for the conservation and sustainable use of biological diversity. This knowledge is often transmitted orally – through rituals, customary laws, songs and agricultural practices – from generation to generation.2 This knowledge is essential to carry out scientific experiments and studies because it provides important information on the properties of genetic resources and may contribute to new discoveries. With regard to genetic resources, the grabbing phenomenon presents specific characters strictly connected with the very special nature of these resources, thus it may be useful to preliminary clarify what cases may be qualified as ‘grabbing’ in this context. A first reflection relates to the object of these grabbing practices which is twofold: a material element that relates to the physic characters of the resource and an immaterial one that includes the 1 cbd, art. 2 refers to ‘biological resources’ and includes in this notion “genetic resources, organisms or parts thereof, populations, or any other biotic component of ecosystems with actual or potential use or value for humanity.” More specifically, the Convention defines also the term ‘genetic material’ clarifying that it “means any material of plant, animal, microbial or other origin containing functional units of heredity.” 2 There is currently no internationally agreed definition of ‘traditional knowledge associated with genetic resources’ and neither the cbd nor the Nagoya Protocol provide for a definition of this notion.

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genetic information embedded in their dna. Besides, this grabbing may touch upon another immaterial element: the traditional knowledge associated with the resources. Another distinguishing feature, strictly related to the characters just described, is that genetic resources grabbing may occur with the illegitimate appropriation of one single seed or plant that is later replicated or breaded, without necessarily involving large-scale investments that generally characterize other natural resources grabbing practices. As for the modalities in which genetic resources grabbing occurs, a first direct type of grabbing takes place when genetic resources and traditional knowledge are taken away from their legitimate holders in violation of the applicable international and national law. In this case, grabbing refers to the illegitimate access to these materials or, in other words, to their misappropriation. These resources may even be used in a sustainable way, but they are not acquired in a legitimate way. A second type of grabbing relates to failures occurring in a later stage of the utilization process, when – even if the resources were accessed in accordance with relevant legal requirements – the providers of the resources do not receive adequate benefits deriving from their utilization. Finally, a third category of de facto grabbing may be envisaged when although access and benefit-sharing are formally in conformity with the applicable legal requirements, and in particular respect pic and mat criteria, nonetheless the providers are not adequately rewarded or fairly treated in practice. One may think, for example, at cases in which mat are not negotiated in a fair way due to an imbalance in the negotiating power of the contracting parties, and this leads to the acceptance by the provider party – which may typically be considered the weaker party – of inequitable contractual clauses. The dynamics that characterize the business of biological resources show the importance of regulating how they are originally accessed and the strictly related aspect of how benefits arising from their utilization are treated. 2

State Sovereignty over Natural Resources, Access and Benefit Sharing, Equity and Traditional Knowledge under the cbd

The cbd is a multilateral environmental framework treaty whose three main purposes are to promote the conservation of biodiversity, the sustainable use of its components, and the fair and equitable sharing of benefits arising from the use of genetic resources.3 The cbd sets the fundamental principles of State 3 cbd, Art. 1. The cbd was adopted on 22 May 1992 and entered into force on 29 December 1993. There are currently 193 parties to the Convention.

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sovereignty over natural resources, equity, access and benefit sharing and traditional knowledge associated to biological resources and envisages general obligations upon State Parties, thereby establishing the foundations for the further development of international rules on these core issues.4 Furthermore, it creates an articulate institutional architecture operating under the lead of the plenary meeting of the States Parties, the Conference of the Parties (CoP). The CoP with the support of other subsidiary bodies further elaborates and specifies the general commitments listed in the Convention and has progressively developed the principles inspiring the biodiversity legal regime. From the outset, the Convention clearly endorses the principle that States have the sovereign right to exploit their own resources and therefore distances itself from the theories considering biodiversity and natural resources as part of the common heritage of human kind.5 These theories were still echoed in the 1990s and harshly adversed by developing countries. Today the principle of permanent sovereignty on natural resources is generally recognized as a customary norm of international law, although some different views exist with regard to its substantive content.6 From this general principle specific rights and obligations descend upon States: they enjoy the right to possess, exploit, and freely dispose of their resources, and this entails that they are legitimately entitled to authorize access to these resources and determine the modalities of such access. Other inherent rights deriving from sovereignty are the right to regulate foreign investment and to nationalize and expropriate foreign property subject to international law requirements. These rights should be fulfilled in good faith and in the respect of other international legal commitments. As a prerogative deriving from State sovereignty, the cbd recognizes the State authority to determine the modalities to access biological resources and, for instance, requires that access shall be subject to the prior informed consent of the provider country.7 On the other hand, sovereignty implies the respect of certain duties on behalf of States: they shall manage and conserve their natural resources. Pursuant to the cbd, States are required to adopt measures to protect biological 4 At present, three protocols have been adopted in the framework of the Convention: the Cartagena Protocol on Biosafety, the Nagoya-Kuala Lumpur Supplementary Protocol on Liability and Redress to the Cartagena Protocol on Biosafety and the Nagoya Protocol on Access to Genetic Resources and the Fair and Equitable Sharing of Benefits Arising from Their Utilization (abs). 5 cbd, art. 3. 6 N. Schrijver, Sovereignty Over Natural Resources: Balancing Rights and Duties (Cambridge University Press, 2nd ed., 2008). 7 cbd, art. 15.1.

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diversity in situ, for example by establishing protected areas, and ex situ through research and conservation facilities.8 Furthermore, States should exploit biological resources in ways that adequately consider the protection of the environment and the respect for the fundamental human rights and use them for national development purposes and for the well being of people. The inherent interconnection of State sovereignty with the peoples’ rights is duly reflected in the legislation implementing the cbd in South Africa recognizing that: “(…) the State and its people exercise sovereign and inalienable rights over their biological resources” and that “the rights of local communities over their biological resources, knowledge and technologies that represent the very nature of their livelihood systems (…) are of a collective nature and, therefore, are a priori rights which take precedence over rights based on private interests.”9 The biodiversity regime is deeply inspired by the principles of intergenerational and intragenerational equity, which call for a ‘sustainable use’10 of biological diversity that meets the needs and aspirations of present and future generations and for the sharing of benefits among providers and users of biological resources. Recourse to equity as a principle governing the exploitation of genetic resources aims at overcoming the concerns of developing countries that the benefits deriving from the utilization of genetic resources were going mainly to the final users instead of being shared with the original providers of such resources.11 More generally, equity should reconcile the different economic, cultural and ethical interests of the States and other stakeholders, since it inspires the treaty provisions but also the contractual arrangements between

8 9

See respectively cbd, arts 8 and 9. African Model Legislation for the Protection of the Rights of Local Communities, Farmers and Breeders, and for the Regulation of Access to Biological Resources (2000), preamble, at www.cbd.int/doc/measures/abs/msr-abs-oau-en.pdf. 10 The cbd preamble defines: “‘sustainable use’ as the use of components of biological diversity in a way and at a rate that does not lead to the long-term decline of biological diversity, thereby maintaining its potential to meet the needs and aspirations of present and future generations.” 11 Equity is a general principle of law that requires consideration of justice and fairness when interpreting and applying a legal rule. On the meaning and nature of the concept of equity in international law, see D. Shelton, “Equity,” D. Bodansky, J. Brunnée, E. Hey (eds), The Oxford Handbook Of International Environmental Law (Oxford University Press, 2007) 640.

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private parties. The Convention does not clarify the meaning of equity but it provides for guidance on how to implement it in practice.12 Besides the protection of natural resources, the cbd recognizes the importance of protecting the traditional knowledge of indigenous and local communities, as an element that is strictly interconnected with the sustainable management of biodiversity. On this point, the most far-reaching provision of the cbd is art. 8(j) which states that: Each Contracting Party shall, as far as possible and as appropriate, subject to its national legislation, respect, preserve and maintain knowledge, innovations and practices of indigenous and local communities embodying traditional lifestyles relevant for the conservation and sustainable use of biological diversity (…). The provision continues by requiring States Parties to promote their wider application with the approval and involvement of the holders of such knowledge, innovations and practices and encourage the equitable sharing of the benefits arising from the utilization of such knowledge, innovations and practices. Further action to ensure the respect and promotion of traditional knowledge has been suggested by the CoP that recognized the need to halt the misuse and misappropriation of knowledge, innovations and practices of indigenous and local communities embodying traditional lifestyles relevant for the conservation and sustainable use of biological diversity and related genetic resources through effective mechanisms that will protect the rights of indigenous and local communities.13 The cbd marks an important landmark by recognizing, and thereby strengthening, the fundamental principle of State sovereignty on natural and genetic 12 Cfr. cbd, art. 15.7; art. 16.1 and 16.2; art. 19.1 and 19.2. With regard to benefit-sharing related to traditional knowledge, art. 8(j). 13 Conference of the Parties to the Convention on Biological Diversity at its Seventh Meeting, Decision VII/16 on Article 8( j) and related provisions, Doc. unep/cbd/cop/dec/ vii/16, (13 April 2004), Annex: Akwé: Kon Voluntary Guidelines for the Conduct of Cultural, Environmental and Social Impact Assessments Regarding Developments Proposed to Take Place on, or which are Likely to Impact on, Sacred Sites and on Lands and Waters Traditionally Occupied or Used by Indigenous and Local Communities, 32.

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resources, and by setting the main elements of access and benefit sharing. In this context, benefit sharing is not conceived as a compensatory tool granted to indigenous communities when their rights have been breached, but rather as an autonomous form of reward for their role of custodians and sustainable users of resources and as a tangible recognition of their traditional knowledge. However, these concepts are difficult to implement, especially by developing countries who are the most bio-diverse countries but often lack adequate regulatory frameworks at the domestic level.14 Furthermore, developing countries were not satisfied that the existing guarantees would effectively protect their resources and traditional knowledge. Hence the need to strengthen legal certainty and transparency on both sides of the chessboard: for providers of genetic resources to ensure appropriate benefit sharing, on the one hand, and for users to secure access to these resources, on the other hand. The translation of the notion of equitable sharing of benefits into specific obligations has been progressively developed by the CoP. Starting from the early 2000s, the CoP and other treaty-bodies focused on the many implementation challenges of operationalizing the abs provisions. They adopted several soft law instruments and suggested voluntary guidelines to support national authorities in the implementation of domestic abs procedures.15 This lawmaking activity kept an ongoing dialogue among the various stakeholders involved and has later ‘hardened’ in the legally binding provisions of the Nagoya Protocol.

14

L. Glowka, V. Normand, “The Nagoya Protocol on Access and Benefit-sharing: Innovations in International Environmental Law,” E. Morgera, M. Buck, E. Tsioumani (eds), The 2010 Nagoya Protocol on Access and Benefit-Sharing in Perspective. Implications for International Law and Implementation Challenges (Brill-Martinus Nijhoff, 2014), 21, at 24: “(…) in some cases well-intentioned first-generation laws developed to implement the Convention proved difficult to navigate, while the lack of a regulatory framework and the absence of competent authorities on abs in the vast majorities of countries caused legal uncertainty.” 15 The Bonn Guidelines on Access to Genetic Resources and Fair and Equitable Sharing of the Benefits Arising out of their Utilization (Decision VI/24, Doc. unep/cbd/cop6/20 (2002)) represent an important step forward in the direction of strengthening safeguards in accessing genetic resources by providing guidance on the procedures to obtain pic and by setting basic requirements of mat and listing examples of monetary and non-­monetary benefits. The non-monetary benefits, such as the participation of the country of origin in the scientific research and the sharing of technology; and the monetary benefits that are typically the ones resulting from their commercial utilization.

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The Nagoya Protocol

The Nagoya Protocol applies to genetic resources covered by the cbd and to traditional knowledge associated with such resources.16 The Protocol further elaborates upon the general rules of the Convention and expressly recognizes that benefit sharing is linked to the other two objectives of the cbd, namely biodiversity conservation and sustainable use, and that it should contribute to their achievement.17 This linkage calls for a coherent implementation of the Protocol within the original legal framework of the cbd. In an inter-State dimension, the Protocol reaffirms and further specifies the obligation upon Parties to share equitably the benefits arising from the utilization of genetic resources with the country of origin of the resources.18 Advancing from the cbd provisions, in a more progressive intra-State perspective, the Protocol also requires Parties to adopt appropriate domestic regulatory measures to ensure that benefits arising from the use of genetic resources and of related traditional knowledge are shared with the indigenous and local communities holding such resources and knowledge.19 A list of monetary and non-monetary benefits is found in the Annex to the Protocol. Among the monetary benefits the list includes various forms of payments, fees and licenses, joint ventures and joint ownership of intellectual property rights;20 examples of non-monetary benefits are the collaboration in research activities and sharing of its results, the transfer to the provider of resources of technology under fair and most favourable terms, contributions to the local economy, food and livelihood security benefits.21 The obligations set by the Protocol may be grouped in three categories. A first group includes the obligations to be implemented by Parties at the national level. Pursuant to these, States commit to establish a national institutional 16

17 18 19 20

21

The Protocol was opened for signature on 2 February 2011. With 54 ratifications, it entered into force on 12 October 2014. A comprehensive study of the Nagoya Protocol is Morgera, Buck, Tsioumani (eds), The 2010 Nagoya Protocol on Access and Benefit-Sharing in Perspective. Implications for International Law and Implementation Challenges (BrillMartinus Nijhoff, 2014). Nagoya Protocol, arts 1 and 9. Nagoya Protocol, art. 5.1. Nagoya Protocol, art. 5, paras 2 and 5. The issue of intellectual property rights raised major concerns and discussions during the negotiations of the Nagoya Protocol, but it is not addressed in the Protocol. See R. Pavoni, “The Nagoya Protocol and the wto,” Morgera, Buck, Tsioumani, The 2010 Nagoya Protocol op. cit., 200. Nagoya Protocol, Annex.

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network of entities, including focal points and competent national authorities, to adopt regulatory measures and procedures on abs and to ensure their effectiveness.22 A second category of obligations, which in part overlaps with the first one, relates to the substantive and procedural requirements formally addressed to States but that concern directly also private entities that are involved in contractual transactions on abs. Examples of this second type are the provisions indicating the issues that should be considered by providers and users State parties in their domestic legislation and by private parties in their contracts.23 A third set of provisions refers to the obligations upon States to reinforce cooperation at the international level within the Protocol’s institutional architecture by establishing an abs Clearing-house, mechanisms for technology and financial transfer to support the implementation of treaty commitments especially of developing countries,24 and a compliance system to monitor and keep under review the effective implementation of their obligations.25 The compliance mechanism has been recently operationalized by the first MoP and shall be “non-adversarial, cooperative, simple, expeditious, advisory, facilitative, flexible and cost-effective in nature.”26 This compliance mechanism follows the model adopted by other mea s, with some noteworthy peculiarities that reflect the special consideration given to indigenous and local communities.27 Thus, with regard to its institutional aspects, members of the committee are nominated by Parties but could include representatives of 22 23 24

25 26

27

Nagoya Protocol, art. 15. See notably arts 5 and 6 of the Protocol. These issues will be examined in the next section of this chapter. Nagoya Protocol, art. 15.3. According to art. 14 of the Nagoya Protocol, the clearing-house is a means for sharing information on abs provided by the Parties. These information include: legislative, administrative and policy measures on abs; permits or certificate of compliance (see infra); competent authorities of indigenous and local communities, model contractual clauses, codes of conduct and best practices. The first Meeting of the Parties (MoP) to the Nagoya Protocol adopted the Modalities of operation of the access and benefit-sharing clearing-house (Decision NP-1/2, doc. unep/cbd/np/cop-mop/dec/1/2 (20 October 2014), Annex). Nagoya Protocol, art. 30. First Meeting of the Parties to the Nagoya Protocol, Decision NP-1/4, doc. unep/cbd/np/ cop-mop/dec/1/4 (20 October 2014), Annex, Cooperative Procedures And Institutional Mechanisms To Promote Compliance with the Provisions of the Nagoya Protocol and to Address Cases of Non-Compliance, (hereinafter Nagoya Protocol Compliance Mechanism), Section A, para. 2. A comparative study examining several compliance systems under mea s is T. Treves, et al. (eds), Non-Compliance Mechanisms and the Effectiveness of International Environmental Agreements (tmc Asser Press, 2009).

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indigenous and local communities. Furthermore, these communities nominate two observers who are entitled to participate to the committee’s meetings, except if Parties decide otherwise with regard to certain cases.28 With regard to the procedure, the Compliance committee “may seek, receive and consider information from (…) affected indigenous and local communities.”29 Thus, although the communities cannot trigger the procedure,30 they may submit relevant information to the Committee once the procedure is ongoing. Furthermore, the cbd Secretariat may confront these information received from local community representatives against the ones received from the Parties and if contradictory outcomes emerge, it will forward the issue to the Committee.31 These ‘communication channels’ between the communities and the compliance committee are a positive development that could strengthen the dialogue and cooperation between the local actors at the domestic level and the international regulatory regime. The Procedures to Access Genetic Resources and Associated Traditional Knowledge According to the Nagoya Protocol, domestic rules and procedures governing the access to genetic resources and associated traditional knowledge should be informed to clarity and transparency, they should be fair and non-arbitrary as well as cost and time effective.32 States Parties shall designate national focal points in charge of providing relevant information on the modalities of obtaining access to genetic resources and on other relevant aspects related to the process, such as information on the indigenous people and on other stakeholders involved.33 These national authorities are also responsible for granting access permits. The sound functioning of this system is monitored by one or more checkpoints operating at the domestic level.34 These national authorities will be in contact and will share information with the Secretariat of the Protocol, thereby creating a linkage between the domestic and the international legal framework.

3.1

28 29 30

31 32 33 34

Nagoya Protocol Compliance Mechanism, Section B, para. 2. Ibid., Section E, para. 1. The possibility of a ‘community trigger’ was discussed during the intergovernmental negotiations, but was not included in the final text. See E. Morgera, E. Tsioumani and M. Buck, Unraveling the Nagoya Protocol. A Commentary on the Nagoya Protocol on Access and Benefit-sharing to the Convention on Biological Diversity (Brill, 2014) 356. Nagoya Protocol Compliance Mechanism, Section D, para. 9(b)(iii). Nagoya Protocol, art. 6.3(a)(b) and (d). Nagoya Protocol, art. 13. Nagoya Protocol, art. 17.

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The Protocol sets due process requirements that States Parties shall adopt as part of their legislative and administrative measures. The competent authority should adopt a written decision and issue a permit as evidence that the prior informed consent (pic) of the owner of the resource or traditional knowledge has been granted and that the provider and the user have agreed on the terms (the so-called ‘mutually agreed terms’ or mat) that will govern the future utilization and the management of the benefits that will derive from the resources.35 After the competent national authority issues the permit, the latter is notified to a special treaty-body of the Protocol, the abs Clearing-House. Once the national permit is validated by this international treaty body, it formally becomes an ‘internationally-recognized certificate of compliance.’36 This certificate confirms that pic has been obtained and that mat were established and shall contain information on the issuing authority, the date of issuance, the provider, and the person to whom pic was granted. Moreover, it shall indicate the subject-matter or the genetic resource covered by the certificate and the commercial or non-commercial use for which the resource is destined.37 The notification of the permit to the international treaty body connects the domestic and the international regulatory system and establishes a two-tier compliance check that should enhance the transparency of the abs procedure. Furthermore, this two-steps control coupled with the detail and specificity of the information reported in the certificate should enhance certainty with regard to the legal status of the transferred resource and knowledge and hence limit the risk of their grabbing. The respect of pic requirements and the approval and involvement of indigenous and local communities when accessing genetic resources is envisaged upon all Parties, both users and providers of resources. In fact, also user countries are under the obligation to adopt appropriate measures to ensure that resources used within their jurisdictions have been obtained in compliance with pic requirements and that the legitimate owners of traditional knowledge were adequately involved in the accessing process.38 In this regard, two separate due diligence obligations may be envisaged: a first one applies to the State that shall put in place appropriate domestic measures to reach the Protocol’s objectives and entails the international obligation 35 36 37 38

Nagoya Protocol, art. 6.3(e). Nagoya Protocol, art. 6.3(e) iuncto art. 17.2 and 17.3. On the functions and on the kind of information shared through the abs Clearing-house, see Ibid., art. 14. Nagoya Protocol, art. 17.4. Nagoya Protocol, arts 15 and 16.

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to control the conduct of private actors operating under its jurisdiction. The second one is called upon private operators, users and providers of genetic resources, who shall make sure that resources and traditional knowledge have been legally accessed. An example of how these obligations have been implemented in practice is the eu Regulation 511/2014, which states that: With a view to ensuring the effective implementation of the Nagoya Protocol, all users of genetic resources and traditional knowledge associated with genetic resources should exercise due diligence to ascertain whether genetic resources and traditional knowledge associated with genetic resources have been accessed in accordance with applicable legal or regulatory requirements and to ensure that, where relevant, benefits are fairly and equitably shared.39 Arguably, this due diligence obligation does not require extraterritorial interference in the domestic legal order of the provider country, and may be satisfied with the acceptance of the internationally-recognized certificates of compliance, which represent the formal proof that the genetic resources indicated therein were legally accessed and that mat were established.40 The eu Regulation raises the standard of the due diligence set by the Nagoya Protocol upon the users – both States and private actors – of genetic resources, by requiring that the measures they apply should be supported through the recognition of best practices, as well as complementary measures in support of sectoral codes of conduct, model contractual clauses and guidelines with a view to increasing legal certainty and reducing costs.41 The Nagoya Protocol procedure of tracking and providing evidence of access to genetic resources and traditional knowledge represents a way to provide legal certainty in a field traditionally governed by customary rights. One of the 39 The eu Regulation 511/2014 of the European Parliament and of the Council of 16 April 2014 on compliance measures for users from the Nagoya Protocol on Access to Genetic Resources and the Fair and Equitable Sharing of Benefits Arising from their Utilization in the Union, Official Journal of the European Union, 20.5.2014, para. 21. 40 It has been rightly pointed out that extraterritorial application of domestic abs regulations of the provider country may take place in cases brought before the domestic courts of user countries. C. Chiarolla, “The Role of Private International Law under the Nagoya Protocol,” Morgera, Buck, Tsioumani (eds), The 2010 Nagoya Protocol op. cit, 425, at 440. 41 eu Regulation 511/2014, para. 21.

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challenges related to the rights of indigenous people on their land and their resources is that their prerogatives are orally transmitted but may not meet the formalism and other requirements according to national law. Hence, they may not be recognized as formal titles of rights and ownership. Through the Nagoya Protocol pic and mat requirements, the rights of indigenous people on traditional knowledge and genetic resources – be they customary or of other nature – are incorporated and registered in the compliance certificates. Through these certificates, these rights acquire legal certainty and recognition within the national and international legal order. 3.1.1 The Mutually Agreed Terms (mat) It is clearly unfeasible to imagine and preliminary address all the potential problems that may occur in the relationship between a provider and a user with regard to the management of the resources and of the traditional knowledge. Nonetheless the Protocol expressly envisages the more sensitive issues and suggests that providers and users should agree upon specific clauses addressing them. Hence, parties are encouraged to agree on dispute settlement issues, such as the competent jurisdiction and options for alternative dispute resolution, and the applicable law. Furthermore, State Parties should encourage the private contracting parties to address and find agreement on intellectual property rights, subsequent third-party use and changes of intent.42 These issues provide for some substantive elements that fall within the scope of the mat obligation and were among the key concerns of developing countries during the negotiations of the Nagoya Protocol.43 They are extremely sensitive and should be adequately addressed to ensure that benefit sharing covers the full range of potential subsequent uses. Since providers and users may be public entities as well as private entities and individuals, these provisions are directly and formally addressed to States who should adopt appropriate legislation on these matters, but they also have substantive effects on private entities that are involved in contractual transactions on abs. The substantive and procedural obligations on benefit sharing are strengthened by the obligation posed upon States Parties to ensure that their legal systems provide for access to justice in cases of disputes concerning mat.44 Furthermore, the effective implementation of these provisions will be regularly kept under review by the MoP and by the Compliance mechanism.45 42 43 44 45

Cfr. Nagoya Protocol, art. 6.3(g) iuncto art.18.1. Cfr. Glowka, Normand, The Nagoya Protocol op. cit., 31. Nagoya Protocol, art. 18.2. Nagoya Protocol, art. 18.4 iuncto art. 31.

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The Recognition of Laws and Procedures of Local and Indigenous Communities The Nagoya Protocol moves forward from the inter-state language used by the cbd46 towards a greater consideration of indigenous and local communities. Starting cautiously, the preamble of the Nagoya Protocol initially refers generically to the ‘custodians of biodiversity,’ the ‘providers’ of genetic resources without expressly specifying whether it refers to countries or individuals.47 Later on, when traditional knowledge associated with genetic resources enters the picture, the Parties recognize “the diversity of circumstances in which traditional knowledge associated with genetic resources is held or owned by indigenous and local communities” and acknowledge that “it is the right of indigenous and local communities to identify the rightful holders of their traditional knowledge associated with genetic resources, within their communities.”48 The Protocol is certainly influenced by the important developments regarding the rights of indigenous peoples, including the right to their local self-government and to their traditional lands, territories and resources, that have taken place at the international level in the last decade.49 In this perspective, the Protocol recognizes the importance of the active role and of the effective participation of indigenous and local communities and contributes in many ways to strengthen the recognition and the development of their knowledge and values. Adopting a bottom-up perspective, the Nagoya Protocol deepens and operationalizes the principles enshrined in art. 8(j) of the cbd. Pursuant to art. 12 of the Protocol, the Parties commit to take into consideration the views, goals and the aspirations of local peoples, as defined in ‘customary laws, community

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46 The cbd refers generally to States as providers of resources (cfr. cbd, art. 2 definitions). 47 Nagoya Protocol, preamble, 6th and 10th paragraphs. 48 Nagoya Protocol, preamble, 23rd and 24th paragraphs. 49 un General Assembly Resolution, Declaration on the Rights of Indigenous Peoples (13 September 2007), un Doc A/RES/61/295 (undrip); Report of the Special Rapporteur on the Situation of Human Rights and Fundamental Freedoms of Indigenous People, S. James Anaya, The Human Rights of Indigenous Peoples in Light of the New Declaration, and the Challenge of Making them Operative (2008) un Doc. A/HRC/9/9, at 40; International Law Association, Resolution on the Rights of the Indigenous Peoples, ila Resolution No. 5/2012, adopted at the 75th ila Conference, Sofia, (Bulgaria), 26 to 30 August 2012. Notable developments in this field have been brought by international human rights jurisprudence, IAComHR, Indigenous and Tribal Peoples’ Rights over their Ancestral Lands and Natural Resources (2009) oea/Ser.L/v/ii. Doc. 50/09.

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protocols and procedures’ developed by the local communities themselves.50 Furthermore, Parties commit to support the development of these and other traditional legal instruments of indigenous and local communities, including minimum requirements for mutually agreed terms and model contractual clauses for benefit sharing of genetic resources and of associated traditional knowledge.51 Besides recognizing the lawmaking of local communities, Parties shall involve the communities and consult with them in the negotiation of the contractual agreements on the transfer of traditional knowledge.52 To this effect, art.12.2 of the Protocol requires that: Parties, with the effective participation of the indigenous and local communities concerned, shall establish mechanisms to inform potential users of traditional knowledge associated with genetic resources about their obligations (…) arising from the utilization of such knowledge. This provision (one of the few in the Protocol!) uses a rather stringent language, however, its scope is relatively narrow since it covers expressly only the use of traditional knowledge, and not also of genetic resources.53 Furthermore, Parties should promote traditional practices through which local and indigenous communities have historically taken care of biodiversity and encourage them to use and exchange genetic resources and to benefit from them. According to art. 12.4: Parties, in their implementation of this Protocol, shall, as far as possible, not restrict the customary use and exchange of genetic resources and associated traditional knowledge within and amongst indigenous and local communities in accordance with the objectives of the Convention.

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Nagoya Protocol, art. 12.1. A definition of ‘community protocol’ is the following: “a written document developed by a community following a consultative process, to outline the core ecological, cultural and spiritual values and customary laws relating to the community’s traditional knowledge and resources, based on which the community provides clear terms and conditions to regulate access to and benefit-sharing from their knowledge and resources.” Cf. Morgera, Tsioumani and Buck, Unraveling the Nagoya Protocol. A Commentary op. cit., 219. Nagoya Protocol, art. 12.3. The contractual practices and the effective participation of communities’ representatives are discussed infra in the following paragraph. Cf. Morgera, Tsioumani and Buck, Unraveling the Nagoya Protocol. A Commentary op. cit., 218.

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Although this wording is conditioned (‘as far as possible’) and drafted in negative form (‘not restrict’), it upholds an approach that is important with regard to grabbing threats because it encourages the local use and exchange of genetic resources. These provisions aim not only at reducing the risk of grabbing by setting pic and mat requirements, but also positively contribute to strengthen the awareness and the capacity of indigenous communities to benefit directly from the utilization and exchange of genetic resources and of their own traditional knowledge. These obligations directly contribute to tackle the grabbing of genetic resources and associated traditional knowledge because under three different perspectives they strengthen the position of local communities: by recognizing the importance of their legal instruments; by establishing mechanisms to ensure their participation to the relevant abs processes, and by taking measures to preserve and promote communities’ practices. 4

The Contracts on Access and Benefit Sharing: Do They Provide for Effective Safeguards against the Risk of Grabbing?

It has been highlighted that the regulatory framework created by the Nagoya Protocol extends to the contractual arrangements between providers and recipients of genetic materials and traditional knowledge. These transactions take place within a complex legal framework where international legal principles and norms apply together with the applicable domestic law, which includes specific genetic resources law, as well as the more general contract law. Applicable international law includes the fundamental principles en­shrined in the cbd and in the Nagoya Protocol, and most notably equity and fairness in access and benefit sharing. Moreover they may be subject also to the guidelines and requirements set by the CoP’s decisions, to the extent that these are recalled or incorporated by the contracts.54 Besides the biodiversity-related norms, other inter­national rules on intellectual property rights as well as the unidroit Principles of International Commercial Contracts55 may apply. 54

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Cf. Deed of Agreement – Access to Biological Resources and Benefit Sharing annexed to the Australian Model Access and Benefit-Sharing Agreement in the preamble recalls the cbd and article 15 as the legal context in which the Deed is made, and in the annex the Bonn Guidelines. (at http://laptop.deh.gov.au/biodiversity/science/access/permits/pubs/ benefit-sharing-model.pdf). International Institute for the Unification of Private Law (unidroit), Principles of International Commercial Contracts (2010) at http://www.unidroit.org.

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Once transposed into domestic law, the applicable (minimum) standards set by the Nagoya Protocol should ensure compliance with the pic and mat requirements and possibly encourage the contracting parties to address in specific contractual clauses the other issues expressly mentioned by the Protocol provisions. The requirement to reach agreement on the benefit-sharing modalities at the time of accessing the resources, i.e., at an early stage of the pic procedure, should give to the provider party more contractual and bargaining power because she is still in possession of the resources and hence has the possibility to hold back her consent and thereby bar the granting of the permit, if the conditions regarding the resources’ utilization are not satisfactory. Once access is granted, the successive steps of the utilization of the resources and most notably their “subsequent applications and commercialization”56 generally take place in another country and hence could be more difficult to control. Another element to consider is that the value of a genetic resource may significantly vary – in both sides of increase and decrease – at later stages of its utilization process. To this effect, for the purpose of ensuring a fair and equitable benefit sharing, the option of renegotiating mat should be envisaged. Contractual clauses regulating intellectual property rights should be carefully drafted because they have a substantive impact on the interests regulated by the contract. Indeed, a form of grabbing may be envisaged when intellectual property rights on the transferred materials are granted in violation of the contractual terms or in their absence. Furthermore, for the specific purpose of tackling grabbing practices, contractual clauses on the revocation of the access granted or of unilateral withdrawal from the contract would enhance the protection of the provider party. The inclusion of this kind of clauses in the contracts could prove useful in cases where the user party fails to comply with mat, but also for reasons of overriding public interest, such as the protection of the environment and of fundamental rights of the communities involved. For instance, under the relevant African Model Legislation, local communities are recognized the right to refuse access to their biological resources and to withdraw from previous commitments when the access or the related activities are detrimental to their socio-economic life, or their natural or cultural heritage.57 56

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Nagoya Protocol, art. 5.1. This expression broadens the scope of the benefit-sharing obligation to cover all the phases of the research and development chain taking place after the resource is accessed. Cf. Morgera, Tsioumani and Buck, Unraveling the Nagoya Protocol. A Commentary op. cit., 114. African Model Legislation for the Protection of the Rights of Local Communities, Farmers and Breeders, and for the Regulation of Access to Biological Resources (2000), arts. 14, 19 and 20.

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An alternative solution to the liberal approach chosen by the Protocol, where the parties maintain ample discretion in the negotiation of the contracts, is the one adopted by the International Treaty on Plant Genetic Resources for Food and Agriculture (itprgfa).58 This legal framework reduces the space for private decision-making and privileges instead top-down regulations and mandatory standards applicable to the contracts.59 Here, a predetermined Standard Material Transfer Agreement (smta) has been approved that includes mandatory contractual clauses from which parties cannot derogate. For example, with regard to the applicable law, according to art. 7 of the itpgrfa smta: The applicable law shall be the General Principles of Law, including the unidroit Principles of International Commercial Contracts 2004, the objectives and the relevant provisions of the Treaty, and, when necessary for interpretation, the decisions of the Governing Body. A noteworthy clause of the smta envisages that the fao, as the third party beneficiary of the contract, may initiate dispute settlement procedures in case of non-respect of the contractual obligations.60 As regards the effective participation of communities’ representatives to the negotiation and the conclusion of the contracts, and the requirement that these persons are effectively chosen by the communities in accordance with their own decision-making process, an interesting solution is suggested by the South-African Benefit-Sharing Agreement. According to this contractual model, when indigenous communities are involved in the transaction, a resolution adopted by the indigenous community must be attached to the contract. This resolution must confirm that the representative has been duly authorized to

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The International Treaty on Plant Genetic Resources for Food and Agriculture (itprgfa) (3 November 2001, 2400 unts 379) regulates resources, such as crops and forages, for food and agriculture. The itpgrfa is a specialized international abs instrument within the meaning of art. 4.4 of the Nagoya Protocol. A study comparing abs contractual agreements under the cbd and the itpgrfa regimes, in particular from the private sector’s perspective is R. Pavoni, “Channeling investment into biodiversity conservation: abs and pes schemes,” P.M. Dupuy and J.E. Vinuales (eds), Harnessing Foreign Investment to Promote Environmental Protection: Incentives and Safeguards (Cambridge University Press, 2013) 206. smta, art. 8 envisages this options as a last resort measure in case of non-compliance by the parties to the smta with their respective obligations.

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enter into the contract and that the community has full knowledge and consents to the projects and activities to be carried out.61 5

Concluding Remarks

The Nagoya Protocol presents notable developments in international environmental law because it introduces a human-rights approach in addressing access and benefit sharing to genetic resources and associated traditional knowledge. By requiring States to ensure the fair and equitable benefit-sharing with indigenous and local communities, the Protocol addresses the domestic sphere of the relationships between a State and its people and communities, similarly to what human rights instruments do. The innovative reach of these provisions, however, finds its limits in the fact that individuals are not entitled to bring alleged breaches of these rights before the compliance mechanism of the Protocol, and therefore their justiciability depends upon domestic implementation and remedies. Hence it is still within an intergovernmental legal framework, that States commit to a due diligence obligation to take appropriate domestic measures, with respect to which the communities are ‘third party beneficiaries.’62 A noteworthy example of domestic legislation endorsing this approach is the African Model Law on abs recognizing that the State and the community shall be entitled to a share of the earning derived from biological resources and/or knowledge. Pursuant to its provisions, a determined percentage of the benefits is devoted by law to local communities and the decisions regarding the initiatives to be financed through monetary benefits are taken with the involvement and the mutual agreement of the local communities that are the beneficiaries.63 61

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Department of Environmental Affairs of the Republic of South Africa, Benefit-Sharing Agreement, Annexure 8, para. 4. (at https://www.environment.gov.za/sites/default/files/ docs/forms/benefits_sharing_agreement.pdf). For a different perspective, maintaining that these obligations may be considered as owed directly to the communities, see Morgera, Tsioumani and Buck, Unraveling the Nagoya Protocol. A Commentary op. cit., 118. The African Model Legislation for the Protection of the Rights of Local Communities, Farmers and Breeders, and for the Regulation of Access to Biological Resources (2000), art. 12.2. Moreover, pursuant to art. 22: “The State shall ensure that at least fifty per cent of benefits (…) shall be channeled to the concerned local community or communities in a manner which treats men and women equitably. The sharing (of) the benefits (…) shall involve the full participation and approval of the concerned local community or communities.”

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The Nagoya Protocol may raise potential conflicts but also play a complementary role with respect to trade and investment instruments. With regard to the potential conflicts, abs agreements could be qualified as ‘foreign direct investments’ under investment treaties and consequently States could be brought before international investment arbitral tribunals by private investors, for instance in case their abs regulatory policies are challenged as being in violation of the fair and equitable treatment. On the other hand, compliance with the Nagoya Protocol strengthens the abs regulatory apparatus in State Parties – especially the developing countries – and ensures that users countries have permission to access genetic resources. By improving the legal certainty of applicable abs legislation and thereby increasing trust between States Parties and between other stakeholders involved, the Protocol should facilitate access to the resources and knowledge and allow for a more equitable distribution of benefits between users and providers, including indigenous and local communities, thereby avoiding bio-piracy practices and reducing the adverse effects of grabbing on indigenous and local communities. Furthermore, by providing guidance on how States should draft their domestic legislation on abs, the Nagoya Protocol could have an harmonizing function across States Parties providers and users of genetic resources and traditional knowledge. The extent and success of this harmonizing effect will depend upon how States will make use of the broad discretion the Nagoya Protocol’s provisions allow them. In fact, an overview of the Protocol’s provisions shows that the great majority of them leaves to States Parties a significant leeway in the implementation of many obligations.64 Less room for discretion is available for States with regard to the creation of the network of focal points and national authorities in charge of ensuring the sound abs of resources and knowledge. In this context, the Protocol’s provisions are quite direct and straightforward, in particular with regard to the specific functions the national entities shall carry out.65 Other ‘strings’ apply to States with regard to how they will give furtherance to their commitments, because they are linked by a reciprocal and inter-dependent control on their respective abs legislations66 and are subject to international reporting and monitoring under the compliance mechanism established by the Protocol. 64

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Provisions recurrently condition commitments and use language such as: “In accordance with domestic law, each Party shall take measures, as appropriate, with the aim of ensuring…” (art. 7); “In implementing their obligations under this Protocol, Parties shall in accordance with domestic law take into consideration indigenous and local communities’ customary laws” (art. 12.1); “Parties, in their implementation of this Protocol, shall, as far as possible, not restrict the customary use and exchange of genetic resources (…)”(art. 12.4). See, for example, art. 13 and art. 17. Cf. Nagoya Protocol, art. 15.1.

chapter 8

Natural Resource Grabbing: The Case of Tropical Forests and redd+ Annalisa Savaresi* 1 Introduction Every year the world forest cover decreases of millions of hectares1 and forest loss has been described as one of the most significant instances of humaninduced environmental change.2 After decades of unfruitful attempts to negotiate an all-encompassing international treaty on forests,3 efforts to tackle global forest cover loss have found renewed impetus under the climate regime. The endeavour to address the substantial contribution of forest loss to global greenhouse gas emissions4 has in fact resulted in complex law-making processes within and without the institutional scope of the United Nations Framework Convention on Climate Change (unfccc).5 Within the unfccc, Parties have negotiated measures to induce developing countries to maintain and enhance the carbon storage capacity of their forests, * The author gratefully acknowledges support received from the eu-funded LUC4C Project for the preparation of this article. 1 un Food and Agriculture Organization, “Global Forest Resources Assessment,” 2010, fao, 4. 2 M. Williams, Deforesting the Earth: From Prehistory to Global Crisis: An Abridgment (University of Chicago Press, 2006) xvii. 3 For an analysis, see for example R.D. Lipschutz, “Why Is There No International Forestry Law? An Examination of International Forestry Regulation, Both Public and Private,” ucla Journal of Environmental Law and Policy, 2001, 153–179; D. Humphreys, “The Elusive Quest for a Global Forests Convention,” Review of European Community & International Environmental Law, 2005, 1–10; and C.P. MacKenzie, “Lessons from Forestry for International Environmental Law,” Review of European Comparative & International Environmental Law, 2012, 114–126. 4 The Fifth Assessment Report of the Intergovernmental Panel on Climate Change (ipcc) estimates the share of anthropogenic greenhouse gas emissions from agriculture, forestry and other land use (afolu) sector in 2014 at around 25%: ipcc, “2014: Summary for Policymakers,” C.B. Field et al. (eds), Climate Change 2014: Impacts, Adaptation, and Vulnerability. Part A: Global and Sectoral Aspects. Contribution of Working Group ii to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change (Cambridge University Press, 2014) 27. 5 United Nations Framework Convention on Climate Change (unfccc) (adopted 9 May 1992, entered into force 21 March 1994).

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commonly referred to with the acronym ‘redd+.’6 The underlying idea is quite simple: that of creating an international system of financial incentives to maintain and enhance forest carbon stocks in developing countries, where forest loss tends to be concentrated. unfccc Parties have nevertheless struggled to agree on the means by which to put the redd+ idea into practice. In ten years of negotiations they have only managed to agree de minimis guidance on incentives to maintain and enhance forest carbon stocks in developing countries. The resulting sketchy legal framework is characterised by the fact of being sectoral (in the sense that it only covers the forest sector, and only applies to developing countries); voluntary (in the sense that developing countries are not obliged to do redd+ activities, but they may do so, if they wish); and bottom-up (in the sense that developing countries are free to undertake as many redd+ activities as they wish). Developing countries’ obligations in relation to the measurement, reporting and verification of the emissions reductions secured by means of redd+ activities leave them a wide margin of discretion on crucial issues, such as the definition of a forest.7 Equally, no specific obligations are attached to the provision of finance for redd+. Whilst in fact Parties to the unfccc performing redd+ activities are expected to receive ‘resultsbased’ payments, these payments are generically expected to come from a variety of sources, public and private, bilateral and multilateral.8 So far no actual redd+ payments have been made. What has happened, instead, is that some developing countries have announced voluntary commitments to reduce their emissions in the forest sector.9 Many have undertaken 6 The scope of redd+ includes both activities aimed to reduce forest emissions (such as reduced deforestation, forest degradation and sustainable forest management), as well as activities aimed to increase forest carbon sequestration (such as afforestation and reforestation). See unfccc, Decision 1/cp.16, “The Cancun Agreements: Outcome of the work of the Ad Hoc Working Group on long-term Cooperative Action under the Convention,” 15 March 2010, Doc. fccc/cp/7/Add.1, para. 70. 7 For an in-depth analysis of these issues, see A. Savaresi, “Reducing Emissions from Deforestation in Developing Countries under the unfccc: Caveats and Opportunities for Biodiversity,” Yearbook of International Environmental Law, 2010, 21; and A. Savaresi, “Reducing Emissions from Deforestation in Developing Countries under the United Nations Framework Convention on Climate Change. A New Opportunity for Promoting Forest Conservation?,” F. Maes et al (eds), Biodiversity and Climate Change: Linkages at International, National and Local Levels (Edward Elgar, 2013) 237. 8 See unfccc, Decision 2/CP.17, “Outcome of the work of the Ad Hoc Working Group on Longterm Cooperative Action under the Convention,” 11 December 2011, Doc. fccc/cp/2011/9/ Add.2, para. 65. 9 Decision 1/cp.16, paras. 36 and 49, where the Agreements take note of Non-Annex I Parties mitigation actions, to be implemented “as communicated by them” and contained in Ad Hoc

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reforms to create the conditions to perform redd+ activities and eventually receive payments (so-called ‘redd-readiness’). These domestic reforms have largely taken place with the assistance of various bilateral and multilateral international initiatives established beyond the institutional scope of the unfccc, which have independently adopted redd-readiness standards, working as de facto alternative law-making fora. As a result, what began as an international law-making endeavour under the unfccc has become split in a variety of formal and informal overlapping and even competing law-making processes outside the remit of the unfccc. These processes have engendered a very heterogeneous set of outcomes. Little ‘hard’ international law specifically concerning redd+ exists, and most of it has a ‘contractual’ character, taking the form of bilateral agreements aimed to facilitate redd-readiness. Some ‘soft’ law instruments have been adopted, in the form of decisions by unfccc treaty bodies. A significant body of standards has furthermore been elaborated at the initiative of international organisations and non-state actors in the framework of redd-readiness endeavours, complementing and supplementing the legal framework developed under the unfccc. As it shall be seen, these informal instruments presently play a major role in the legal architecture concerning redd+. One specific aspect of redd+ that has been particularly controversial is its potential to act as a catalyst for ‘land-grabs’ and ‘carbon-grabs’ in developing countries. From the outset, the scientific body in charge to assess the impacts of climate change and possible response strategies – the Intergovernmental Panel on Climate Change – warned that forest-related mitigation activities would need to avoid negative impacts on food production and biodiversity likely to result from competition between land uses.10 The un Human Rights Council also warned about the risks of restrictions on access and use of forest resources associated with the implementation of redd+ activities for poorer segments of the population in developing countries.11 Indeed, early evidence from the implementation of redd-readiness activities suggests that, at least in

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Working Group on Long-term Cooperative Action under the Convention, “Compilation of information on nationally appropriate mitigation actions to be implemented by Parties not included in Annex i to the Convention,” 18 March 2011, Doc. fccc/awglca/2011/inf.1. G.J. Nabuurs et al., “Forestry,” B. Metz et al. (eds), Climate Change 2007: Mitigation. Contribution of Working Group iii to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change (Cambridge University Press, 2007) 543. See e.g., un Human Rights Council, “Report of the Office of the United Nations High Commissioner for Human Rights on the Relationship Between Climate Change and Human Rights,” 15 January 2009, un Doc. A/hrc/10/61, para. 68.

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some instances, they have resulted in restriction of access to, use of, and/or ownership of land and forests.12 This paper argues that the complex equity questions underling redd+ may at least be partially addressed by making resort to the vast body of human rights law and practice that has already emerged in connection with the protection of indigenous peoples and other communities inhabiting forests and/ or depending upon their resources. Although human rights are no silver bullet, they provide useful guidance to inform and support international and national law-making on redd+. Such guidance has increasingly been incorporated in international standards concerning development assistance and natural resources management. It is here suggested that the law-making processes associated with redd+ build upon these experience. Far from being a mere consideration of opportunity, getting this specific aspect right of redd+ is key to its success. The paper opens with an introduction on the composite legal landscape characterising redd+. Efforts to streamline human rights considerations into redd+ are then reviewed, highlighting shortcomings and options for further action. The conclusions reflect on ways in which the international law-making on redd+ may address resource-grabbing concerns by adopting a ‘human rights-based’ approach. 2

Law-Making Processes Associated with redd+

International law treats forests as natural resources, recognizing states’ sovereignty as well as their right to exploit forests according to national environmental policies.13 Eversince the 1992 United Nations Conference on the Environment and Development, states have cyclically considered and rejected proposals to negotiate an all-encompassing international treaty on forests and, ultimately, to subject themselves to greater international scrutiny on how they exercise their sovereign powers over forests.

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Rights and Resources Initiative, “What Future for Reform? Progress and Slowdown in Forest Tenure Reform since 2002,” 26 March 2014, at http://www.rightsandresources.org/ publication/what-future-for-reform/. “Non-Legally Binding Authoritative Statement of Principles for a Global Consensus on the Management, Conservation and Sustainable Development of All Types of Forests,” International Legal Materials, 1992, 881 (1a).

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However, the idea that tropical forests are not just natural resources, but sources of important global public goods has made considerable strides in recent years.14 A conceptual divide has materialised between those defending unabated national sovereignty over forests as highly profitable natural resources that neatly fall within states’ geographical boundaries of states, and those advocating addressing forests as an issue of common concern, justifying some kind of ‘droit d’ingérence écologique.’15 Conceptualising the matter of forest depletion as one of provision of global public goods offers an alternative set of lenses to view the problem and the inherent solutions.16 The debate on redd+ provided the opportunity to revolutionise the treatment of forests in international law, by moving away from a focus on national sovereignty, towards securing the provision of global public goods provided by forests. This potential paradigm shift in international forest governance was evident in some unfccc Parties’ submissions, which emphasised that environmental services provided by forests ecosystems had to be recognized and valued by ‘the international community.’17 Negotiations on redd+ under the unfccc were largely expected to create an international system to finance forests carbon sequestration in developing countries. In particular, they were expected to result in the establishment of a redd+ mechanism, provide a new forum to address questions such as who should decide over forests and the carbon stored therein; how such decisions ought to be taken; and how the related financial resources ought to be distributed. The ‘re-commodification’ of forests in light of their carbon value was set to take place with international payments for forest carbon sequestration, supported by a system of obligations for the reporting, measuring and verification 14

See for example teeb, The Economics of Ecosystems and Biodiversity: Mainstreaming the Economics of Nature: A Synthesis of the Approach, Conclusions and Recommendations of teeb (unep, 2010) 27. 15 This term is used in P.H. Sand, “unced and the Development of International Environmental Law,” Journal of Natural Resources & Environmental Law, 1992–1993, 209. 16 D. Bodansky, “What’s in a Concept? Global Public Goods, International Law, and Legitimacy,” European Journal of International Law, 2012, 651, 656. 17 Cf. for example, unfccc/sbsta, “Issues relating to reducing emissions from deforestation in developing countries and recommendations on any further process. Submissions from Parties” 11 April 2006, Submission by Bolivia, Costa Rica, Nicaragua and Papua New Guinea, 27. Cf. also the assertion at the 2010 Paris Conference establishing the redd partnership, where Martin Mabala, Environment Minister of Gabon, reportedly asserted: “Forests are a planetary asset and no longer the concern of individual countries.” E. Gainley, Sarkozy: More Funds Needed to Fight Deforestation, undp watch, at http://undpwatch.blogspot .com/2010/03/sarkozy-more-funds-needed-to-fight.html.

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of emission reductions achieved.18 The struggle to work out the details of how to carry out this unprecedented international policy experiment has resulted in a complicated law-making process, which has eventually produced results rather different from those envisioned by its early proponents. Adoption of a definitive set of internationally coordinated rules on redd+ has been hampered by lack of consensus on financial and institutional arrangements, as well as broader governance questions that have long eluded international regulation. Notwithstanding the closure of negotiations on all out­standing methodological issues concerning redd+ in 2015,19 several elements of the legal architecture concerning redd+ remain illdefined, most saliently those concerning where the finance for redd+ payments should come from. Far from being a merely technical issue, decisions on this specific matter are laden with momentous consequences. As developing countries do not have emission reduction targets under the climate regime, in fact, putting the redd+ idea into practice required that unfccc Parties decide how to entice developing countries to reduce their emissions; how to ensure that they actually do so; and how to cover the related costs. Two main scenarios may be envisioned. First, under a market-based approach, redd+ could become a forest carbon offset program. redd+ payments would then be associated with the creation of a new commodity, i.e. redd+ forest carbon credits. unfccc Parties providing redd+ finance and those providing redd+ forest carbon credits would conceivably enter into relationships akin to international investment.20 As a result of these, willing developed countries would pay willing developing countries to reduce their forest-related emissions, or to enhance their forest carbon stocks, and receive forest carbon offsets in return. This approach has, however, been vehemently opposed by some developed countries, who fear that redd+ offsets would swamp their already frail carbon markets,21 as well 18

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N. Stern, The Economics of Climate Change: The Stern Review (Cambridge University Press, 2007) 26; and J. Eliasch, Climate Change: Financing Global Forests. The Eliasch Review (Earthscan, 2008). Earth Negotiations Bulletin, Volume 12 Number 638, 14 June 2015. D.M. Firger, “The Potential of International Climate Change Law to Mobilise Low-Carbon Foreign Direct Investment,” P. Dupuy and J.E. Viñuales (eds), Harnessing Foreign Investment to Promote Environmental Protection (Cambridge University Press, 2013) 176. eu Commission, “Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions. Addressing the challenges of deforestation and forest degradation to tackle climate change and biodiversity loss,” 17 October 2008, COM(2008) 645, 10, where the Commission recommended considering including forestry credits within the eu carbon

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as by some developing countries, who reject the idea that emission reductions carried out in developing countries be credited to developed ones.22 Others have resisted the commodification of forest carbon altogether.23 Second, under a non-market-based approach, redd+ could be viewed a means to assist developing countries in mitigating climate change, and possibly even in complying with emission reduction obligations under a new climate agreement.24 In this scenario, redd+ payments would be akin to a form of aid.25 Developed countries, in other words, would get nothing in return for financing emissions reductions in developing countries, other than compliance with their general obligations under the unfccc to assist developing countries in implementing their obligations. Reaching consensus on these issues, however, has proven difficult, and presently both scenarios remain in principle possible. So far the unfccc Conference of the Parties (cop) has only encouraged developing country Parties to undertake redd+ activities on a voluntary basis,26 following a series of preparatory steps.27 These steps are expected be followed by an implementation phase, where redd+ activities will be measured, reported and verified, and eventually lead to performance-based payments. To date, however, no actual redd+ payments have been made. The regulatory framework for reporting, measuring and verifying emissions reduction and enhancement associated with redd+ activities remains rather sketchy, leaving a very wide margin of appreciation to implementing parties. As a result, the international legal framework on redd+ is remarkably ill-defined and provides little clarity over States’ reciprocal obligations concerning redd+.

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market “only as a complementary tool and in the longer term – i.e. post-2020 – provided that certain conditions are fulfilled (especially supply/demand balance and liability).” “Joint Statement Issued at the Conclusion of the 16th Basic Ministerial Meeting on Climate Change. Governments of Brazil, South Africa, India and China, Meeting in Foz do Iguaçu, Brazil,” 15 and 16 September 2013, at https://www.environment.gov.za/mediarelease/ 16thbasic_ministerialmeeting_climatechange. Compare the submission by the Plurinational State of Bolivia at the 40th Session Subsidiary Body for Scientific and Technological Advice, “Matters relating to methodological guidance for non-market based approaches, such as joint mitigation and adaptation approaches for the integral and sustainable management of forests,” 26 March 2014. As provided in unfccc, art. 4.3. On the aid-ification of redd+ see e.g. A. Angelsen and D. McNeill, “The Evolution of redd+,” A. Angelsen et al. (eds), Analysing redd+: Challenges and Choices (cifor, 2012) 31, 39. unfccc, Decision 2/CP.13, “Reducing emissions from deforestation in developing countries: approaches to stimulate action,” 14 March 2008, Doc. FCCC/CP/2007/6/Add.1, Annex para. 7. Decision 1/CP.16, para. 71.

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In spite of these uncertainties, numerous developing countries have announced voluntary commitments to reduce their emissions in the forest sector.28 Even more developing countries have undertaken reforms to create the conditions to perform redd+ activities and eventually receive the related payments. These domestic reforms have predominantly taken place with the assistance of the United Nations Collaborative Programme on Reducing Emissions from Deforestation and Forest Degradation (un-redd) and the World Bank’s Forest Carbon Partnership Facility (fcpf). Operating beyond the institutional scope of the unfccc, these initiatives have independently prepared redd-readiness standards that have filled unfccc guidance on redd+ with content. While in fact the fcpf and the un-redd standards are mere internal rules, their incorporation into partnership and borrowing agreements makes them a crucial source of legal obligations for partner countries and a determinant factor in the emerging body of law on redd+.29 As the next section shows in further detail, in the absence of detailed guidance by the unfccc cop, standards by the un-redd and the fcpf have become the principal source of internationally coordinated guidance on redd+, contributing to the emergence of a ‘practice’ for redd-readiness making. These standards, however, adopt diverging approaches on matters that are essential to the protection of the rights of forest-dependent segments of the population in developing countries and to address the land-grabs concerns associated with redd+. 3

Social Impacts, Safeguards and Non-Carbon Benefits of redd+

The restrictions upon forest uses associated with avoided deforestation and degradation may affect forest-dependent communities’ livelihood and means of subsistence. Negotiations on redd+ have witnessed a lively debate on how to avoid these perverse outcomes on how to combine redd+ activities and policies with the pursuit of ‘co-benefits.’ In 2010 the unfccc cop adopted a list of 28

29

unfccc, Decision 2/CP.15, “Copenhagen Accord (18 December 2009),” 30 March 2010, Doc. fccc/cp/2009/11/Add.1, Appendixes i and ii. See also Decision 1/cp.16, paras 36 and 49, where the Agreements take note of Annex i Parties emission reduction targets, and Non-Annex i Parties mitigation actions contained in documents Doc. fccc/sb/2011/inf.1 and Doc. fccc/awglca/2011/inf.1. L. Boisson de Chazournes, “Policy Guidance and Compliance: The World Bank Operational Standards,” D. Shelton (ed.), Commitment and Compliance: The Role of Non-Binding Norms in the International Legal System (Cambridge University Press, 2000) 281–303, 282.

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safeguards that Parties should promote and respect in the implementation of redd+ activities.30 These safeguards acknowledge that redd+ activities should avoid causing harm and enhance “other social and environmental benefits.”31 From the perspective of States’ international obligations, this rather sibylline reference raises the fundamental question of whether or not the provision of such co-benefits is a requirement for Parties performing redd+ activities. Guidance adopted by the unfccc cop does not provide a straightforward answer to this question. While in fact a summary of information on how redd+ safeguards are addressed and respected should be included in national communications that Parties must periodically submit32 and is a requirement to receive redd+ payments,33 the decision of whether or not to report noncarbon benefits and the definition of what these are has been left to the discretion of each state implementing redd+ activities.34 Had unfccc Parties decided to include non-carbon benefits in the reporting obligations concerning the implementation of for redd+ safeguards, this would have been a potentially important tool to provide international scrutiny of how the matter of land tenure and the protection of extant land access and uses are addressed in the implementation of redd+ activities. As this has hardly been the case, some remedies to address potential land and resource grabs associated with redd+ may come from to the unfccc Parties’ extant obligations under human rights law. 3.1 Human Rights and redd+35 Restrictions over forest access and uses associated with redd+ activities may affect the enjoyment of substantive human rights, such as the right to freedom

30 31 32

33

34 35

Decision 1/cp.16, Appendix i, para. 2. Ibid., para 2(e). unfccc, Decision 12/cp.17, “Guidance on systems for providing information on how safeguards are addressed and respected and modalities relating to forest reference emission levels and forest reference levels as referred to in decision 1/CP.16 (2011),” 15 March 2012, Doc. fccc/cp/2011/9/Add.2, paras 3–4. unfccc, Decision 9/cp.19, “Work programme on results-based finance to progress the full implementation of the activities referred to in decision 1/CP.16, paragraph 70,” 31 January 2014, para. 4. unfccc, Draft decision -/cp.21, “Methodological issues related to non-carbon benefits resulting from the implementation of the activities referred to in decision 1/cp.16,” para. 70. This section draws and expands upon some of my reflections in A. Savaresi, “The International Human Rights Law Implications of the Nagoya Protocol,” E. Morgera, M. Buck, and E. Tsioumani (eds), The 2010 Nagoya Protocol on Access and Benefit-Sharing in

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of movement and personal security, property, and freedom from racial discrimination. redd+ activities may also have important implications for the enjoyment of economic, social and cultural rights, including the rights to housing, food, water, health, an adequate standard of living, and culture. The protection of these human rights is especially conspicuous with regard to indigenous peoples and other communities inhabiting and/or depending upon forest resources for their livelihood and survival. Human rights bodies have produced a sizeable body of case law sanctioning the negative impact of forestry and resource extraction activities on the rights of indigenous and local communities. For example, the Inter-American Court of Human Rights found that Nicaragua had violated the right of the members of Mayagna (Sumo) Awas Tingni to use and enjoy their property, by granting logging concessions to utilize resources located in the area where members of the community lived and carried out their activities.36 Building upon this caselaw, some literature has argued that property rights over ancestral land and resources must be recognized regardless of actual use at the time of proceedings, and that alternative resources must be provided where restitutio in integrum is not available.37 Others, however, have more cautiously suggested that, in cases of non-actual use, the extent of indigenous peoples’ rights to lands, territories and resources they traditionally possessed and controlled is ‘less clear.’38 Either way, states have undertaken specific obligations in this regard, under the International Labour Organization Convention Concerning Indigenous and Tribal Peoples in Independent Countries (ilo Convention 169),39 which are also embedded in the un Declaration on the Rights of Indigenous Peoples (undrip).40 As a un General Assembly Resolution, undrip does not ex se impose legally binding obligations on members of the un. Neither does it

36 37 38 39

40

Perspective (Brill, 2013) 53; and A. Savaresi, “The Human Rights Dimension of redd,” Review of European Comparative & International Environmental Law, 2012, 102. Inter-American Court of Human Rights, Mayagna (Sumo) Awas Tingni Community v. Nicaragua, Judgment of 31 August 2001, Case n. 79, para. 153. G. Pentassuglia, “Towards a Jurisprudential Articulation of Indigenous Land Rights,” European Journal of International Law, 2011, 165, 176. Cf. International Law Association, “The Hague Conference Report, Rights of Indigenous Peoples,” 2010, 21. Convention concerning Indigenous and Tribal Peoples in Independent Countries, (ilo Convention 169) (Adopted 27 June 1989, entered into force 5 September 1991). To date the Convention has been ratified by 22 states. unga, “Declaration on the Rights of Indigenous Peoples” (undrip), 13 September 2007, un Doc. A/res/61/295.

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affirm ‘special rights’ that are separate from the fundamental rights in the specific circumstances of indigenous peoples, but rather builds upon ‘existing’ human rights.41 Rather, undrip is an authoritative statement of the rights of indigenous peoples, which ought to be viewed “within the framework of the obligations established by the un Charter to promote and protect human rights on a non-discriminatory basis.”42 On top of these substantive human rights considerations, inadequate involvement of affected subjects in decision-making processes concerning redd+ could be regarded as an infringement of procedural rights. Public participation requirements are a common feature of national and international environmental law instruments, building on the pillars of access to information, participation in decision-making processes, and access to justice.43 In the European region, these guarantees are famously enshrined in the Aarhus Convention,44 which is open for ratification by all states, and whose example has recently been followed in the Latin America and the Caribbean region.45 Indigenous peoples enjoy special protection also in this regard. In particular, undrip recognises indigenous peoples’ right to determine their own economic, social and cultural development and to manage their natural resources.46 The Declaration furthermore prescribes that indigenous peoples may not be forcibly removed from their lands or territories without their free, prior, and informed consent (fpic).47 fpic is required in connection with all legislative or administrative measures that may affect indigenous peoples, particularly for 41

42 43

44

45

46 47

Special Rapporteur on the Situation of Human Rights and Fundamental Freedoms of Indigenous Peoples, “The Human Rights of Indigenous Peoples in Light of the New Declaration, and the Challenge of Making them Operative,” 11 August 2008, un Doc. a/hrc/9/9, 40. Ibid., 41. unga, “Report of the un Conference on Environment and Development, Rio Declaration on Environment and Development,” 12 August 1992, Doc. A/conf.151/26/Rev.1, Annex, Principle 10. United Nations Economic Commission for Europe Convention on Access to Information, Public Participation in Decision-making and Access to Justice in Environmental Matters (Aarhus Convention) (adopted 25 June 1998, entered into force 30 October 2001). v. Torres, “Access to Information, Participation and Justice in Environmental Matters and the Post-2015 Development Agenda: Recent Developments in Latin America and the Caribbean,” 3rd unitar-Yale Conference on Environmental Governance and Democracy, 5 September 2014, at http://conference.unitar.org/yale2014/sites/conference.unitar.org .yale2014/files/2014%20UNITAR-Yale%20Conference%20-%20V%20TORRES.pdf. undrip, Art. 3. Ibid., Art.10.

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the development, utilization or exploitation of mineral, water, or other resources.48 It has been argued that undrip provisions on fpic may be regarded as an embodiment of customary international law.49 The latter conclusion depends on whether one takes the view that custom may indeed form on matters such as these;50 that enough practice exists; and that the required element of opinio juris is satisfied. Nevertheless, indigenous peoples’ right to fpic has also found recognition in the case law of human rights bodies.51 The Inter-American Court has been particularly proactive in recognizing and elaborating upon indigenous and tribal communities rights with regard to granting concessions for the exploration and exploitation of natural resources, or implementation of development investment plans or projects on indigenous or tribal lands.52 Its findings have influenced the decisions of other human rights bodies,53 which have clarified that fpic is required in accordance with obligations under the corresponding treaties.54 Regardless of considerations concerning the legal status of undrip, 48 49 50

51

52

53

54

Ibid., Art. 32.2. International Law Association, “The Hague Conference Report, Rights of Indigenous Peoples,” 2010, 51. For example, Thirlway argues “the practice of a State in relations to its own citizens, a matter of domestic jurisdiction within the meaning of Article 2(7) of the un Charter, is in principle without significance for the establishment of a customary rule.” H. Thirlway, “The Sources of International Law,” M.D. Evans (ed), International Law (Oxford University Press, 3rd ed., 2010) 95, 104. For example, the Inter-American Commission has found that the granting of logging and oil concessions to third parties in the absence of effective consultations with, and the informed consent of, the Maya people had breached their right to property in Maya Indigenous Community of the Toledo District v. Belize, Case No. 12.053, para. 194. This requirement has been applied also to communities not categorized as ‘indigenous.’ Compare: Inter-American Court of Human Rights, Saramaka People v. Suriname, Judgment of 28 September 2008, Case n.172, paras. 79–86. See the compilation in Inter-American Commission on Human Rights, “Indigenous and Tribal Peoples’ Rights over their Ancestral Lands and Natural Resources,” 30 December 2009, oea/Ser.L/v/ii. Doc. 50/09. Cf. for example African Commission on Human and Peoples’ Rights, Centre for Minority Rights Development (Kenya) and Minority Rights Group International on behalf of Endorois Welfare Council v. Kenya, Decision of 4 February 2010, Comm. No. 276/2003, para. 297. See for example Inter-American Commission on Human Rights, Mary and Carrie Dann v. United States, Decision of 27 December 2002, Case n.11.1140, paras. 170–171; and un Committee on Economic, Social and Cultural Rights (43rd Session), “General Comment No. 21, Right of everyone to take part in cultural life,” 21 December 2009, Doc. E/C.12/gc/21, para. 37.

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therefore, fpic has become a well-established requirement in international human rights law. With specific reference to extractive activities, the Special Rapporteur on the Rights of Indigenous Peoples has underscored that there is a very narrow scope of permissible exceptions to fpic. In order to be valid, such limitations must comply with certain standards of necessity and proportionality, be determined by law, non-discriminatory and “strictly necessary solely for the purpose of securing due recognition and respect for the rights and freedoms of others and for meeting the just and most compelling requirements of a democratic society.”55 Such a public purpose “is not found in mere commercial interests or revenue-raising objectives, and certainly not when benefits from the extractive activities are primarily for private gain.”56 These requirements of necessity and proportionality are furthermore said to be “difficult to meet for extractive industries that are carried out within the territories of indigenous peoples without their consent.”57 Whilst elaborated in connection with extractive activities, this interpretation of scope of fpic may be said to apply mutatis mutandis to redd+. And indeed various forest-related standards adopted by international organizations58 and non-state actors59 have increasingly, although not exhaustively, incorporated fpic-like considerations. These have also increasingly emerged in the context of redd+, as the next section explains. 4

Efforts to Streamline Human Rights Considerations into redd+60

4.1 unfccc Treaty Bodies The unfccc does not specifically mention human rights. Nevertheless, the implementation of climate change response measures, like redd+, may have a host of implications on the enjoyment of several human rights. The Human 55 56

undrip, art. 46, para. 2. Special Rapporteur on the Situation of Human Rights and Fundamental Freedoms of Indigenous Peoples, “Extractive industries and indigenous peoples” 1 July 2013, a/hrc/24/41, 35. 57 Ibid. 58 International Tropical Timber Organisation, “Criteria and indicators for the sustainable management of tropical forests including reporting format,” 2005, Criteria 7.12–14. 59 Forest Stewardship Council, “Principles and Criteria,” 2012, Principles 2–4; and Roundtable on Sustainable Palm Oil, “Principles and Criteria for Sustainable Palm Oil Production,” 2007, 2. 60 This section draws and expands upon some of my reflections in Savaresi, “The Human Rights Dimension of redd,” op. cit.

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Rights Council and its Special Rapporteurs and Independent Experts have increasingly drawn attention to the need to take into account the human rights implications of climate change response measures,61 including redd+.62 They have furthermore suggested that international human rights law might strengthen international, regional and national climate change policymaking, promoting policy coherence, legitimacy and sustainable outcomes.63 The unfccc cop, for its part, has specifically emphasized that Parties should fully respect human rights “in all climate change related actions.”64 Since the unfccc does not contain any conflict clause, this assertion may be regarded as a significant statement concerning the relationship between the climate and the human rights regimes. As there is no intrinsic priority of one set of obligations over the other, when faced with implementation conflicts, obligations under the unfccc should be interpreted in such a way as to support, rather than conflict with, their human rights obligations. However, not all Parties to the unfccc have ratified human rights treaties, and adherence to the unfccc may not become an instrument to impose upon States obligations contained in instruments they have not adhered to. Therefore, the identification of relevant human rights law and practice depends on a host of circumstances, and most crucially, on the human rights treaties each unfccc Party has ratified. In the specific case of redd+, the safeguards adopted by the unfccc cop specifically underscore the need to respect the “rights of indigenous peoples and members of local communities, taking into account relevant international obligations, national circumstances and laws,” noting the adoption of undrip.65 This reference to the protection of the rights of indigenous and local communities is an important source of additional guidance on how to address the relationship between redd+ and human rights law. Virtually all unfccc Parties eligible to participate in redd+ have ratified the two ‘foundational’ human rights treaties, the International Covenant on Civil and Political 61

62

63 64 65

See the collection of references in Independent Expert on the issue of human rights obligations relating to the enjoyment of a safe, clean, healthy and sustainable environment, Mapping Human Rights Obligations Relating to the Enjoyment of a Safe, Clean, Healthy and Sustainable Environment. Focus report on human rights and climate change (2014). See e.g. unga Human Rights Council (10th Session), “Report of the Office of the United Nations High Commissioner for Human Rights on the Relationship between Climate Change and Human Rights”, A/HRC/10/61, 15 January 2009, 68. unga Human Rights Council (26th Session), Res. 26/L.33 (23 June 2014), Preamble. See Decision 1/cp.16, para. 8. Ibid., Appendix i, 2(c).

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Rights66 and the International Covenant on Economic, Social and Cultural Rights.67 Several redd+ eligible countries have also ratified regional human rights treaties, and some of them have ratified ilo Convention 169 and the un Convention on the Elimination of All Forms of Racial Discrimination (uncerd).68 In this vein, redd+ safeguards may be regarded as sui generis conflict avoidance devices, drawing attention to the international human rights treaties unfccc Parties have ratified, and to the need to implement redd+ activities in a way that is compatible with obligations concerning the protection of human rights.69 Thus, the implementation of redd+ activities should not lead to violations of substantive human rights, such as the right to property, or the prohibition of discrimination. Furthermore, redd+ safeguards also require that redd+ activities promote and support the participation of all stakeholders.70 States’ obligations in this regard overlap with those associated with procedural human rights concerning public participation. The relevant law, however, clearly depends on the treaties states have ratified, as adherence to redd+ may not become an instrument to impose upon states’ obligations contained in instruments they have not adhered to. For example, ilo Convention 169 provides a series of procedural rights concerning activities to be carried out on indigenous peoples’ traditional lands,71 including their right to partake in the benefits of such activities and receive compensation for any damage sustained.72 unfccc Parties that have ratified ilo Convention 169 may, as a result of their commitment under this instrument, have legislation in place to protect indigenous peoples’ rights. In such cases, legislation passed to meet ilo Convention 169 requirements could be used as a basis to define how land rights relate specifically to redd+. Only a few states eligible to carry out redd+ activities, however, have ratified ilo Convention 169.

66 67 68

69 70 71 72

The only unfccc Parties eligible to carry out redd+ activities that are not parties to the iccpr are Bhutan, Fiji, the Solomon Islands and South Sudan. The only unfccc Parties eligible to carry out redd+ activities that are not parties to the icescr are Bhutan, Fiji, Mozambique, South Sudan and Vanuatu. International Convention on the Elimination of All Forms of Racial Discrimination (uncerd) (adopted 7 March 1966, entered into force 4 January 1969). The Convention has 177 Parties. Vienna Convention on the Law of Treaties, Art. 31(3)(c). Decision 1/cp.16, para. 2(d). ilo Convention 169, art. 6. Ibid., art. 15.

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Nevertheless, several unfccc Parties have supported the adoption of undrip,73 which provides a series of procedural and substantive rights concerning indigenous lands or territories. States are required to consult and cooperate in good faith with the indigenous peoples concerned through their representative institutions in order to obtain fpic, “particularly in connection with the development, utilization or exploitation of mineral, water or other resources.”74 The requirement of consent has been interpreted to entail that indigenous peoples be empowered to “effectively determine the outcome of decision-making that affects them, not merely a right to be involved in such processes.”75 As recalled above, undrip does not ex se impose legally binding obligations on members of the un, but indigenous peoples’ and other “tribal” communities’ right to fpic has also found recognition in the case law of human rights bodies.76 There are thus multiple entry points whereby fpic may be regarded as a requirement for redd+/redd-readiness activities. A fundamental caveat must however be borne in mind. Given the lack of univocal guidance from the unfccc cop, States’ obligations in this regard depend upon the commitments they have undertaken under the human rights treaties they have ratified, as well as relevant domestic laws. The processes dealing with redd-readiness have addressed this matter in greater detail, adopting rather diverging approaches. 4.2 redd-Readiness Processes The un-redd Programme (un-redd) was established in 2008 as a multidonor trust with the objective to assist developing countries with reddreadiness preparations.77 The un-redd has adopted a ‘human rights-based approach’78 to guide partner countries in interpreting unfccc cop guidance

73

74 75 76 77 78

The Declaration was adopted by a majority of 144 States, with four votes against: Australia, Canada, New Zealand and the United States. These four states have since reversed their positions. Among unfccc Parties eligible to carry out redd+ activities, Azerbaijan, Bangladesh, Bhutan, Kenya and Nigeria abstained, whereas Ethiopia, Fiji, Papua New Guinea, Solomon Islands and Vanuatu did not vote. undrip, art. 32.2. Office of the High Commissioner for Human Rights, “Expert Mechanism Advice No. 2, Indigenous peoples and the right to participate in decision-making,” 2011, para. 1. Inter-American Court of Human Rights, Saramaka People v. Suriname cit., paras. 79–86. un-redd, “un Collaborative Programme on Reducing Emissions from Deforestation and Forest Degradation in Developing Countries, Framework Document,” 20 June 2008, 8. un-redd, “Social and Environmental Principles and Criteria,” 25–26 March 2012, unredd/pb8/2012/v/1, 2.

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on redd+ in light of human rights law and practice.79 In particular, un-redd standards have the explicit objective to help partner countries to meet their commitments under a number of international agreements, including human rights ones, as well as decisions by their treaty bodies.80 The list of relevant instruments includes ilo Convention 169, undrip and uncerd.81 Firstly, un-redd standards require that funded programs respect and promote the recognition and exercise of the rights of indigenous peoples, local communities and other vulnerable and marginalized groups “to land, territories and resources, including carbon.”82 Importantly, the un-redd should respect and uphold decisions taken, whether consent is given or withheld; ensure that there is no involuntary resettlement,83 and clearly building upon rights included in human rights instruments, especially ilo Convention 16984 and undrip.85 Secondly, un-redd standards require that the design, planning and implementation of national redd+ programs “promote sustainable livelihood and poverty reduction,”86 and respect local and other stakeholders’ values.87 There is an evident link between this requirement and economic social and cultural rights, like the right to food, but also with indigenous peoples’ right to determine and develop priorities and strategies for the development or use of their lands or territories and other resources.88 Thirdly, un-redd standards require that the design, planning and implementation of national redd+ programs comply with ‘democratic governance,’89 going beyond the unfccc cop safeguards, to encompass a range of elements that are typically associated with procedural rights. un-redd standards, in fact, specifically ask that all information related to redd+ be transparent and accessible; the full and effective participation of relevant stakeholders; and access to justice.90

79 Ibid., 3. 80 Ibid., 2. 81 Ibid. 82 Ibid., Principle 2, Criterion 7. 83 Ibid., Criteria 7–11. 84 ilo Convention 169, arts. 6 and 15. 85 undrip, arts 3, 10 and 32. 86 un-redd, “Social and Environmental Principles and Criteria,” Principle 3. 87 Ibid., Criterion 21. 88 undrip, art. 32. 89 un-redd, “Social and Environmental Principles and Criteria,” Principle 1. 90 Ibid., Criteria 1–6, and at 8.

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These standards are further elaborated upon in guidelines that partner countries should use to seek and obtain fpic for all activities supported by the un-redd.91 These guidelines describe fpic as a ‘special standard’ for the exercise of indigenous peoples’ substantive rights, including the right to property, and other rights that may be implicated in natural resource development.92 fpic criteria are outlined in great detail, including a step-wise approach specifying what is required from partner countries.93 The guidelines do not include a list of activities for which fpic is required, but a checklist to determine whether or not this might be the case.94 Activities potentially covered by fpic span from the adoption of legislation to the practical implementation of redd+ activities at the local level.95 The guidelines distinguish consent from mere consultation, specifying that fpic is meant to enable communities to participate in decision-making processes, and withhold and withdraw their consent.96 un-redd partner countries are furthermore to consider fpic also for communities that share characteristics with indigenous peoples,97 whereas identification of indigenous peoples should take place by means of self-identification and not be dependent upon whether the national government has recognized the subject community as indigenous peoples.98 Finally, the un-redd is developing a mechanism to address grievances from individuals and communities affected by funded activities, as well as reports of non-compliance with its standards. This mechanism is set to operate in addition to grievance mechanisms that partners are required to establish at the national level, to enable the un-redd to scrutinise implementation of its guidance in partner countries. un-redd partner countries are supposed to submit biannual reports on progress achieved, and to provide information on the implementation of these standards. As the un-redd standards have only recently been adopted, little evidence exists on how they have been implemented in practice. It already seems clear, however, that the un-redd has gone to great lengths to expand upon the 91 92 93 94 95 96 97 98

un-redd, “Guidelines on Free, Prior and Informed Consent,” 2013. Ibid., 18. Ibid., 23–4. Ibid., 27. Ibid., 28. Ibid., 20. Ibid., 12. Ibid., 29.

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unfccc cop guidance, drawing on human rights law and practice. While the un-redd does not request states to ratify human rights treaties, its standards specifically draw upon human rights law and practice. As states enter voluntarily into partnerships with the un-redd, they are expected to abide by its standards, which may be regarded as sui generis human rights conditionalities. In turn, this raises the question of the legitimacy of such conditionalities, since the un-redd standards seemingly impose upon partner countries human rights obligations drawn from treaties that they have not ratified. Considerations of a different nature apply to the other main international initiative dealing with redd-readiness, the fcpf. The fcpf was launched in 2007 with the aim of providing eligible countries with financial and technical assistance to carry out redd+ activities.99 Unlike the un-redd, the Facility also aims to pilot performance-based payments for redd+ activities,100 and is set to start testing such payments in 2015, as a means to increase confidence in the establishment of a redd+ mechanism under the unfccc.101 The World Bank has assumed the functions of trustee and secretariat of the Facility. The fcpf is subject to the World Bank’s operational policies to avoid, mitigate, or minimize adverse impacts of projects supported.102 However, the World Bank’s Operational Policy on Indigenous Peoples requires partner countries to engage in a process of free, prior, and informed ‘consultation,’ rather than ‘consent.’103 No reference to fpic is made, involuntary resettlement is openly contemplated, and adverse effects should be “minimized, mitigated, or compensated.”104 The fcpf decision to rely upon controversial World Bank operational policies has attracted much criticism. The un Permanent Forum on Indigenous Issues has emphasized that “displacement and exclusion of indigenous peoples from their forests should be avoided at all costs” and that the choice not to participate in redd+ or in fcpf supported projects “should be respected.”105 99 World Bank, “Charter Establishing the Forest Carbon Partnership Facility,” 2013, 2. 100 Ibid. 101 Compare: World Bank, “Charter Establishing the Forest Carbon Partnership Facility,” 2. 102 Forest Carbon Partnership Facility, “Incorporating Environmental and Social Considerations into the Process of Getting Ready for redd plus,” March 2010, 2. 103 World Bank, “op 4.10 – Indigenous Peoples,” July 2005, 1. 104 Ibid. 105 See un Permanent Forum on Indigenous Issues “Impact of Climate Change Mitigation Measures on Indigenous Peoples and on Their Territories and Lands,” 19 March 2008, Doc. E/C.19/2008/10, para. 88.

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More generally, the un Special Rapporteur on the Rights of Indigenous Peoples has urged that the Operational Policy on Indigenous Peoples should be reviewed to ensure consistency with undrip and the rights of indigenous peoples.106 An evaluation of the fcpf has specifically underscored the need to strengthen coordination with un-redd, and resolve differences with regard to advice given to participating countries on implementation of social safeguards.107 The reluctance of the World Bank to deal with human rights, however, is a major hindrance towards greater collaboration between the two institutions on this issue. The divergence in safeguards adopted under the fcpf and the un-redd has resulted in the fact that the same activities in the same countries may be subject to different standards, depending on which institution is handling the funding. To address this problem, the fcpf has decided that when the fulfilment of the Partnership agreements is delegated to third institutions that deploy more stringent standards than its own, the more stringent standards prevail.108 While this solution addresses questions associated with conflicts between standards, it also means that states that are partners solely to the fcpf can abide to less stringent standards. This approach is hardly conducive to addressing the concerns associated with land and resource grabs associated with redd+. Incoherence between standards by the fcpf and the un-redd is in urgent need of coordination, to ensure the establishment of a level playing field enabling countries to carry out redd+ activities on an equal footing and avoid land and resource-grabs. Guidance and obligations embedded in human rights law and practice provide a useful and expedient term of reference in this respect. It is theoretically possible that only unfccc Parties that consent to adhere to a human rights-based approach get access to redd+ funding. As this section has shown, while the unfccc cop has not addresses this matter, redd-readiness processes have taken a divergent stance on it. The next section reflects on how more systematic reliance on human rights law and practice may help address resource-grabbing concerns associated with redd+.

106 un Special Rapporteur on the Rights of Indigenous Peoples, Press Release, 27 March 2013. 107 Baastel and nordeco, “First Program Evaluation for the Forest Carbon Partnership Facility (fcpf)” 13 June 2011, 54. 108 Forest Carbon Partnership Facility, “Readiness Fund Common Environmental and Social Approach among Delivery Partners,” 2011, 9.

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179

Conclusions: Addressing Resource-Grabbing Concerns Associated with redd+ by Building upon Human Rights

The excursus on measures adopted to address the social impact of redd+ activities has revealed a fragmented picture and diverging standards on fundamental issues such as involuntary resettlement and fpic. There is ample scope to build upon human rights to address the resource-grabbing concerns associated with redd+ activities. Building upon states’ extant human rights obligations would avoid duplicating efforts and exploit the consensus that underpins existing human rights law. The added value of making reference to human rights does not just lie in legal enforceability, but also in benchmarking and institutional support. De lege ferenda, concerns relating to the resource-grabbing concerns raised by redd+ activities may therefore be at least partially addressed by unambiguously anchoring redd+ safeguards to states’ human rights obligations. Such an approach may be embedded in unfccc cop guidance. Building explicit links with extant human rights instruments and practice, however, may be difficult because not all state Parties eligible to carry out redd+ activities are parties to the same human rights treaties. At the institutional level, coherence between redd+ and human rights could be obtained by deepening cooperation between unfccc and human rights bodies, with Human Rights Council procedures monitoring redd+ practice, or entrusting a Special Rapporteur on climate change and human rights with this task.109 Another avenue to engender greater synergies with human rights could be to build upon extant certification standards, which have been developed to support redd+ programs in contributing to human rights protection and poverty alleviation.110 Finally, it could also be possible to ‘upgrade’ un-redd standards, by means of a unfccc cop decision. Imperfect as they may be, un-redd standards provide an obvious source of inspiration and an expedient point of departure to develop an internationally coordinated approach to the land and resource grab concerns associated with redd+. Their incorporation in a unfccc cop decision, however, would require bypassing institutional jealousies, as well as the opposition of unfccc Parties that have consistently objected to allowing 109 Cf. the petition launched by Environmental Justice Foundation, at http://ejfoundation .org/climate/a-special-rapporteur-on-human-rights-and-climate-change. 110 Such as: Climate, Community and Biodiversity Alliance, “Climate, Community and Biodiversity Project Design Standards,” 2013, at www.climate-standards.org/ccb-standards; and ccba and care, “redd+ Social & Environmental Standards,” 2012, at www.redd-standards.org.

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greater international scrutiny on domestic policies on issues such as forest and land governance. And indeed, the recent closure of unfccc negotiations on methodological guidance on redd+ unequivocally indicates that there is limited political appetite to provide further and more pervasive guidance on how to address concerns associated with social impact of redd+ activities, including potential land and resource grabs. Yet, existing references to human rights in unfccc cop decisions, and the potential inclusion of a reference to human rights in the new climate agreement to be adopted in December 2015,111 clearly draw attention to unfccc Parties’ extant obligations under human rights law. In this connection, the unredd standards have arguably shown the way and engaged in a useful exercise of mutually supportive interpretation of States’ obligations. Time will tell whether the un-redd human rights-based approach will solve the delicate land and resource grabbing concerns raised by redd+. For the time being, it is clear that while redd+ has opened an unprecedented window of opportunities, it has also created new risks. Experience accumulated with human rights law and practice seemingly provides a precious aid on how to address these risks. It can only be hoped that unfccc Parties capitalize upon lessons learnt through this experience.

111 A. Savaresi and J. Hartmann, “Human Rights in the 2015 Agreement” (Legal Response Initiative 2015).

chapter 9

International Land Investments or the Environment Put up for Auction: The Case of the Niger Basin Komlan Sangbana 1 Introduction International land investments in developing countries is one of the major phenomena of recent decade.1 The increasing demand for food, animal feed, biofuels, minerals and timber, as well as water scarcity in some regions of the world have motivated a number of countries and private investors to invest heavily in the acquisition of land in areas deemed suitable for agricultural production, particularly those located near water resources.2 It is estimated that since 2006, 15 to 20 million hectares of farmlands in developing countries have been subjected to transactions or negotiations with foreign investors.3 Sub-Saharan Africa is generally cited as the first destination of these investments.4 However, the acquisition of these lands generally results in the setting up of systems of intensive farming that pose serious threats to aquatic ecosystems in place.5 This situation is further exacerbated when the aquatic ecosystem is shared by several States. This contribution aims at clarifying the implications of international land investments on the shared freshwater in terms of the international regime of environmental protection. To do this we will pinpoint these implications and suggest measures aiming at ensuring

1 See hlpe, Land Tenure and international investments in agriculture, Second Report of the High Level Panel of Experts on Food Security and Nutrition, Rome, 2011, 8–9. 2 Ibid.; see also P. Woodhouse, “Foreign Agricultural Land Acquisition and the Visibility of Water Resource Impacts in Sub-Saharan Africa,” Water Alternatives, 2012, 213–214. 3 un Human Rights Council, Large-scale land acquisitions and leases: A set of minimum principles and measures to address the human rights challenge, Report of the Special Rapporteur on the right to food, 28 December 2009, un Doc. A/hrc/13/33/Add.2, para. 11. 4 Ibid. 5 For a substantive developments on the impacts of Farmland Investments on water resource, see M.M. Mbengue, S. Waltman, Farmland Investments and Water Rights: The legal regimes at stake (iisd, 2015); P. Woodhouse, “Foreign Agricultural Land Acquisition and the Visibility of Water Resource Impacts in Sub-Saharan Africa,” Water Alternatives, 2012, 208–222.

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sound management of the environment. In this regard, we will use as area of illustration the Niger basin area. 2

Niger Basin Area

2.1 Geographical Background The Niger River Basin is located in Western Africa and covers 7.5% of the continent. The basin spreads over Benin, Burkina Faso, Cameroon, Chad, Guinea, Ivory Coast, Mali, Niger, and Nigeria totalling up nine different countries that make up the area of the basin.6 The Niger River has a total length of 4200 km, and is the third longest river in Africa (9th in the world), behind the Nile and the Congo Rivers.7

Figure 9.1  Red: Country limit, Yellow: Niger Endoreic Basin, Blue: Niger Active Basin Credit: Niger Basin Authority, 2014 6 Information available online at: http://www.abn.ne/. See also Niger Basin Authority, Atlas Niger Basin (Niger Basin Authority, 2007). 7 Niger Basin Authority, Atlas Niger Basin op. cit., 6.

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The basin is home to an estimated 107 million people who live mostly on agriculture, livestock farming and fishing as well as a few other activities that are directly or indirectly related to the water resource.8 The Niger River encompasses six different hydrographic regions, each of which is distinguished by unique drainage and topographic characteristics.9 The Upper Niger River Basin’s headwaters are in the Fouta Djallon Massif, Guinea. From there the river then flows northeast, traversing the Inland Delta, a vast spreading floodplain which averages 50.000 km2 in size and that dissipates a large portion of the potential hydraulics through evaporation and absorption. When it reaches the edges of the Sahara Desert, the Niger River turns back, forming a great bend and flowing southeast as the Middle Niger River section. Then it becomes the Lower Niger as it flows to the Niger Delta at the Gulf of Guinea, which it reaches after being joined by its largest tributary, the Benue River. The diverse climatic and geographic characteristics of the Niger River Basin play a very important role in the availability of water resources, which then affects a range of water resource related activities. With an active part covering an area of nearly 2.2 millions of square km2 including 1.5 million square km2 of an active hydrological basin, the Niger Basin has significant potential irrigable lands which rouses growing interest among investors. If information regarding these transactions is generally almost non-existent due to the opacity surrounding transfer agreement, it was however estimated in 2009 that about 16.200 ha of land have been disposed of within the inner delta of the Niger in Mali.10 It is likely that similar estimates are envisaged in other segments of the basin considering their potential. Therefore, the impact of these investments can be questioned under the principles of International Environmental Law. 2.2

Legal Background

The protection of the Niger Basin is currently under an innovative legal framework, which raises the protection of environment as a cornerstone of the management of the river Basin. Firstly, we will mention the Niger Basin Water 8 Ibid. 9 I. Andersen, K.G. Golitzen (eds), The Niger River Basin. A Vision for Sustainable Management (The World Bank, 2005). 10 L. Copula et al., Land Grab or Development Opportunity? Agricultural Investment and International Land Deals in Africa (iied/fao/ifad, 2009) 42; see also T. Hertzog et al., “Ostrich-like Strategies in Sahelian Sands? Land and Water Grabbing in the Office du Niger, Mali,” Water Alternatives, 2012, 304–321.

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Charter (hereinafter Water Charter) adopted in 30 April 2008. The Water Charter reflects the values that must guide post-modern water resources management in Africa.11 It puts water resources at the heart of the law of the African international watercourses contrary to the classics instruments of regulation of international rivers and lakes which are limited to cooperation in the use of a river basin.12 In 2011, an Appendix related to the protection of environment (hereinafter Appendix to Water Charter) was added to the Water Charter. The Appendix aims to ensure adequate protection of the environment of the basin on the basis of sustainable, collaborative and participatory management of the environment in accordance with the goals of sustainable development (art. 3). The Appendix was divided in 23 chapters that cover all aspects of aquatic environments. The first three chapters provide general principles and tools related to the management and protection of the resources of the basin. It reaffirms general principles such as the no-harm principle, the precautionary principle, the principle of cooperation, the polluter-pays principle, public participation or the obligation to assess the environment impact. Other chapters provide a specific framework for classic issues like the fight against water pollution and the fight against degradation of land (Chapters 4–6), or suggest a set of rules to deal with new issues that challenge the management of the area like desertification, climate change or genetically modified organisms (Chapters 7 to 11). It deals also with the right of people regarding environmental issues (Chapter 16) and makes an original provision for dispute settlement (Chapters 19–20).13 In this respect, the Appendix to the Niger Basin Water Charter appears as a rare instrument on shared water courses which takes into account all the sectors of environment and all natural resources of a shared basin in a holistic view. Despite this innovative approach, it must be underlined that this issue of land acquisition largely remains a matter of internal policy of States. Art. 3 of the Appendix to the Water Charter makes it clear that land issues are excluded from the scope of the Annex: 11

M.M. Mbengue, “Les Chartes de l’eau: vers une nouvelle conception de la gestion des ressources en eau partagées,” M. Kamga and M.M. Mbengue (eds), Liber amicorum Raymond Ranjeva: Africa and International Law: Reflections on the International Organization (Pedone, 2013) 227. 12 Ibid. 13 In addition to classic dispute settlement mechanisms, the Appendix provides a mechanism that involves traditional authorities in the conflict resolution related to the environment at local level (art. 216). This provision take account the specificity of dispute around African shared watercourses that involves most of time local communities which living near the watercourses.

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This Appendix applies to all sectors of environment and all natural resources of the basin. Notwithstanding the preceding paragraph, are excluded from the scope of this Appendix, land issues and protection of marine environment. The protection of these environmental sectors excluded from the scope of this Appendix, is under the jurisdiction of the States Parties and shall remain governed by national laws and international conventions binding on States Parties. However, we must distinguish between the regulations on land acquisition per se and the consequences of the exercise of this sovereign right of States over shared natural resources. This distinction is also followed in the Appendix to Water Charter through the consecration of a general obligation to fight against pollution. According to art. 51: “The Authority and the Member States undertake to cooperate together to prevent and reduce pollution in the Niger basin.” Art. 52 provides that the aspects of cooperation against pollution concern inter alia: a) Protection of biodiversity including flora, fauna, fish resources and associated ecosystems; b) Protection of natural resources including soil and water resources through monitoring of physicochemical parameters of water; c) Protection of the environment against hazardous substances including waste, pesticides, residues of fertilizers and other harmful and/or dangerous chemicals; d) Protection against agro-pastoral malpractice. According to this provision, it appears that the protection of the basin aquatic environment takes into account the fight against the impact of the land uses activities. The Article underlines the holistic view that must guide the environmental protection issues. Therefore, to understand the scope of environmental implications of international farmland investment, it would be appropriate to apprehend the integrated nature of the various elements of the environment. The Appendix to Water Charter adopts the definition of multilateral environment instruments14 and highlights the character of interdependency in defining biodiversity as being “the variability among living organisms from all sources, inter alia, terrestrial, marine and other aquatic ecosystems and the ecological complexes of which they are part (…)”(art. 1, para. 1). By ‘ecosystem’ is meant a “dynamic complex formed of communities of plants, animals and microorganisms and their non-alive environment which, by their interaction, form a functional unit” (art. 1, para. 11). Consequently, the observation of environmental implications of land investments is framed in an ecosystemic approach that includes the management of land, forests and the use of water. 14

See notably Convention on Biological Diversity (1992), arts. 2 para. 2 and 8.

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The Environmental Implication of the International Land Investments

The principle of sustainable development is the cornerstone of the legal regime related to the protection of the Niger Basin. In the preamble of the Appendix to Water Charter, the Parties justify their will to adopt the Appendix in their determination to promote and protect the basin’s environment, to ensure its sustainable development. Solemnly declared in the Rio Declaration on Environment and Development,15 the principle of sustainable development underpins the idea according to which the right to economic development cannot be claimed at the expense of obligations to protect the environment. The goals of economic development and those of environmental protection must be addressed in an integrated manner.16 In a transboundary context, the implementation of the principle of sustainable development entails compliance with the duty to prevent harmful effects in the environment and natural resources of other States.17 Set forth in Principle 21 of the Stockholm Declaration and resumed in Principle 2 of the Rio Declaration, the no harm rule requires that: States have, in accordance with the Charter of the United Nations and the principles of international law, the sovereign right to exploit their own resources pursuant to their own environmental and developmental policies, and the responsibility to ensure that activities within their jurisdiction or control do not cause damage to the environment of other States or of areas beyond the limits of national. Under the Niger basin legal regime, the no harm principle is enshrined in art. 5 of the Water Charter and art. 4 (p) of Appendix to Water Charter. Generally, the principle implies the duty to maintain the quantity and quality of the water in order to protect the water and its ecosystem.18 Large-scale land investment in the Niger basin raises the problem of adequacy with this duty. Concerning the threat on the quantity of water, international investors are interested in farmland with access to water. Thus, efforts to serve the interest of international investors comprise general allowance of water and the construction 15 16

See notably Principles 3 and 4. P. Birnie, A. Boyle, C. Redgwell, International Law and the Environment (Oxford University Press, 3rd ed., 2009) 115. 17 On the no harm Rule see S. McCaffrey, The Law of International Watercourses (Oxford University Press, 2007) 406 et seq. 18 McCaffrey, The Law of International Watercourses op. cit., 409.

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of additional facilities to increase the capacity of water withdrawal for irrigation. The example of the leasing of irrigable lands in the inner Niger Delta is quite illustrative. For example, in 2008, in the context of the national ‘Rice Initiative’ to stabilize food prices and restore self-sufficiency in the country, Mali leased 100.000 ha in the Office du Niger to Malibya, a subsidiary of Libya Africa Investment Portfolio as part of a larger project that includes the construction of one of the largest canals in Africa and the production of hybrid rice.19 Malibya plans to access water from the Niger River through a 40 km irrigation canal. However, it is argued that the agreement did not provide any restriction on the amount of water being extracted.20 It only provided that, from to January to May, when the river is low, the project should cultivate less water-intensive crops. From June to December, Malibya can use all the water it needs ‘without restriction.’ But these provisions remain unclear in a region where the level of river flow is flawed.21 In this perspective an uncontrolled water withdrawal could adversely affect the floodplain downstream, which besides providing rice, fish and pasture for millions of people, is also the habitat of a large number of birds and other species.22 Note, in addition, that the inner Niger Delta is classified as a Ramsar site.23 In the Niger basin, the large-scale land investments pose also the problem of water quality. As we mentioned, the acquisition of land goes with the setting up of systems of intensive farming. To increase land productivity, investors generally support the massive use of fertilizers and introduce new 19 20 21

22

23

The Oakland Institute, Understanding Land Investment Deals in Africa; Country report: Mali, (The Oakland Institute, 2011) 26. Ibid., 27. The basin crosses successively several distinct pluvio-climatic areas which provide a specific and complex dynamics, that is to say: the Sudan Guinean to Sudan Sahelian area (upper basin) with annual rainfalls varying from upstream to downstream between 1500–1600 m and 600 mm, the Sudan and Sahelian to the Saharan sub desert area (Inner Delta, Niger Loop and Middle Niger) with a pluviometry varying from 600 mm to less than 100 mm in an arid area. In the Sahelian and Sudan-Saharan areas where the project is located, the rainfalls are above all characterized by their low level, their irregularity in time and space. See Niger Basin Authority, Atlas Niger Basin op. cit., 12–17. See L. Zwarts et al., “The Economic and Ecological Effects of Water Management Choices in the Upper Niger River: Development of Decision Support Methods,” International Journal of Water Resources Development, 2006, 143–144. For a comprehensive study on the effects of water management in the Upper Niger see Also A. Jägerskog et al., Land Acquisitions: How will they Impact Transboundary Waters? (siwi, 2012) 24–25. Information available at the Ramsar Convention website: http://www.ramsar.org. On February 1, 2004, the Inner Delta was designated by the State of Mali as an internationally important wetland, the third largest Ramsar site in the world (4,119,450 ha). For a description of priority conservation areas, see Niger Basin Authority, Atlas Niger Basin op. cit., 30, 36.

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farming techniques. However, the use of irrelevant techniques and approaches and the uncontrolled and growing use of chemical and mineral fertilisers are among the mains factors of degradation of the Niger basin resources.24 In this perspective an increase of cultivated lands raise concern about the impact of these activities on the quality of the Niger River and its ecosystem. This incertitude was exacerbated by the fact that few evidences showed that measures were taken to ensure that the activities deployed were environmentally viable. For example, given the probable risk posed by the agricultural system established in the purchased lands, the authorization process of these activities should include environmental impact assessment to determine the effects of the project of intensive farming on the ecosystem in place. However, the opacity surrounding these transactions, which are often denounced, casts doubt on the use of authorization schemes to prevent damage to the environment.25 Besides, the basic structure of the state governments in the Niger Basin, some of which are weakened by internal conflicts, can hamper effective monitoring of authorized activities under large-scale investments. It appears that the exercise of a sovereign right to use its lands can affect the rights of others tributaries and ecosystems per se, when this use implies a connection with a transboundary basin area. 4

Measures to Ensure Sound Management of the Environment

4.1 Environmental Impact Assessment Environmental impact assessment is the preliminary procedure which “permits to the State to determine the extent and the nature of the risk of an activity and, therefore, the kind of preventive measures it must take.”26 The principle that States must proceed to the environmental impact assessment of projects threatening to cause a significant transboundary damage was recognized as a part of general international law.27 This is especially apparent in the Pulp Mills 24 25

26 27

See Niger Basin Authority, Atlas Niger Basin op. cit., 44. See for example uncertainty on the realisation of environmental impact assessment in Malibya project, The Oakland Institute, Understanding Land Investment Deals in Africa op. cit., 27. Draft articles on Prevention of Transboundary Harm from Hazardous Activities with commentaries, Yearbook of the International Law Commission, 2001, vol. ii (Part ii), 433. icj, Pulp Mills on the River Uruguay (Argentina v. Uruguay), Judgment of 20 April 2010, icj Reports, 2010, 14, para. 204; Seabed Disputes Chamber of the International Tribunal for the Law of the Sea (itlos), Responsibilities and obligations of States sponsoring persons and entities with respect to activities in the Area, Advisory opinion of 1 February 2011, itlos

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Case. Giving a ruling on the content of the obligation to prevent pollution according to art. 41 of River Uruguay Statute, the International Court of Justice declared that: the obligation to protect and preserve, under Article 41 (a) of the Statute, has to be interpreted in accordance with a practice, which in recent years has gained so much acceptance among States that it may now be considered a requirement under general international law to undertake an environmental impact assessment where there is a risk that the proposed industrial activity may have a significant adverse impact in a transboundary context, in particular, on a shared resource. Moreover, due diligence, and the duty of vigilance and prevention which it implies, would not be considered to have been exercised, if a party planning works liable to affect the regime of the river or the quality of its waters did not undertake an environmental impact assessment on the potential effects of such works.28 The environmental and social impact assessment is therefore within the logic that “in the field of environmental protection, vigilance and prevention are required on account of the often irreversible character of damage to the environment and of the limitations inherent in the very mechanism of reparation of this type of damage.”29 This principle thus allows the integration of environmental requirements right from the design phase of the project and ensures that these are taken into account during the design, preparation and execution phases. The environmental impact assessment is laid down in art. 15 of the Appendix to the Water Charter: Projects, programmes and activities likely to have a significant negative impact on the environment, water resources and human health in the basin are subject to environmental and social impact assessment, designed to identify potential negative impacts to adopt measures to prevent or mitigate them.

28 29

Case No. 17, para. 145. See as well P. Birnie, A. Boyle, C. Redgwell, International Law op. cit., 167–175; N. de Sadeleer, Environmental Principles: From Political Slogans to Legal Rules (Oxford University Press, 2002) 86–90. A.Z. Cassar, C.E. Bruch, “Transboundary Environmental Impact Assessment in International Watercourses,” New York University Environmental Law Journal, 2004, 169–244. icj, Pulp Mills cit., para. 204. icj, Gabčíkovo-Nagymaros Project (Hungary/Slovakia), Judgment of 25 September 1997, icj Reports, 1997, 7, para. 140.

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Art. 19 requires this environmental impact assessment at the transboundary level: States Parties shall ensure that any project, programme and actively undertaken in their territory and likely to have a significant negative impact on the environment of other States Parties be subject to a transborder study of the environmental and social impact. The transborder environmental and social impact assessment states, precisely, the risks that the proposed activity poses to the environment and human health in other States Parties. The dispositions provided by Economic Community Of West African States Supplementary Act A/sa.3/12/08, which adopt the Community Rules on Investment and the modalities of their application30 are also relevant. Art. 12 of this Act requires that: (1) Investors and Investments shall conduct an environmental and social impact assessment of the potential investment. Investors or the investments shall comply with environmental assessment screening criteria and assessment processes applicable to their proposed investments prior to their establishment, as required by the laws of the host Member State for such an investment or the laws of the home State for such an investment. The investor shall comply with the minimum standards on environmental and socio-cultural impact assessment and screening that the Member States shall adopt at the first meeting of the Parties, to the extent that these are applicable to the investment in question. (2) Investors or the investment shall make the environmental and social impact assessments accessible in the local community and to affected interests in the host State where the investment is intended to be made prior to the completion of the host State measures prescribing the formalities for establishing such investment. (3) Investors, their investments and host State authorities shall apply the precautionary principle to their environmental and social impact assessment. The application of the precautionary principle by investors and investments shall be described in the environmental and social impact assessment they undertake.

30

Adopted 19 December 2008, at: http://www.ecobiz.ecowas.int/en/pdf/cim-vision-english -version.pdf.

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These provisions are relevant because they directly oblige investors to conduct an environmental impact assessment. It enshrined also increasing inclusion of environmental provisions in the investments treaties. However, environmental impact assessment content stays in the practice a controversial subject. While accepting the preventive nature of environmental impact assessment in its judgment in the Case concerning Pulp Mills on the River Uruguay, The International Court of Justice considered that: it is the view of the Court that it is for each State to determine in its domestic legislation or in the authorization process for the project, the specific content of the environmental impact assessment required in each case, having regard to the nature and magnitude of the proposed development and its likely adverse impact on the environment as well as to the need to exercise due diligence in conducting such an assessment.31 However, the Appendix to the Water Charter provides some indications on the content of an environmental impact assessment. Art. 16 requires that a study should include at least a description of the proposed activity and its purpose, a description of alternative solutions if needed, a description of the environment in which the proposed activity may have an impact, a description of the impact and the estimation of its importance, a description of the corrective measures and of monitoring and management programs, as well as possible plans for post-project analysis. The assessment must therefore take into account in an integrated manner the impacts that the activity could have on people and property as well as on the environment of other States. Consequently, to be objective, the study implies a wide involvement of all concerned and interested parties in the accomplishment of the planned activity. The suitability of the impact assessment also needs widespread involvement of all parties concerned and interested in the completion of the planned activity. Public participation is, in this regard, one of the core aspects to take into account when realizing the impact assessment. The Appendix to Water Charter includes the “public participation through any appropriate form of such participation as public consultation, public hearing or public inquiry” in the main steps of the procedure for the environmental and social impacts assessment (art. 17(e)). It remains to be seen if only nationals of States that plan activities with transboundary impacts are involved in this public participation or if the local population of riparian States living in other countries participates as well. The legal regime of the Niger Basin does not provide specific 31

icj, Pulp Mills cit., para. 205.

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answers to this question. However, considering that the public participation concerns ‘potential affected persons,’ the nationals of riparian States that will be affected must be consulted. This should be done in collaboration with the concerned States. Regarding its preventive significance, the risk assessment of an activity should establish the relationship between the risk and the damage it could lead to. Therefore it must be as complete and objective as possible. 4.2 Public Participation In addition to being a required procedure in the study of impact assessment, public participation is an autonomous principle in the preservation of the environment.32 In effect, public participation is recognized as an essential component of the principle of sustainable development. The Principle was solemnly declared by principle 10 of the Rio Declaration. Under this principle, the process of leasing land must give the opportunity to potentially affected communities and individuals to express their view concerning the uses of those lands. Traditionally, public participation is understood through the following trilogy: public access to information, public participation in the decision-making process and access to justice.33 In the legal framework of the Niger Basin, these three aspects are grasped in an integrated manner, with an emphasis on public participation in the decision-making process. In fact, public information and access to justice seem to be considered in order to assure genuine public participation in the decision-making process. The analysis regarding access to information is confirmed in art. 4 (g) of the Appendix. It provides that: the protection of the environment of the basin is ensured according to the fundamental following principles : g) The information and participation principle, pursuant to which a right to access to the information detained by the authorities on the basin environment, is granted to the public in order to take part effectively to the decision-making process.34 32

33 34

On the principle see M. Tignino, K. Sangbana (eds), Public Participation and Water Resources Management: Where Do We Stand in International Law? (unesco, 2015); J. Razzaque,“Information, public participation and access to justice in environmental matters,” S. Alam et al. (eds), Routledge Handbook of International Environmental Law (Routledge, 2013) 137–153 ; M. Tignino, “Les contours du principe de la participation publique et la protection des ressources en eau transfrontières,” Vertigo, 2010, at: http:// vertigo.revues.org/9750. Tignino, “Les contours du principe de la participation publique,” op. cit. See art. 203 para. 4 of Appendix to Water Charter: “The right to information, to reach its goal of ensuring effective participation in decision making process should be designed as

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Access to justice is mentioned at the art. 204 para. 3, specifically regarding public participation in the decision-making process. The emphasis on public participation in the decision-making process underlines the importance of associating local communities and individuals with the development and authorisation of the activities that have impacts on their lifestyle. It creates a sense of ‘ownership’ in the decision itself.35 Involving people at an early stage of the decision-making process creates greater trust in the process and decreases the possibility of later conflicts.36 By involving them, the public will be guaranteeing the preservation of their basic rights. This point of view was underlined by the African Commission on Human and Peoples' Rights (achpr). In the view of the Commission, the respect of the right to health37 and the right to a general satisfactory environment38 include inter alia “providing information to those communities exposed to hazardous materials and activities and providing meaningful opportunities for individuals to be heard and to participate in the development decisions affecting their communities.”39 It emerges that public consultation in the process of land leasing for farming has a great importance as it creates conditions for secured international land investments. Taking into account the integrated nature of the three aspects of public participation, we may argue that the legal framework of public participation in the decision-making process of the Niger basin requires at least adequate public information and wise public consultation procedure. According to art. 203 para. 3 of the Appendix to Water Charter “The right of public access to information covers both all information on activities being implemented and planned measures which have or may have a negative impact on the environment or human health in the Basin.” Nevertheless, the Annex to the Charter provides a number of exceptions to the information obligation. Thus, in application of art. 203 para. 7,

35 36 37 38 39

a real right of access to information about the nature of activities conducted or proposed and those relating to public authorities involved In the decision- making process and from which environmental information can be obtained.” Razzaque, “Information, public participation and access to justice,” op. cit., 143. Birnie, Boyle, Redgwell, International Law op. cit., 288. African Charter on Human and Peoples’ Rights (African Charter), (adopted 27 June 1981, entered into force 21 October 1986), art. 16 para. 1. African Charter on Human and Peoples’ Rights, art. 24. African Commission on Human and Peoples’ Rights, Social and Economic Rights Action Center (serac) and Center for Economic and Social Rights/Nigeria, Decision of 27 October 2001, 155/96, para. 53.

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a request for information on environmental issues may be refused if (i) the public authority to which the request is addressed does not hold the information […] (ii) the application of information is manifestly unreasonable or formulated in too general terms to be met, (iii) the request relates to documents that are being developed or concerns internal communications of public authorities where such an exemption is provided for by national law, given the interest that the disclosure of the information requested would present to the public. Are excluded from the scope of the disclosure requirement, inter alia the information that is likely to have negative impacts on (ii) international relations, national defense or public security (iii) the course of justice; iv) trade secrets and industrial information, where such confidentiality is protected by law; (v) intellectual property rights; (vi) confidentiality of data and / or files relating to a physical person etc. The extent of these exceptions is likely to dilute the essence of the right including when issues are sensitive like international land investments. They should be submitted to a strict interpretation regime. We could regret that the Annex did not mention expressly this requirement like the Aarhus Convention regarding access to information, public participation in the decision-making process and access to justice in environmental issues upon which it is based concerning its content. The art. 4 para. 4 in fine of the Convention requires indeed that these grounds for refusal should be interpreted “restrictively given the interest of the release of information for the public and depending on whether these information are related or not to emissions into environment.” Concerning the participation in decision-making process itself, art. 204 para. 3 of the Appendix to Water Charter provides that the participation includes inter alia : i) participation in decision-making process on specific activities that may affect the public; ii) participation in the design, development and implementation of policies, plans and programs relating to the environment, iii) participation in the development of policy documents and strategies as well as laws and regulations on environmental issues iv) participation in appropriate mechanisms for public consultation including a public hearing or public inquiry at which people can submit any comments, information, analysis or opinions, suggestions, proposals, cons-proposals which they consider relevant to the proposed activity. According to those provisions, the public must be taken into account from the beginning of the process to the end. In addition to ensuring that the participation is effective, “it must begin

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early in the process, at a time when all options are open” (art. 204 para. 2). At the end, the public must be guaranteed that this view was taken into account in the final decision. In this regard, the State parties must guarantee to the public an effective access to administrative and judicial remedies. 4.3 The Accountability of Investors The accountability of investors constitutes a main point to ensure a sound management of the environment. Generally, the corporate accountability is envisaged as a voluntary process of business to integrate the three dimensions of sustainable development: the economy, the environment and the society.40 There is no particular way of implementing corporate accountability. However, in order to support investors in taking on responsibility, a number of organisations have developed and introduced standards and initiatives that demonstrate best practices.41 Concerning large scale agricultural investments, the fao, ifad, the United Nations Conference on Trade and Development ­(unctad) and the World Bank have agreed on seven principles for ‘responsible agro-investments,’ which state that investments should be undertaken in line with the following principles: Principle 1: Existing rights to land and associated natural resources are recognised and respected; Principle 2: Investments do not jeopardise food security but rather strengthen it; Principle 3: Processes for accessing land and other resources and then making associated investments are transparent, monitored, and ensure accountability by all stakeholders, within a proper business, legal, and regulatory environment; Principle 4: All those materially affected are consulted, and agreements from consultations are recorded and enforced; Principle 5: Investors ensure that projects respect the rule of law, reflect industry best practice, are economically viable, and result in durable shared value; Principle 6: Investments generate desirable social and distributional impacts, and do not increase vulnerability; Principle 7: Environmental impacts due to a project are quantified and measures are taken to encourage sustainable resource use while minimising the risk/magnitude of 40

41

On the corporate accountability, see L. Boisson de Chazournes, E. Mazuyer (eds), The Global Compact of the United Nations 10 years after (Bruylant, 2011); E. Mazuyer (ed), Regards croisés sur le phénomène de la responsabilité sociale de l’entreprise, (La documentation française, ceric, 2010) ; E. Morgera, Corporate Accountability in International Environmental Law (Oxford University Press, 2009). On the environmental accounting see P. Sands et al., Principles of International Environmental Law (Cambridge University Press, 2012) 659 et seq. See for example H. Mirza et al., The Practice of Responsible Investment Principles in LargerScales Agricultural Investments. Implications for Corporate Performance and Impact on Local Communities (World Bank, 2014).

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negative impacts and mitigating them.42 Despite the fact that water is not explicitly mentioned in the principles, we can consider that water issues are taken into account. However, it could be useful if water were also recognised in the international principles for responsible agro-investments.43 As a voluntary process, corporate responsibility remains in principle attached to the willingness of investors in implementing the recommended principle. This situation could affect the efficiency and reduce its capacity to prevent the degradation of environment. In some case accountability could be a binding process for the investors. This is the case when accountability is required by national legislation. It could consist of an obligation to inform for the investors. The obligation can take the form of annual environmental reporting requirements, which should mention the impact of its activities and remedies adopted in that purpose. Obligations can also be imposed on investors making public their environmental policies.44 This obligation to inform enhances the transparency around their activities. Another tool providing by Appendix to Water Charter for this purpose is the implementation of environmental audits. Art. 21 of the Appendix to Water Charter provides that “States Parties shall undertake to conduct regular environmental audits for all activities that constitute a source of pollution, nuisance or environmental degradation, whether these activities have been or not object of environmental and social impact assessment.” The aims of this audit is to ensure the environmental performance of the institution in accordance with its environmental policy and environmental management system (art. 21 para. 4). Institutions that have been audited have the duty to implement their findings. It must develop and implement necessary corrective actions to address deficiencies identified during the audit, initiate or begin the process of continuous improvement of its activities and establish the means for continuous improvement of its environmental performance. By environmental audit national authorities can ensure that the activities carried on their territories do not cause degradation to the Niger basin and its environment. The obligation of States to ensure the accountability of investors was underlined by the Court of Justice of the Economic Community of West African States in the cerap v. Federal Republic of Nigeria. In this case, the plaintiff argued that Nigeria failed to protect the natural resources upon which people 42 43 44

Principles for Responsible Agricultural Investment (rai), available at: https://www .­responsibleagroinvestment.org/node/256 (accessed in August 2014). Jägerskog et al., Land Acquisitions op. cit., 24–25. See H. Mirza et al., The Practice of Responsible Investment Principles in Larger-Scales Agricultural Investments op. cit., (World Bank Report, 2014) 10.

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depend or are fed in the Niger Delta by allowing private oil companies to destroy food sources. Nigeria in its pleadings rejected these arguments by listing a series of measures taken to respond to the environmental situation including inter alia the adoption of numerous laws passed to regulate the extractive oil and gas industry and safeguard their effects on the environment, and the creation of agencies to ensure the implementation of the legislation. However, the Court pointed out the insufficiency of these measures to prevent the continued environmental degradation of the region: However, compelling circumstances of this case lead the Court to recognise that all of these measures did not prevent the continued environmental degradation of the region, as evidenced by the facts abundantly proven in this case and admitted by the very same Federal Republic of Nigeria. This means that the adoption of the legislation, no matter how advanced it may be, or the creation of agencies inspired by the world's best models, as well as the allocation of financial resources in equitable amounts, may still fall short of compliance with international obligations in matters of environmental protection if these measures just remain on paper and are not accompanied by additional and concrete measures aimed at preventing the occurrence of damage or ensuring accountability, with the effective reparation of the environmental damage suffered.45 And the Court adds that: It is significant to note that despite all the laws it has adopted and all the agencies it has created, the Federal Republic of Nigeria was not able to point out in its pleadings a single action that has been taken in recent years to seriously and diligently hold accountable any of the perpetrators of the many acts of environmental degradation which occurred in the Niger Delta Region. And it is precisely this omission to act, to prevent damage to the environment and to make accountable the offenders, who feel free to carry on their harmful activities, with clear expectation of impunity that characterises the violation by the Federal Republic of Nigeria of its international obligations […].46 45 46

ecowas Community Court of Justice, serap v. Federal Republic of Nigeria, Judgement of 14 December 2012, ecw/ccj/jud/18/12, paras. 104–105. Ibid., paras. 110–111.

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Under these provisions it appears that the lack of accountability of investors favours the degradation of the environment. 5 Conclusion Appreciation of the impacts of large-scale agricultural investments on transboundary water remains a complex issue. Within the Niger Basin context, it poses a dilemma between the sovereign right to the use of their lands and protection of the transboundary aquatic environment. There is no question of denying the sovereign character of land leasing issues. However in a context of shared resources between several states, it is important to stay within the dynamics of community of rights and interests as enshrined in international law. This community of rights implies for the States the obligation to ensure that activities within the limits of their jurisdiction or under their control do not cause damage to the environment of other States. Under this principle, States shall take measures to prevent degradation of the aquatic environment. Among these measures, environmental impact assessment, public participation and accountability of investors could be considered as minimum s­ tandards needed to guarantee an environmental agro-investment. But the remaining challenge is the capacity and competence of state regulatory bodies in regulating and monitoring large scale agricultural investments. To address this issue cooperation between States could be a good way to proceed. In this regard the Niger Basin Authority (nba) constitutes an efficient tool of cooperation.47 Despite the fact that the NBA is currently not competent in coordinating land investments, it can support States in shaping harmonized legislation and management policies which will take into account the impacts of increasing cultivation of lands. In the face of important challenges such as protection of water, joint actions are unique responses. 47

On the contribution of Basin Organizations to the protection of freshwater resources, see L. Boisson De Chazournes, Fresh Water in International Law (Oxford University Press, 2013) 176–185.

chapter 10

The European Integration and the 2009 Renewable Energy Directive: A Suitable Framework for the Implementation of the Sustainability Criteria for Biofuels Production in Third-States? Federico Esu and Solenne Avet

Introduction: The International Dimension of the European Union Environmental Policy

Climate change mitigation is often presented as a key policy goal underpinning biofuels promotion policies1 with a dual objective: increasing security of energy supply while reducing greenhouse gas (ghg) emissions by replacing fossil fuel with renewables.2 The integration of a worldwide environmental concern within the European framework has raised new legal issues concerning a prospective external action to apply European Union (eu) environmental policies in non-eu states. Furthermore, in light of the evolution of the eu environmental governance regime,3 the adoption of the sustainability criteria4 in the Renewable Energy Directive 2009/28/EC (red)5 reflects this willingness of the eu to take ­measures 1 See L. Cotula, N. Dyer and S. Vermeulen, ‘Fuelling exclusion? The biofuels boom and poor people’s access to land,’ iied & fao, 2008, 9–10. 2 See A. Lendle and M. Schaus, “Sustainability Criteria in the eu Renewable Energy Directive: Consistent with wto rules?,” International Centre for Trade and Sustainable Development (ictsd) Information Note N. 2, 2010, 2; Accessed 10 June 2015. Available at: http://ictsd.org/i/ publications/86798/. 3 See I. von Homeyer, ‘The Evolution of eu Environmental Governance,’ J. Scott (ed.) Environmental Protection: European Law and Governance (Oxford University Press, 2009), 1–2. The author distinguishes four key features of this regime: the environment, the internal market, the integration of international law, and sustainable development. 4 The sustainability criteria aim at preventing the conversion of high biodiversity lands into the production of biofuels. The sustainability criteria are listed in the arts 17, 18 and 19 of the Directive 2009/28/ec (see note 5) and apply since December 2010. 5 Directive 2009/28/ec of the European Parliament and of the Council on the promotion of the use of energy from renewable sources and amending and subsequently repealing Directives 2001/77/ec and 2003/30/ec, (23 April 2009), oj L 140/16. This Directive sets out a

© koninklijke brill nv, leiden, ���6 | doi 10.1163/9789004305663_012

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to fight climate change. Indeed, by supervising the production of sustainable biofuels, the eu indirectly controls the application of climate change policies beyond its borders. Two statements help explaining this consideration: on the one hand, the lack of effective international instruments to control the application of climate change measures and the multilateral nature of international climaterelated treaties led the eu to be at the forefront of international actions to combat climate change6; on the other hand, among all international and regional organisations, the eu may be seen as the one with a complete structure in terms of rules and policies to regulate the international production of biofuels.7 This chapter will show how the sustainability criteria can be employed to combine the fight against climate change while representing a legal tool to participate in the development of third states. To underpin this argument and develop this approach, the present essay will take the following structure. The first part will focus on two legal aspects: a) the integrative approach chosen by the authors of the 1992 United Nations Framework Convention on Climate Change (unfccc) to allow international actors to implement the provisions of the Convention8 and b) the binding nature of eu secondary law to implement these provisions in member states and – indirectly – in third states. The second part of this essay will discuss the legal conflict between the unilateral action of the eu and the international principle of cooperation to tackle climate change issues. common framework for the promotion of energy from renewable sources, which include wind, solar, aerothermal, geothermal, hydrothermal and ocean energy, hydropower, biomass, landfill gas, sewage treatment plant gas and biogases. In particular, these provisions establish mandatory national targets for the overall share of energy from renewable sources in gross final consumption of energy and for the share of energy from renewable sources in transport. Furthermore, the Directive lays down rules relating to statistical transfers and joint projects between European Community member States, joint projects with third countries, guarantees of origin, administrative procedures, information and training, and access to the electricity grid for energy from renewable sources. The Directive also establishes sustainability criteria for biofuels and bioliquids. 6 See C. Fräss-Ehrfeld, Renewable Energy Sources: a chance to combat climate change (Wolters Kluwer Law Business, 2009). 7 See, among others, R.D. Kelemen, “Globalizing European Union Environmental Policy,” Journal of European Public Policy, 2010, 335–349. 8 The integrative approach denotes the incorporation of international principles into the legal systems of states parties to the unfccc, with the purpose of enforcing the application of such principles at the national level.

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The last part will suggest a ‘win-win’ scenario between the eu and third states consistent with the initial objective of the Kyoto Protocol.9 In this chapter, the authors wish to stress that a clear, effective, strong and efficient regulatory framework for biofuels production can be used as a legal regime to take into account the needs of developing states and their respective sustainability criteria – be the latter economic, environmental or social in nature. 1

The Sustainability Criteria Under red 2009: A Chance for International Cooperation?

The lack of sufficient land available in European territories to meet the growing demand of domestic biofuel production, as well as the need to avoid the over-exploitation of limited land, have pushed industrialized states to invest in tropical and sub-tropical developing states. These states present several economic and environmental advantages for biofuel feedstocks such as low labour costs, longer growing seasons, favourable weather conditions, and land suitable for sugarcane and oil palm trees that currently constitute some of the most efficient feedstocks for biofuels.10 To date and at the eu level, particular attention has been paid to the first two methods listed in red art. 18: namely voluntary certification schemes and national systems. It goes beyond the purpose of this article to undertake a thorough discussion of those two methods. Rather, this essay will focus on bilateral and multilateral agreements as useful means through which the eu and third-states could render the production and trade of biofuel production more effective. The recourse to inter-state agreements can guarantee better coordination between states (or group of states) as well as coordination with other mechanisms and multilateral agreements already operating on the international 9

10

See D. Freestone, “The International Climate Change Legal and Institutional Framework: An Overview,” D. Freestone and C. Streck (eds), Legal aspects of implementing the Kyoto Protocol Mechanism, (Oxford University Press, 2005) 7. In order to implement a win-win scenario, host countries must benefit of advantages deriving from the projects. Such advantages may be, for instance, new resource and technology transfers – including access to cleaner technology and contribution to sustainable development. International Food & Agricultural Trade Policy Council and Renewable Energy and International Law (reil), ‘wto Disciplines and Biofuels: Opportunities and Constraints in the Creation of a Global Marketplace,’ International Food & Agricultural Trade Policy Council, ipc Discussion Paper, 2006, 3; at http://www.agritrade.org/Publications/ DiscussionPapers/WTO_Disciplines_Biofuels.pdf.

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level, such as the unfccc or the Convention on Biodiversity (cbd).11 This strategy is not new; the eu has already resorted to such agreements to improve sustainability in the forestry sector, demonstrating the feasibility of this approach.12 However, one issue raised in relation to the sustainability criteria under the red has been the unilateral formulation and adoption of such criteria by the eu. The result of this lack of negotiations is the absence of coordination with, and consideration of developing countries. Indeed, developing and least developed countries are likely to find the sustainability criteria too strict to implement. Albeit conceived as a means to promote development in third-states and a way to guarantee the production of sustainable biofuels, the criteria have been more closely related to the eu energy market and climate policies than to the effective needs of third-states.13 This lack of consensus undermines the development of international cooperation and, subsequently, the enforcement of the measures conventionally agreed. In order to underpin our position on the need for mutual agreements between biofuel producing (developing) states and importing states (eu), the fundamental provisions calling for cooperation between states at both the international and the European level will be synthetically outlined below. Indeed, looking at the international and European framework governing the response to global environmental issues, one of the common approaches stressed is the continuous cooperation among states.14 The International Framework on Climate Change: A Focus on Cooperation The unfccc – adopted during the 1992 Rio Conference on Environment and Development and signed by 155 states and by the European Community (ec) – sets out its principal objective in the “stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic

1.1

11 The cbd was opened for signature at the Earth Summit in Rio de Janeiro on 5 June 1992 and entered into force on 29 December 1993. The Convention’s three main goals are: a) conservation of biological diversity (or biodiversity); b) sustainable use of its components; c) and fair and equitable sharing of benefits arising from genetic resources. 12 See F.X. Johnson, “Regional-global Linkages in the Energy-Climate-Development Policy Nexus: The Case of Biofuels in the eu Renewable Energy Directive,” Renewable Energy Law & Policy Review, 2011, 104. 13 Ibid., 106. 14 As this paper will illustrate, whether provided for under the unfccc, the Kyoto Protocol, the Rio Declaration or the Fundamental Treaties of the European Union, cooperation features in several dispositions.

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interference with the climate system.”15 An important provision of the Convention is art. 4 which sets forth specific commitments addressed to all Parties and, more specifically, to developed state Parties. All Parties are bound to create inventories of greenhouse gas sources and sinks in order to: a) formulate national and, where appropriate, regional programmes to limit global warming, b) to cooperate in the adaptation to the impacts of climate change, and c) to promote scientific research. In addressing these obligations to developing and developed state parties, the provision qualifies these obligations by permitting parties to “take into account their common but differentiated re­ sponsibilities and their specific national and regional development priorities.”16 Furthermore, an obligation exists, in art. 4, para. 217 to develop national policies and measures to mitigate the adverse effects of climate change, indicating that developed states parties have to take the lead in modifying longer-term trends in anthropogenic emissions.18 It was only with the negotiation of the 1997 Kyoto Protocol that developed states parties committed themselves to straightforward targets and timetables for the reduction of the major greenhouse gases and to the development of international mechanisms for ensuring the fulfilment of these commitments.19 For example, the Protocol states in art. 10 that states should cooperate in the promotion of effective modalities for the development, application and diffusion of, and take all practicable steps to promote, facilitate and finance, as appropriate, the transfer of, or access to, environmentally sound technologies, know-how, practices and processes pertinent to climate change, in particular to developing countries […].20 15

16 17 18

19 20

United Nations Framework Convention on Climate Change (unfccc), adopted at the United Nations Conference on Environment and Development (unced), Earth Summit, Rio de Janeiro, June 1992, art. 2. Ibid., art. 4(1). Ibid., art. 4(2)(a). See C. Redgwell, “International Legal Responses to the Challenges of a Lower-Carbon Future: Climate Change, Carbon Capture and Storage, and Biofuels,” D.N. Zillman et al. (eds), Beyond Carbon Economy: Energy Law in Transition (Oxford University Press, 2008), 89–90. Ibid., 90. Kyoto Protocol to the unfccc, art. 10(c). The Protocol was adopted in Kyoto, Japan, on 11 December 1997 and entered into force on 16 February 2005. The detailed rules for the implementation of the Protocol were adopted at cop 7 in Marrakesh, Morocco, in 2001, and are referred to as the ‘Marrakesh Accords.’ The Kyoto Protocol’s commitment period started in 2008 and ended in 2012.

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States are also called to cooperate “in the scientific and technical research and promote the maintenance and the development of systematic observation systems and development of data archives to reduce uncertainties related to the climate system, the adverse impacts of climate change and the economic and social consequences of various response strategies.”21 Moreover, cooperation is required “at the international level, and, where appropriate, using existing bodies,” in “the development and implementation of education and training programmes, including the strengthening of national capacity building, in particular human and institutional capacities and the exchange of secondment of personnel to train experts in this field, in particular for developing countries.”22 The eu is party to the Kyoto Protocol and is therefore committed to meet its targets and obligations, including the call for cooperation set forth in art. 10. Despite the different binding nature, similar provisions are embedded in the Rio Declaration.23 As far as biofuel production is concerned, such production falls among those activities that, according to the Rio Declaration, shall take place in harmony with environmental protection and preservation. All aspects related to biofuel production should be also measured. Several principles of the Rio Declaration stress that natural resources and ecosystem conservation shall be guaranteed within any biofuel production (any activity) patterns so that the latter are environmentally sustainable.24 At the same time, the needs of the poor communities shall be considered, making sure that environmental, economic and social concerns are taken into account and inequalities are as much as possible levelled.25 Furthermore, the Rio Declaration calls for international cooperation not just among people, but also among states during all stages of biofuel production and development.26 Particularly, Principle 12 reads “States should cooperate to promote a supportive and open international economic system that would lead to economic growth and sustainable development in all countries, 21 22 23

24 25 26

Kyoto Protocol, art. 10(d). Ibid., art. 10(e). The Rio Declaration on Environment and Development, adopted at the United Nations Conference on Environment and Development (unced), Earth Summit, Rio de Janeiro, June 1992. The Declaration is a statement of 27 Principles upon which nations agreed to base their actions in dealing with environmental and development issues. Therefore, the core of such an instrument is based on sustainable development and the reconciliation between environment and development. Ibid., Principles 3, 4, 8 and 15. Ibid., Principles 5, 6 and 14. See M.G. Bastos Lima, “Biofuel governance and international legal principles: it is equitable and sustainable?,” Melbourne Journal of International Law, 2009, 476.

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to better address the problems of environmental degradation […]” and – interesting for the purpose of this paper – “unilateral actions to deal with environmental challenges outside the jurisdiction of the importing country should be avoided […].” The reference to ‘unilateral action’ seems to refer to the unilateral adoption of the sustainability criteria by the eu.27 Given these premises, an effective avenue to enforce the sustainability criteria may be by setting and regulating these standards under an appropriate legal framework that may arise out of consensual negotiations between states. Such negotiations are capable of reflecting the consensus of the contracting parties involved not just on the sustainability criteria but also on other technical, environmental, social and economic concerns directly or indirectly related to biofuel production and development.28 In addition, negotiations should take into account different views expressed by small farmers and ngos oper­ ating in the sector as well as smallholders in general. The whole energy and agricultural production system may benefit from the efforts employed in biofuel regulation. It is an opportunity to take action in fostering international law of sustainable development. Indeed, numerous aspects that characterize bioenergy production are not only limited to the production. Rather, such aspects may be applied to other energy and agricultural activities when threats of departure from the principles enshrined in the Rio Declaration occur. 1.2 The European Framework and its Environmental Objectives International cooperation is also a fundamental pillar of the eu energy and climate change strategy. Any achievement at the eu level alone will be insufficient to meet the global challenge. Therefore, concrete efforts towards cooperation with other major economies and developing states are essential.29 The Treaty on the European Union (teu) emphasises that the crucial role the Union should consist in contributing to ‘sustainable development,’ poverty eradication and human rights protection.30 Furthermore, the Union is required to contribute to the “strict observance and the development of international 27

28 29 30

In addition, developed states, according to the principle of Common But Differentiated Responsibilities (cbdr), are the ones that shall undertake special commitments in favour of such cooperation. See Bastos Lima, Biofuel governance op. cit., 476. These are the requirements set by Principles 7, 10, 12, 13 and 27 of the Rio Declaration. See L.R. Lynd and J. Woods, “A new hope for Africa,” Nature, 2011, 21. Consolidate Version of the Treaty on the European Union (2012) C 326/15, art. 3(5). The teu, signed in Maastricht in 1992 and entered into force in 1993, lays out, along with the Treaty on the Functioning of the European Union (tfeu) and other satellite Treaties, how the eu operates. In particular, the teu establishes the various eu institutions together with their remit, procedures and objectives.

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law.”31 In addition, art. 21(d) calls upon the “eu to foster the sustainable economic, social and environmental development of developing countries with the primary aim of eradicating poverty.”32 The Treaty on the Functioning of European Union (tfeu), lists the objectives the European environmental policy shall contribute to achieve. Such objectives are identified in the first paragraph of art. 191 as preserving, protecting and improving the quality of the environment; protecting human health, prudent and rational utilisation of natural resources; promoting measures at international level to deal with regional or worldwide environmental problems, and in particular combating climate change.33 The same article goes on inviting the Union and its member states to cooperate, “within their respective spheres of competence, with third countries and with the competent international organisations.”34 Cooperation may thus be subject to international agreements between the eu and third Parties. The provisions mentioned above illustrate that cooperation in, and contribution to, sensitive international measures are demanded by eu fundamental Treaties and, therefore, should guide member states’ actions to tackle international issues. In addition to the provisions set forth in the other international instruments presented above, the European framework with the red 2009 should be taken into account and applied to biofuel production and development. 2

The European Contribution to the International Action to Fight Climate Change

The Implementation of the International Policies on Climate Change: A European Integrative Approach Is the European integration a suitable framework for the implementation of  sustainability criteria in third-states? To what extent does the eu and its 2.1

31 32 33

34

teu, art. 3(5). Ibid., art. 21. Consolidated Version of the Treaty on the Functioning of the European Union (2012) oj C 326/49, art. 191(1). The tfeu, signed in Rome in 1958 as the Treaty establishing the European Economic Community, establishes in details the role, the policies and the operation of the European Union. The tfeu has been lastly amended by the Treaty of Lisbon, which came into force in 2009. tfeu, art. 191(4).

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sustainability criteria provided under the red 2009, offer a regional model conducive to the integration of international environmental principles? In order to comply with the provisions of the Kyoto Protocol,35 the eu adopted in June 2009, the eu Climate and Energy Package with three 20% binding targets by 2020. This package consists of reducing greenhouse gas emissions by 20%, increasing the share of renewable energy to 20% and improving energy efficiency by 20%.36 The three goals of this package correspond to the willingness of the eu to regionally integrate international commitments and to combine its targets with other objectives related to the energy sector such as the need to ensure the functioning of the energy market, the security of energy supply, the promotion of energy efficiency, and the interconnection of energy networks.37 The integration of the different targets in the European framework corresponds to the environmental integration of eu law, framed in legally binding terms in art. 11 of the tfeu. Art. 11 provides that environmental protection requirements must be integrated into the definition and implementation of the eu’s policies and activities.38 The environmental integration chosen by the eu is a central concept, which aims at integrating sustainable development considerations into sectorial policies such as energy, transport and industry. The integration of sustainable development among environmental objectives39 and actions40 was a first attempt of the eu to extend its policies by 35

36

37 38 39

40

Council Decision (ec) 2002/358 concerning the approval, on behalf of the European Community, of the Kyoto Protocol to the United Nations Framework Convention on Climate Change and the joint fulfilment of commitments thereunder (2002) oj L130/I. The eu member states are members of the Kyoto Protocol to the unfccc. The Climate and Energy Package is a set of binding legislation which aims to ensure the eu meets its ambitious climate and energy targets for 2020. The targets were set by eu leaders in March 2007, when they committed Europe to become a highly energy-efficient, low carbon economy, and were enacted through the climate and energy package in 2009. tfeu, art. 194(1). Ibid., art. 11. Ibid., art. 191(3). The article reads: “preparing its policy on the environment, the Union shall take account of: available scientific and technical data, environmental conditions in the various regions of the Union, the potential benefits and costs of action or lack of action, the economic and social development of the Union as a whole and the balanced development of its regions.” tfeu, art. 3(5): With regard to the ‘external’ world, eu “shall contribute to peace, security, the sustainable development of the Earth, […] free and fair trade, […] protection of human rights.” See also, tfeu, art. 21(2): eu is to “foster the sustainable economic, social and environmental development of developing countries” with primary aim of poverty eradication.

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aligning its framework with the Principles of the 1992 Rio Declaration.41 This action requires that all activities, including the production of biofuels occur in harmony with environmental preservation.42 To comply with international environmental principles and requirements such as climate change principles, the Organisation also adopted an external approach. This approach consists “in ensuring that other sectorial environmental initiatives consider climate change implications and that at the same time broader environmental concerns are fully accounted for in devising and implementing climate change measures.”43 Internal environmental integration aims at ensuring that eu institutions will take a holistic approach in the elaboration of environmental rules.44 This approach helps understanding the complex articulation of environmental and energy policies in the Single Market with the international requirements to reduce greenhouse gases. In practice, we will observe throughout this paper that, at the regional level, the efficiency of national policies to meet the targets relies mainly on the articulation of climate change law with eu environmental objectives and policies. The design of the eu energy and environmental policy is driven by two forms of integration: one internal and one external. The external integration allows the integration of climate change policies in non-environmental sectors while the internal one focuses on its incorporation within other environmental objectives and actions. These two forms of integration correspond to the willingness of the eu to take a holistic approach towards environmental issues.45 However, the lack of effectiveness in the implementation of the unfccc and Kyoto Protocol provisions hampers the incorporation of international climate change policies. It also undermines the elaboration and application of clear and binding policies at the regional level.46 This obstacle stems from the differences between eu and international climate change law. Concerning its scope and unlike eu law, international climate change law, does 41 42 43

44 45 46

The principles of sustainable development are part of the eu development cooperation objectives. See Principles 3, 4, 8 and 15 of the Rio Declaration. See E. Morgera, K. Kulovesi and M. Munez, “Environmental Integration and Multi-faceted International Dimensions of eu Law: Unpacking the eu’s 2009 Climate and Energy Package,” Common Market Law Review, 2011, 831. Ibid., 831. See M. Lee, “The environmental implications of the Lisbon Treaty,” Environmental Law Review, 2008, 133. See J. Scott, “The Multi-Level Governance of Climate Change,” P. Craig and G. de Burca (eds), The Evolution of eu Law (Oxford University Press, 2nd ed., 2011), 805–835.

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not have any concrete legal basis that can ensure its enforcement, and no ­constitutional basis to legitimate its application in non-member states.47 Combined with the financial, technological, institutional, behavioural governance and collective actions to combat climate change, the implementation of climate change law appears as particularly challenging.48 All these policies are interconnected and have to be consistent with the requirements of the internal market provided for in art. 26 of the tfeu.49 With the different concerns surrounding the market of renewables, the Single Market has appeared to be a key driver to implement the provisions of the unfccc50 and paved the way for an energy transition. The energy transition suggested by the promotion of renewable energy is one of the key policies to mitigate long-term climate change. The depletion of fossil energies accelerates this transition because states are economically constrained to seek alternatives to replace coal, natural gas and petroleum by cleaner and unlimited energies such as – inter alia – biomass,51 wind, and solar power.52 The red 2009 on the promotion of renewable energy is part of the package and provides flexible instruments to encourage member states to implement domestic support scheme in their national systems. The Directive differs from

47

48 49

50 51

52

See P. Birnie and A. Boyle, International Law & the Environment (Oxford University Press, 3rd ed., 2009), 337. The authors maintain that “the difficulty to categorize the atmosphere as part of international law helps understanding the existence of this shortcoming. Compare to lands, atmosphere cannot be equated to airspace, which is simply a spatial dimension subject to the sovereignty of the subjacent states.” See K. Rietig, “Climate Policy integration beyond principled priority: a Framework for analysis,” Centre of Climate Change Economics and Energy Policy, 2012, 17. tfeu, art. 26(1): “The Union shall adopt measures with the aim of establishing or ensuring the functioning of the internal market, in accordance with the relevant provisions of the Treaties.” See R. Hildingsson, J. Stripplea and A. Jordan, Governing Renewable Energy in the eu: confronting a Governance Dilemma (European Political Science, 2011)18. Biomass is intended as the biodegradable fraction of products waste on the residues from biological origin from agriculture (including vegetal and animal substances), forestry and related industries including fisheries and agriculture as well as the biodegradable fraction of industrial and municipal waste. Definition provided by the red 2009/28/EC, at http:// ec.europa.eu/agriculture/bioenergy/potential/index_en.htm. Art. 1 of the Directive defines energy from renewable sources as “energy renewable energy from non-fossil sources namely wind, solar, aero-thermal, geothermal, hydrothermal and ocean energy, hydropower, biomass, landfill gas, sewage treatment plan gas and biogases.”

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the previous ones in as much as it sets binding targets, a broader scope, and sustainability criteria for the production of biofuels.53 red art. 3.4 sets a mandatory target of 10% share of renewable energy used for transport in each member state. The intention behind this target initially was to foster the production of biofuels and the transport of fuels produced from biomass54 as well as to replace fossil fuels in Europe and in developing countries. The European Commission expressed its willingness to “explore the opportunities for developing countries, including those affected by the reform of the eu sugar regime for the production of biofuel feedstocks and biofuels, and to set out the role the eu could play in supporting the development of sustainable biofuel production.”55 2.2 The Adverse Consequences in Third Countries With these new economic opportunities, European firms started to invest mass­ ively in the production of biofuels feedstocks in third states in Asia, Africa and South-America. The adverse effect was that the increasing investments in these states56 and the global land rush for the production of first generation biofuels57 exacerbated pressures on primary resources and undermined the natural resources entitlements and livelihoods of smallholders.58 The indirect 53

54

55 56

57

58

See M. Nilsson, L.J. Nilsson and K. Ericsson, “Rapid Turns in European Renewable Energy Policy Advocacy and Framing in the Proposed Trading of Guarantees of Origin,” canes Working Paper, 2008, 3. Communication from the Commission to the Council and the European Parliament, Biofuels Progress Report, Report on the progress made in the use of biofuels and other renewable fuels in the Member States of the European Union, {sec(2006) 1721} {sec(2007) 12}, com(2006) 845 final. The most common biofuels are biodiesel made from vegetable oil and bioethanol made from sugar and starch crops. Commission Communication, An eu Strategy for Biofuels, com(2006) 34 final, ojc/67 (18 March 2006). On average, in the 2007–09 period that share was 20% in the case of sugar cane, 9% for both oilseeds and coarse grains (although biofuel production from these crops generates by – products that are used as animal food), and 4% for sugar beet. We distinguish two generations of biofuels: the first one which is based on biomass that could be used for food purposes or on biomass produced on land otherwise suitable for food production. The second one, which relies on other techniques of production such as ethanol extracted from wood or grass cellulose and biodiesel produced from algae. The alternative techniques of the second-generation biofuels are still under development and not yet commercially available. See the definitions in red 2009/28/EC, art. 2(h) and (f). oecd, ‘Price Volatility in Food and Agricultural Markets: Policy Responses,’ Policy Report including contributions by fao, ifad, imf,oecd, unctad, wfp, the World Bank, the  wto, ifpri and the un hltf, 2011; available at http://www.oecd.org/agriculture/

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land-use change (iluc)59 provoked by the high production of biofuels called into question the positive environmental impact of this renewable source of energy. The iluc occurs when food crops are displaced by energy crops and cultivated on lands with high carbon or biodiversity value such as peatlands or forests.60 Furthermore, the lack of regulations and the unstable situation in host countries prevent their national governments and legislative bodies to face these consequences and take the appropriate measures.61 The financial pressure on local investments weakens these nations, which do not have the appropriate economical systems to bear the risks of the market. Moreover, although the adoption of the red 2009 may play an important role in improving the economic situation of developing states by fostering their agricultural development, changes within the trade market have a direct impact on their production and standard of living.62 In relation to the multi-dimensional aspects associated with the large-scale investments in biofuels in third countries and as an important importer and consumer of biofuels, the eu was at the forefront to reduce negative effects of the red in third countries and supervise the international production of biofuels. However, there are limits to how far the European action in this field can go. Many scholars discuss the legitimacy of the European’s energy policy to deal with climate change mitigation.63 Furthermore, even though eu law appears as the most appropriate basis to apply international environmental principles and provide a good domestic example, this position does not confer on the eu the right to impose a unilateral action to solve a multidimensional issue.

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pricevolatilityinfoodandagriculturalmarketspolicyresponses.htm (Accessed 11 June 2015). See also, L. Cotula, “The international political economy of the global land rush: A critical appraisal of trends, scale, geography and drivers,” The Journal of Peasant Studies, 2012, 649. In October 2012, the European Commission has published a proposal to limit global land conversion for biofuels production. The use of food-based biofuels to meet the 10% target of the Renewable Energy Directive will be reduced to 5%. European Commission, Press Release, New Commission proposal to minimise the climate impacts of biofuel production (2012) IP/12/1112, available at http://europa.eu/rapid/press-release_IP-12-1112_en.htm. Scott, “The Multi-Level Governance,” op. cit., 805–835. A.P.J. Mol, “Environmental authorities and biofuel controversies,” Environmental Politics, 2010, 61. The author argues that Indonesia, Laos and Mozambique, for instance, have a clear lack of state capacity and power to monitor and regulate the devastating effects of large-scale biofuel developments. European Commission, ‘eu 2013 Report on Policy Coherence for Development’(report), swd (2013) 456 final. See, among others, Bastos Lima, “Biofuel governance,” op. cit., 470.

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Increasing Cooperation as a Way Forward

To What Extent This Regional Instrument Could Enhance Cooperation Between the eu and Third States while Legitimating eu External Action? As a ‘regional economic integration organization’ party to the Kyoto Protocol, the eu and its member states have to cooperate in international negotiations.64 The conclusion of bilateral or multilateral agreements responds to the objectives of the eu to enhance its external cooperation with third countries.65 As this paper illustrates, depending on their content and objectives, such agreements can coordinate the different aspects – whether economic, social or environmental – related to the production of biofuels, in order to protect the lands while stimulating the local development of host countries. Unlike other instruments, and according to the holistic approach of the European energy policies analysed above, bilateral or multilateral agreements can cover different sectors such as forestry and agriculture while taking into account the fluctuations of the internal market and trade needs.66 They are particularly useful at the international level to stimulate the development and the energy transition of developing countries. The international framework largely influenced the elaboration and implementation of these instruments, especially with the principle of cooperation enshrined in the Rio Declaration and other international agreements. The principle of cooperation encourages states to reach agreements between them by taking into account the specificities of each party following a process of

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Kyoto Protocol, art. 8. tfeu, art. 191(4): “With the respective sphere of competence, the Union and the Member States shall cooperate with third countries and with the competent international organisations. The arrangements for Union cooperation may be the subject of agreements between the Union and the third parties concerned. The previous subparagraph shall be without prejudice to Member States’ competence to negotiate in international bodies and to conclude international agreements.” 66 The eu has recently concluded a Voluntary Partnership Agreement (vpa) with Indonesia for the regulation of timber. eu-Indonesia, “Voluntary Partnership Agreement of 30 September 2013 – timber products checked under independently monitored traceability system to ensure they are produced in compliance with relevant Indonesian legislation. The eu is providing support to establish and improve the control systems that will be used.” See European Commission, Press Release, ‘eu and Indonesia sign historic deal to curb illegal timber,’ 30 September 2013, ip/13/887, available at http://europa.eu/rapid/ press-release_IP-13-887_en.htm. The document also illustrates that similar agreements have already been signed between the eu and some African Countries.

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consensus.67 Moreover, the principle in question encourages states to adopt a clear policy framework, through open negotiations instead of a unilateral action. In order to reach bilateral or multilateral agreements, developed countries have to participate in the development of developing countries by transferring know-how, technologies, practices and processes pertinent to climate change.68 For instance, the Kyoto Protocol exhorts developed states to cooperate with their less developed counterparts by adopting joint policies and programmes.69 Likewise, the adoption of the United Nation Convention on Biological Diversity added a new requirement with the sustainable use of natural resources and invited states to coordinate their actions. With regard to the renewable energy sector, states agreed in 2008 that biofuels should be sustainable through the development of a sound policy framework.70 The eu showed its support and participation to this international principle with the sustainability criteria. At the regional level, the aforementioned Principles entail that the eu and its member states have to respect the level of development of developing countries in order to implement their criteria. However, the lack of clarity and precision in the formulation of these criteria leave member states the freedom to define the content of the agreements. 67

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Rio Declaration, Principle 12: “States should cooperate to promote a supportive and open international economic system that would lead to economic growth and sustainable development in all countries, to better address the problems of environmental degradation. Trade policy measures for environmental purposes should not constitute a means of arbitrary or unjustifiable discrimination or a disguised restriction on international trade. Unilateral actions to deal with environmental challenges outside the jurisdiction of the importing country should be avoided. Environmental measures addressing transboundary or global environmental problems should, as far as possible, be based on an international consensus.” Kyoto Protocol, art. 10: “All Parties, taking into account their common but differentiated responsibilities and their specific national and regional development priorities, objectives and circumstances […].” Kyoto Protocol, art. 10(e): “Cooperate in and promote at the international level, and, where appropriate, using existing bodies, the development and implementation of education and training programmes, including the strengthening of national capacity building, in particular human and institutional capacities and the exchange or secondment of personnel to train experts in this field, in particular for developing countries […].” The European Parliament attempted to add sustainability criteria to the Food Quality Directive 98/70/ec (as amended by Directive 2009/30/ec and the Directive on the promotion of the use of energy from renewable sources [2009/28/ec]), but the sustainability criteria proposed for the red in January 2008 were instead applied to the Fuel Quality Direc­­tive, thus facilitating the appropriate harmonisation across the two pieces of legislation.

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The lack of consensus and international negotiations in the elaboration of the sustainability criteria explain the failure to make the criteria effective.71 The eu unilateral approach is in contradiction with the needs of developing countries, which require more flexibility and a fair representation of interests in the elaboration of the criteria.72 Such criteria are often too strict and landrelated, which impedes their efficient implementation at the local level and prevent the social and economic development of the state involved.73 3.2 The Principle of Common but Differentiated Responsibilities (cbdr) According to the Principle of Common but Differentiated Responsibilities (cbdr), developed and developing states have to take different energy solutions to reduce ghg emissions.74 This principle reflects the broader concept of ‘climate justice’ according to which the biggest burden of reductions and actions need to be supported by industrialized countries, given the contribution the latter have made over time to climate change by embracing unsustainable energy production and consumption patterns.75 Thus, developed states should take on their responsibilities to introduce, finance, and support reforms leading to more sustainable energy models. In doing so, they should take into account the whole range of social, environmental and economic needs of developing states for two main reasons: First, to provide patterns that developing states are able to adopt and adapt to their realities;76 Secondly, in order to help developing states understanding how they can contribute, with their lands and natural resources, in meeting the targets set by developed nations and fulfil their obligations to the international community as a whole. Art. 18 of the Renewable Energy Directive: Bilateral and Multilateral Agreements to Implement the Sustainability Criteria The third method listed in red art. 1877 exhorts the ec to conclude bilateral and multilateral agreements with third states with the aim of providing the

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Bastos Lima, “Biofuel governance,” op. cit., 484. Ibid., 486. The two main sets of criteria that must be fulfilled cumulatively are greenhouse gas (ghg) emission savings and land-use requirements. Biofuel production must meet those criteria in order for biofuels to be counted towards the mandatory renewable energy targets and to be eligible for financial support. red 2009, art. 5(1). See A.J. Bradbrook and R.D. Wahnschafft, “A Statement of Principles for a Global Consensus on Sustainable Energy Production and Consumption,” Journal of Energy & Natural Resources Law, 2001, 145. Ibid., 145. Taking advantage of financial and technological assistance from developed states. The other two being voluntary certification schemes and national systems. red art. 18.

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discipline for the application of the sustainability criteria. For ‘third states’ the provision applies to those involved in biofuel production and export to the European internal market.78 It does not seem that member states are obliged to resort to bilateral and multilateral agreements with third states. Rather, according to the provision, only where such agreements are concluded and only when they set specific sustainability criteria, then biofuels and bioliquids originating from third states should be produced in full compliance with such sustainability criteria.79 Furthermore, art. 18 provides the areas that shall be necessarily covered by the bilateral and multilateral agreements. Indeed, according to this provision – and in case such agreements are signed between the eu and third states as well – the parties should establish which measures shall be taken “for the conservation of areas that provide, in critical situations, basic ecosystem services” (such as watershed protection and erosion control), “for soil, water and air protection, indirect land-use changes, the restoration of degraded land, the avoidance of excessive water consumption in areas where water is scarce.”80 Another legal support to these agreements as potentially viable means of implementation has also emanated from the Directive 2009/30/EC, where the European Parliament and the Council have pointed out the consequences likely to derive from the Directive 2009/28/ec – especially with the introduction of binding targets.81 The Directive in para. 15 points out the fact that “the incentives provided in this Directive will encourage increased production of biofuels worldwide” and that “there is a concern that production of biofuels in certain third countries might not respect minimum environmental or social 78 79

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Ibid., art. 18. Ibid., art. 18, para. 4. The provision reads “[…] Where the Community has concluded agreements containing provisions relating to matters covered by the sustainability criteria set out in Article 17(2) to (5), the Commission may decide that those agreements demonstrate that biofuels and bioliquids produced from raw materials cultivated in those countries comply with the sustainability criteria in question. When those agreements are concluded, due consideration shall be given to measures taken for the conservation of areas that provide, in critical situations, basic ecosystem services […]” (emphasis added). As well as “to the issues referred to in the second subparagraph of Article 17(7).” Directive 2009/30/ec of the European Parliament and of the Council amending Directive 98/70/EC as regards the specification of petrol, diesel and gas-oil and introducing a mechanism to monitor and reduce greenhouse gas emissions and amending Council Directive 1999/32/EC as regards the specification of fuel used by inland waterway vessels and repealing Directive 93/12/eec, 23 April 2009, para. 15. The Directive revised the Fuel Quality Directive [Directive 98/70/ec] and establishes sustainability criteria that must be met by biofuels if they are to count towards the greenhouse gas intensity reduction obligation.

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requirements.” The paragraph therefore stresses the importance of developing “multilateral and bilateral agreements and voluntary international or national schemes that cover key environmental and social considerations, in order to promote the production of biofuels worldwide in a sustainable manner.”82 In addition, when such agreements or schemes are not put in place, the provision encourages member states to ‘require economic operators to report on those issues.’83 Thus, all three methods listed in art. 18 of the red are reaffirmed on an equal basis, with the conclusion of bilateral and multilateral agreements seen as means to promote sustainable biofuel production. Focus on Multilateral and Bilateral Approaches under red Art. 18 (4). A ‘win-win’ Scenario as a Possible Solution: A Collaborative Approach to Environmental Protection and Development? Among the instruments available to stimulate sustainable biofuel production are the bilateral and multilateral agreements between the Union and nonmember states – key players in the production of this renewable source of energy. Indeed, in order to deal with the new challenges due to the effects of globalization in environmental governance, cooperation and collaboration among states and between states and non-state actors by means of agreements and arrangements are of overriding importance. Such forms of response may guarantee the consideration of all interests involved, effective consensual interactions, transparency, and accountability mechanisms towards all stakeholders.84 As we illustrated earlier, one of the major consequences of the eu’s new binding targets has been the increasing of biofuel production. This large increase in biofuel production did not allow developing states to have the time necessary to adapt and adequately adjust their internal policies. The criteria set by red 2009 proved to be too strict and arduous to comply with. Developing host-states playing a pivotal role in biofuel production have not been put in the condition to express their points of view and needs. The case of Senegal, illustrated by one author, demonstrates how the African state – an active producer of biofuels destined to the European market in accordance with the eu-Africa

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82 Ibid. 83 Ibid. 84 See A.P.J. Mol, “Environmental authorities and biofuel controversies,” Environmental Politics, 2010, 77, where the author cites J. Meadowcrowft, “Democracy and accountability: the challenge for cross-sectoral partnerships,” P. Glasbergen, F. Biermann, and A.P.J. Mol (eds), Partnerships, governance and sustainable development. Reflections on theory and practice (Edward Elgar, 2007) 194–213.

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energy partnership – did not have any voice during the negotiations of such partnership.85 A legal regime based on bilateral and multilateral agreements can embed legally binding and enforceable criteria that take into account all risks associated with biofuel production and development. Access to lands by host state’s smallholders and family farms, food security and water protection, biodiversity conservation, employment guarantees, and appropriate infrastructures are the most widely known fundamental issues to deal with.86 The agreements should allow collaboration amongst non-governmental organizations, governments, investors, and intergovernmental organizations concerned with sustainability in biofuel production.87 Moreover, resources can be allocated for further research and development on second and third generation biofuel technologies. The bilateral and multilateral agreements should possess some flexibility in order to allow their adaptation to institutional, organizational, resource-based and decision-making differences among the negotiators. This is even more necessary when such agreements aim at addressing transboundary environmental issues that touch upon different national and local interests.88 They can incorporate international and regional standards for sustainable biofuel production. International standards would take into account, inter alia, the transboundary nature of ecosystems and would prevent developing states from lowering their internal standards to attract investment. Finally, international standards are also capable of influencing the creation of international norms that ultimately lead to customary or hard law. As far as the procedural steps that can be taken in the conclusion of the agreements, the Union and each non-eu state concerned could initially undertake negotiations of bilateral agreements between themselves. It would allow the establishment of country-specific sustainability criteria – since such criteria are likely to differ from one country to the other, depending on the concrete 85 86

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See M.G. Bastos Lima, “Biofuel governance,” op. cit., 488. See R.L. Ottinger, “Biofuels – Potential Problems and Solutions,” Fordham Environmental Law Review, 2009, 259; see also L. Cotula, S. Vermuelen, R. Leonard and J. Keeley, Land Grab or Development Opportunity? Agricultural Investment and International Land Deals in Africa, iied/fao/ifad, London/Rome 2009, 7; isbn: 978-1-84369-741-1. J. Lin, “Is your biofuel affixed with an approved seal?: A comparative analysis of the European Union Biofuels Certification Regime and the Clean Development Mechanism,” University of Hong Kong Faculty of Law Research Paper No. 2001/003, 13 at: http://ssrn.com/ abstract=1874998. L.A. Greening and S. Bernow, “Design of coordinated energy and environmental policies: use of multi-criteria decision-making,” Energy Policy, 2004, 725.

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environmental, social and economic needs of each country. Sustainability criteria should, therefore, be country-specific and take into account the interests and needs of all stakeholders, including the marginal ones. Once the sustainability criteria are identified, they may develop in a harmonized way and become a subject matter of multilateral agreements involving a group of states or areas with similar sustainability priorities. In this way, the sustainability criteria would become more flexible but also develop adequate standards, as they would arise out of specific state-to-state negotiations – on a ‘win-win basis’89 – rather than a purely European policy merely based on the economic interests of eu member states. Furthermore, a stable legal framework achievable through international bilateral and multilateral agreements allows for a more efficient regulation of biofuels production and the relative investment. Economic operators would have clearer standards to comply with, as these standards will also be reproduced in host state-investor contracts and licences. In addition, since multinationals in the biofuel sector also have the capacity of transferring innovation, technologies and know-how, they may become the main actors in the implementation of the sustainability criteria and therefore contribute to the sustainable development of the host state. Finally, provisions in bilateral or multilateral agreements may include the so-called rai Principles.90 These Seven Principles of Responsible Agricultural Investment, prepared in 2010 by the Food and Agriculture Organization (fao), the United Nations Conference on Trade and Development (unctad), the International Fund for Agriculture Development (ifad) and the World Bank Group aim at providing a framework of standards that can promote the dialogue on large-scale farmland acquisition. Given the voluntary nature of these

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Conceived as a situation that guarantees a favourable outcome for everyone involved in the negotiations or where each party benefits in some way. The Principles on Responsible Agricultural Investment (prai or rai) aim to enhance responsible agricultural investment that respects rights, livelihoods and resources. Support for the rai Principles has been reaffirmed by G20 leaders at the Cannes Summit, November 2011 and at the Los Cabos Summit, June 2012. The seven Principles cover all types of investment in agriculture, including between principal investors and contract farmers. As official documents illustrate, “the Principles are based on detailed research on the nature, extent and impacts of private sector investment and best practices in law and policy […] they are intended to distil the lessons learned and provide a framework for national regulations, international investment agreements, global corporate social responsibility initiatives, and individual investor contracts,” available at: http://unctad .org/en/Pages/DIAE/G-20/PRAI.aspx.

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principles, their inclusion in inter-state agreements may provide them with further efficacy and binding nature.91 3.5 The Example of Brazil Brazil provides an interesting and relevant example of how cooperation with the establishment of multilateral agreements allows developing states to participate in the adoption and application of sustainable standards in the production of biofuels.92 Indeed, Brazil has been at the forefront of the application of the principle of cooperation in the biofuels sector with a two-step implementing programme.93 First, in order to develop its domestic production, Brazil established joint response between the government and the private sector.94 Secondly the country adopted agreements with the us and the eu95 but also with developing countries96 and international bodies such as International Standards Organisation (iso) and the World Trade Organization (wto).97 To participate actively in the elaboration of internationals standards and improve the production of sustainable biofuels, Brazil accompanied these agreements with scientific research on the first and second generation of biofuels as well as alternative raw materials.98 With this initiative, Brazil called developed states to adapt and align their standards on the needs of developing states towards the creation of an international biofuels market, where standards would be discussed and settled through a consensus.99 As an emerging nation with a growing economy, Brazil 91

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See E.N. Stebek, “Between ‘Land Grab’ and Agricultural Investment: Land Rent Contracts with Foreign Investors and Ethiopia’s Normative Setting in Focus,” Mizan Law Review, 2011, 189. This is not the stage for a thorough discussion on Brazil and the measures this country has adopted with regard to biofuel production and development, for which the authors wish to address the reader to the relevant scholarship. See P. Calfucoy, “The Brazilian Experience in Building a Sustainable and Competitive Biofuel Industry,” Wisconsin International Law Journal, 2012, 558, 563. Ibid., 563. Ibid., 564. The author explains that “in 2007, Brazil initiated the Tripartite Task Force on Biofuel Standard with eu and us and International Biofuels Forum, which aimed at harmonizing the standards and codes of Biofuels industry.” With the us, Brazil expanded their cooperation to five countries: Guatemala, Honduras, Jamaica, Guinea Bissau and Senegal. P. Calfucoy, “The Brazilian Experience” op. cit., 579. Ibid., 580. For example, Brazil, with its Brazilian Sugarcane Industry Association, created the Brussels Group to discuss the concerns about the indirect land use changes effect. For more information see, among others, Brazilian Sugarcane Industry Association, ‘unica’s

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is increasingly gaining negotiating powers. Therefore, the country has the potential to represent other developing and third states in the elaboration of international policies and balance the interests of the North of the world with the ones of the South. 4

Concluding Remarks

The scale at which biofuels can be produced should necessarily take into account the scarce natural resources upon which we depend for food, fuel and essential environmental services. At the time of writing this paper, the eu is working towards raising its targets for the 2020–2030 period. Should this enhancement occur, it would be necessary to rethink the approaches adopted so far and the effects that new binding targets can produce on developing states as well as the effective support the eu will provide to their development. Climate change is a common concern of mankind. Biofuel production falls within the responses to fight climate change. However, in order to produce high amounts of biofuels, Europe has to – and already did – invest in third states lands acquisitions. This means that third states’ lands are exploited to produce biofuels that will be mostly imported to the European market. It also means that third states’ lands become essential means to fight a common concern such as climate change. This cannot be said to be a fair practice, if it is not accompanied by a right model of development for the host countries in exchange of the ‘contribution’ they are providing to eu, first, and the whole mankind, in general. Agricultural investment, in order to be conducted in a responsible way, should respond, inter alia, to principles of equity. This means that the rights of the poor in the South need to be protected. Because investments in this field aim at producing biofuels – and since those biofuels are directed to developed countries’ (eu) internal markets to meet their binding targets to fight climate change – they cannot aggravate host states conditions.100 On the contrary, developing countries have to receive the proper benefits for providing their lands and therefore contributing to developed states’ measures to fight an issue the latter are mainly responsible for. This would comply with the principle of common but differentiated responsibilities. The development of large-scale, Comments to ec’s Consultation on Indirect Land Use Change Impacts of Biofuels,’ 2010, available at http://sugarcane.org/resource-library/unica-materials?b_start:int=10. 100 See O. De Schutter, “How not to think of land-grabbing: three critiques of large-scale investments in farmland,” The Journal of Peasant Studies, 2011, 249.

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land-related investments should also be guided by coordination at the international level.101 Finally, given the abundance of natural resources in non-eu states in Africa, Asia, South America, the investments, the know-how, the technological and financial assistance coming from the eu for the production of renewable sources of energy may prove the best way to provide a new model of energy production and consumption. Developing states may take advantage of these inputs to provide themselves with new ways of living, of consuming, of developing, giving evidence to developed states (the eu, inter alia) that while the latter are currently trying to slow down their development trends and recommending as much as possible a reverse of paths, the former may actually take advantage of the lessons (presumably) learnt by the North of the world. 101 Ibid., 275.

PART 4 The Investment Context

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chapter 11

Integrating Human Rights into the Extractive Industries: How Investment Contracts Can Achieve Protection Anil Yilmaz-Vastardis and Tara Van Ho Introduction States are in a unique position to regulate each and every activity of business enterprises operating in the extractive industries.1 International law recognizes that states have permanent sovereignty over the natural resources located within their territories.2 As a result of this, businesses generally cannot operate in the extractives sector without obtaining permits and authorizations from the host state and are required to operate within the parameters of the terms of their investment contracts and the laws applicable to their activities. This gives host states ample opportunity to structure the legal framework applicable3 to the investments in the extractives sector in a manner that realizes their duty to protect human rights. However, states are often encouraged to make their regulatory framework as attractive as possible to outside investors.4 Laws applicable to foreign investments (hereinafter collectively referred to as ‘fil’)5 1 According to the Multilateral Investment Guarantee Agency, extractive industries comprise of oil, gas and mining sectors, see http://www.miga.org/sectors/index.cfm?stid=1813. 2 un General Assembly resolution 1803 (xvii) of 14 December 1962, “Permanent sovereignty over natural resources”; icj, Armed Activities on the Territory of the Congo (Democratic Republic of the Congo v. Uganda), Judgment of 19 December 2005, icj Reports, 2005, at para. 244; N. Schrijver, Permanent Sovereignty over Natural Resources, Max Planck Encyclopaedia of Public International Law, para. 1; M. Sornarajah, The International Law On Foreign Investment (Cambridge University Press, 3rd ed., 2010) 40. 3 This legal framework includes, but is not limited to, investment laws, treaties and contracts, licenses and permits, national laws and regulations applicable to businesses operating in the extractive industries. 4 T.H. Cheng, Power, “Authority and International Investment Law,” American University International Law Review, 2004–2005, 465, 500. 5 In the context of this paper, fil is understood in a narrow sense to comprise of investment treaties and the investment contracts between the state and the investor. In a broader sense, fil would also comprise of national law provisions on foreign investment promotion, terms of the investment license and permit etc., as any of these instruments may be taken into consideration when a dispute is submitted to an international arbitration tribunal or a local

© koninklijke brill nv, leiden, ���6 | doi 10.1163/9789004305663_013

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are often designed with the sole purpose of promoting foreign investments, without placing any obligations over investors, in order to increase global economic growth and act as a tool for development. The concessions provided to foreign investors under the fil framework may place significant obstacles to states’ ability to implement their duty to protect human rights.6 Whether favourable legal frameworks for investment in fact increase international investment flows and whether foreign investment contributes to economic development of the host state are often debated.7 This is more so in the extractive industries, where the location of the valuable resources is considered the primary determinant of investment decisions.8 There is no empirical evidence that higher environmental standards and human rights compliance deters foreign investments in the extractive industries.9 This paper considers how states can integrate their human rights obligations into investment contracts as a means of minimizing the adverse effects of business activities related to the extractives sector on human rights. The first two parts establish the theoretical background and the legal framework within which the concrete proposals in the final part are discussed. The analysis will begin with how the permanent sovereignty principle enables host states10 to utilize the legal instruments applicable to investor conduct to fulfill their duty to protect under international human rights law (‘ihrl’) in the extractive



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court by an investor against the host state. It is important that all these instruments include necessary provisions to ensure social and environmental protection; however, the focus of this paper will solely be on investment contracts. See, e.g., icsid, Suez, Sociedad General de Aguas de Barcelona s.a., and Vivendi Universal s.a., Decision on Liability of 30 July 2010, icsid Case No. ARB/03/19, para 262. Sornarajah, The International Law On Foreign Investment op.cit., 57. J.P. Walsh and J. Yu, “Determinants of Foreign Direct Investment: A Sectoral and Institu­ tional Approach,” imf Working Paper, WP/10/187, at 21. See, Y. Xing and C.D. Kolstad, “Do Lax Environmental Regulations Attract Foreign Investment?”, Environmental Resource and Economics, 2002, 1, 22. Studies specific to human rights found different results on the relationship between human rights and fdi. Compare, e.g., S.L. Blanton and R.G. Blanton, “What Attracts Foreign Investors? An Examination of Human Rights and Foreign Direct Investment,” Journal of Politics 2007, 143, 152; J.P. Tumman and C.F. Emmert, “The Political Economy of u.s. Foreign Direct Investment in Latin America, 1979–1993,” Latin America Research Review, 2004, 49. Under the un Guiding Principles on Business and Human Rights both host and home states carry the duty to protect. The focus of this paper; however, is only on the host states’ duty to protect; See John Ruggie: Guiding Principles on Business and Human Rights: Implementing the United Nations “Protect, Respect and Remedy” Framework, u.n. Doc. A/HRC/17/31 (2011).

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industries.11 For this purpose, Section 2 considers the theoretical understanding of international law as both an expression and constraint on sovereignty. It treats the discourses in international investment law and international human rights law separately before considering how the two fields interact. This paper further aims to contribute to the discussion on the implementation of the state duty to protect in the extractive industries in light of the 2011 un Guiding Principles on business and human rights, formulated by for un Special Representative John Ruggie, (alternatively ‘un Guiding Principles’ and ‘ungps’).12 In Section 3, it considers the expectations of the un Guiding Principles for states in adopting investment contract provisions that are consistent with a human rights approach. It suggests that the ungps place an expectation on states to ensure the laws and contracts include adequate and appropriate remedies and terms of liability for when violations occur despite proper due diligence measures by businesses. It is also important that the host state puts in place efficient enforcement mechanisms to ensure proper  implementation of the protections and guarantees integrated into these instruments. In Section 4, the Qara Zaghan Gold Mining contract between the Govern­ ment of Afghanistan and Afghan Krystal Natural Resources Company (aknr) for exploitation of the gold mine in the Qara Zaghan region in Afghanistan will be analysed as a case study.13 The focus, when analyzing this contract, is on impact of the investment on the local communities’ right to land and right to an adequate standard of living. The analysis draws on the authors’ collective experience advising states, intergovernmental organizations and non-governmental organizations on the appropriateness of legislation and contracts relating to the extractive industry development. We argue that for a state to meet its human rights obligations, it must incorporate human rights in its investment contracts. The recommendations include requiring impact assessments and community engagement, and introducing articles aimed at protecting the state’s continuing sovereignty in the area of human rights regulations.

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This should be distinguished from the discussion on whether the principle of permanent sovereignty over natural resources should prevail in the face of investment protections. On that discussion, see, D.E. Vielleville and B.S. Vasani, “Sovereignty over Natural Resources versus Rights Under Investment Contracts: Which One Prevails?” Transnational Dispute Management, 2008, 21. Guiding Principles, supra n. 10. A copy of this contract is available on the website of the Afghanistan Ministry of Mines and Petroleum. See, http://mom.gov.af/Content/files/QaraZaghan-Contract-2.pdf.

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International Law as Sovereign Expression and Constraint

Sovereignty is a much debated concept with different dimensions, the discussion of which falls beyond the scope of this paper.14 It, however, still largely remains the cornerstone of international law.15 In the traditional and widest sense it denotes the nation-state’s “…right to exercise…to the exclusion of any other state [or international organization], the functions of a state.”16 According to Brownlie, the notions of sovereignty and equality of states bear three main consequences:17 “(1) a jurisdiction, prima facie exclusive, over a territory and the permanent population living there; (2) a duty of non-intervention in the area of exclusive jurisdiction of other states; and (3) the dependence of obligations arising from customary law and treaties on the consent of the obligor.” The latter requires the state’s expression of its sovereignty to limit its jurisdiction under the former two consequences and to submit itself to external standards and external courts and tribunals under ihrl and fil. This section will elaborate on the allocation of power and authority on issues covered by ihrl and the fil between the states and other relevant non-state actors. It will demonstrate the disproportionate shift of power and authority from states to nonstate actors in ihrl and fil. This shift results in non-state actors protected by fil holding significantly more power than those protected under ihrl, which ultimately hinders the enforcement of ihrl when it clashes with fil. 1.1 Permanent Sovereignty over Natural Resources In the extractive industries, the doctrine of permanent sovereignty over natural resources both expands and constrains the state’s ability. Common art. 1 of the International Covenant on Civil and Political Rights (iccpr) and the International Covenant on Economic Social and Cultural Rights (icescr) finds that the State, on behalf of its people, are “entitled to and endowed with

14

See, J.H. Jackson, “Sovereignty: Outdated Concept or New Approaches, in Redefining Sovereignty,” W. Shan et al. (eds.), Redefining sovereignty in international economic law (Hart Publishing, 2008), 3. 15 Ibid. 16 pca, Island of Palmas Case, us v the Netherlands, Award of the Tribunal of 4 April 1928, 8. 17 J. Crawford, Brownlie’s principles of public international law, (Oxford University Press, 8th ed., 2012) 289. According to Lowe, “what sovereignty signifies is not a defined, static body of rights and duties but a changing frame of reference in international relations, whose content is partly – perhaps largely – determined by factors and processes outside the law.” V. Lowe, “Sovereignty and International Economic Law,” W. Shan et al. (eds), Redefining sovereignty in international economic law (Hart Publishing, 2008), 77, 78.

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the legal capacity to dispose freely of natural resources” in a territory.18 The state retains a permanent interest in the natural resources at all times, though it can assign or grant rights for identifying, mining, or cultivating the resources.19 The management of the extractive industry is therefore one more intimately linked to sovereignty. This authority of the state over its natural resources is constrained in the sense that it entails obligations for prudent natural resource management, both the resource itself and the income generated from the resource, which would enable the state to use its maximum available resources for realization of human rights and the wellbeing of its peoples.20 As Jack Donnelly argues “[s]overeignty is (only) the authority to decide, the right to choose among alternative courses of action the one that appears most beneficial or least harmful” for the peoples. Art. 2 of the icescr supports such an interpretation of the state’s purview as it obliges states to “take steps…to the maximum of its available resources, with a view to achieving progressively the full realization of the rights” in the Covenant.21 18

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N. Schrijver, Sovereignty over natural resources: balancing rights and duties (Cambridge University Press, 1997) 7. See also, L. Cotula, Human rights, natural resource and investment law in a globalised world: shades of grey in the shadow of the law (Routledge, 2012) 5; unga Resolution on Permanent Sovereignty, para. 1 declares “The right of peoples and nations to permanent sovereignty over their natural wealth and resources must be exercised in the interest of their national development and of the well-being of the people of the State concerned.” For a more in-depth discussion of Permanent Sovereignty over Natural Resources, see, e.g., E. Duruigbo, “Permanent Sovereignty and Peoples’ Ownership of Natural Resources in International Law,” George Washington International Law Review, 2006, 49; K.N. Gess, “Permanent Sovereignty Over Natural Resources,” International and Comparative Law Quarterly, 1964, 398. See J. Donnelly, “Human Rights and State Sovereignty,” Human Rights and Welfare Working Papers, at 17 available at http://www.du.edu/korbel/hrhw/workingpapers/2004/21-donnelly -2004.pdf; See also, E. Duruigbo, “Permanent Sovereignty and Peoples’ Ownership of Natural Resources in International Law,” George Washington International Law Review, 2006, 65 (arguing that “The right of peoples to sovereignty over natural resources necessarily imports an entitlement to demand that governments manage these resources to the maximum benefit of the people.”); L.A. Miranda, “The Role of International Law in Intrastate Natural Resource Allocation: Sovereignty, Human Rights and Peoples-Based Development,” Vanderbilt Journal of Transnational Law, 2012, 800, (asserts that “the doctrine [of permanent sovereignty over natural resources] possesses an intrastate dimension: one that was originally qualified as an obligation of the government of a state to its peoples as a whole.”). International Covenant on Economic, Social and Cultural Rights (icescr), art. 2(1), 993 u.n.t.s. 3, entered into force 3 January 1976.

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1.2 Permanent Sovereignty, ihrl and fil Permanent sovereignty over natural resources is exercised by the State on behalf of and for the benefit of the peoples. The doctrine does not entail a peremptory norm for exploitation of natural resources by states only, but rather it gives the power to the state to determine the way in which the sources will be exploited.22 In this sense, entering into an investment agreement for exploitation of natural resources or into an investment treaty granting protections to foreign investors is an exercise of the state’s sovereignty over its natural resources. However, once these instruments are entered into, they act as a limitation over the state’s authority to exploit those natural resources to the extent, and in the manner, provided in the particular instrument. Similarly, entering into ihrl obligations pertinent to natural resources is an exercise of state sovereignty, but once these obligations become binding they will act as a constraint over the state’s authority over its natural resources. The roots of both areas of law are found in the international law on state responsibility, and both “set[] minimum standards of protection…protect[ing] non-state actors against arbitrary exercise of state sovereignty.”23 The two fields differ, though, in the focus of their protection and the expectation of equal treatment.24 Between the late 1800s to the mid-1900s, the us and European home states sought to provide a higher level of protection for foreign investors than what was provided under the domestic laws of developing, principally post-colonial, states.25 Consequently, fil demands discriminatory treatment in favour of foreign investors, providing “an internationally recognized legal framework to protect foreign investment which would give direct rights and standing to the investor vis-à-vis the host state” and a set of minimum standards that may mean foreign investors receive compensation for actions domestic citizens would not.26 ihrl, on the other hand, “aims to protect human dignity” and in doing so requires equality and non-discrimination.27 Whereas fil permits demands on the state that favour investors based on their nationality, ihrl requires states to treat all within their territory or jurisdiction in a non-discriminatory manner, prohibiting deference based on nationality. While permanent sovereignty gives the states the right to formulate the legal framework applicable to natural resource exploitation, it is argued here 22 Schrijver, Permanent Sovereignty over Natural Resources, op.cit., para.23. 23 Cotula, Human rights, natural resource and investment law op.cit., 39. 24 Ibid. 25 Ibid., 39–40. 26 Sornarajah, The International Law On Foreign Investment op.cit., 35, 37. 27 Cotula, Human rights, natural resource and investment law op.cit., 40.

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that states are under an obligation to ensure that this framework adheres to the principle that the state’s sovereignty must be exercised by “choos[ing] among alternative courses of action the one that appears most beneficial or least harmful.”28 As a consequence, the state should strike the appropriate balance between fil and ihrl when exercising its permanent sovereignty. This may require limitations imposed on investor rights by the state to protect human rights of the local communities, or the limitation of land rights of the local community in order to enable the investor to conduct its business activities. Balancing the rights of the beneficiaries of these two areas requires an exercise of sovereignty by the state. In this sense, in the extractives sector the state is well situated to act as a barrier between the investor and the local communities whose rights and interests often clash. How does fil Restrict States’ Ability to Implement their ihrl Obligations Investment contracts may trigger a shift of power and authority over the actions of the foreign investor relating to the investment within the host state.29 This is a shift that transfers the power and authority from the state to investors and international tribunals to different extents, depending on the content of the instrument, and therefore, acts as a constraint on the host state’s sovereignty, on its power to regulate. While the transfer of power and determination of its extent is an expression of sovereignty, once this shift takes place, the host state’s ability to exercise sovereignty vis-à-vis the foreign investment becomes restricted by the standards prescribed in the relevant instrument. Foreign investment law instruments diminish the ability of the state organs, including the executive, legislature and the courts to act in a manner contrary to the rules prescribed by these instruments.30 Investment contracts can restrict the sovereignty of the host state in favour of private parties by stipulating legal or fiscal stabilization or by referring the settlement of disputes to international arbitration. For instance, art. 27(2) of the Qara Zaghan Gold Project Contract between Afghanistan and Afghan Krystal Natural Resources Company31 provides that “[a]ny future changes to existing Mineral Laws shall have no bearing on the terms, conditions or validity of this contract.” This constitutes a stabilization clause for the Mineral Laws

1.3

28 29 30 31

See, Schrijver, Permanent Sovereignty over Natural Resources op.cit. See, Cheng, “Authority and International Investment Law” op.cit., 469. Ibid., 481. Accessible at http://mom.gov.af/Content/files/Mineral%20Contracts/File_211_QaraZaghan _Contract-English.pdf.

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of Afghanistan as it affects the investor.32 The 2010 Minerals Law, which was in force at the conclusion of this contract,33 does not itself include a legal stabilization clause; however, the company will escape the stronger environmental or social protections that are found in the subsequent Minerals Law,34 relying on the stabilization clause found in the investment contract. As the duration of the contract is set for 10 years, any changes to the Minerals Law of Afghanistan within that period will be inapplicable to the Qara Zaghan project. While stabilization clauses restrict the state’s ability to enforce new regulation against the protected investor, international arbitration clauses require the state to submit itself to dispute settlement outside its own national courts. Investment treaty provisions often support and strengthen the conditions of investment set out in the investment contract. They can impose serious restrictions on the state’s ability to regulate in the extractive industries.35 Even though the fil instruments tend to restrict states’ ability to impose new conditions on investors, these instruments can only be created with state consent. Since the content of these instruments are formulated or negotiated by states,36 they give the necessary flexibility to the state to implement their human rights obligations at the formulation or negotiation stage. On this 32

33 34

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On stabilization clauses, see, e.g., Cotula, Human rights, natural resource and investment law op.cit., 4; J. Letnar Cernic, “Corporate Human Rights Obligations under Stabilization Clauses,” German Law Journal, 2010, 210; A. Shemberg, Stabilization Clauses and Human Rights: A Research Project conducted for the ifc and the United Nations Special Representative to the Secretary General on Business and Human Rights (2008), available at http://www.ifc .org/wps/wcm/connect/9feb5b00488555eab8c4fa6a6515bb18/Stabilization%2BPaper.pdf ?MOD=AJPERES&CACHEID=9feb5b00488555eab8c4fa6a6515bb18. A new Minerals Law was passed in 16 August 2014. For instance, art. 92 of the 2014 Minerals Law requires license holders to enter into Community Development Agreements “for the purpose of assisting the local communities affected by Mineral Activities in order to promote sustainable local economic development, the general welfare and quality of life of the local communities, recognizing and respecting the rights, customs and traditions of local communities.” 26 per cent of all cases submitted to icsid up to date since the inception of the centre were related to disputes in the oil and gas and mining industries. See icsid Caseload and Statistics, https://icsid.worldbank.org/apps/ICSIDWEB/resources/Documents/ICSID%20 Web%20Stats%202015-1%20%28English%29%20%282%29_Redacted.pdf. The content of national laws or investment contracts may be influenced by requirements of loan conditionality on creating a favourable investment framework imposed by international financial institutions. However, as mentioned earlier, there is no evidence that applying stricter environmental and social standards deter investments in resource extraction. Therefore, there is no reason for states to adopt lax environmental and social regulation to fulfil the loan conditionality.

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t­heoretical background on the interaction of sovereignty, ihrl and fil, the following sections will focus on the demands of ihrl regarding business activity and the ways in which these could be incorporated into investment contracts. 2

The Potential Impact of the un Guiding Principles

To date, the international community’s focus on business and human rights has primarily been aimed at examining the impact of foreign investment and in particular of multinational corporations (‘mncs’) on human rights and suggesting or creating soft-law mechanisms for remedying those impacts.37 This is  understandable as most foreign investment, though not all, comes in the form of investments from multinational corporations.38 Currently, the leading framework for responsibilities in the area of business and human rights is the un Guiding Principles, which recognizes a tripartite division of responsibility for governing the human rights impacts of corporations.39 States are to protect human rights from impacts by corporations, businesses are to respect human rights in their activities, and both states and businesses are to ensure negative human rights impacts are remedied.40 This section will outline the responsibilities recognized in the Guiding Principles while suggesting that they also offer a tool for better explaining and guiding the integration of human rights in fil instruments. The ungps draw on the traditional understanding of a state’s responsibility within human rights: respect, protect, and fulfil.41 Ruggie’s alteration to this 37

J.G. Ruggie, “Business and Human Rights: The Evolving International Agenda,” American Journal of International Law, 2007, 819; see, also, e.g., un Guiding Principles, op.cit., para. 1; Report of the un Special Representative to the Secretary General on Business and Human Rights, Protect, Respect and Remedy: A Framework for Business and Human Rights, u.n. Doc. A/HRC/8/5 paras. 1–3, (2008) (“A Framework for Business and Human Rights”); oecd Guidelines for Multinational Enterprises (2011), available at http://www.oecd.org/ daf/inv/mne/48004323.pdf (“oecd Guidelines”); see also, C. de la Vega, et al., Holding Businesses Accountable for Human Rights Violations: Recent Developments and Next Steps, 2–3 (Friedrich Ebert Stiftung, July 2011), available at http://library.fes.de/. 38 Sornarajah, The International Law On Foreign Investment op.cit., 60. 39 un Guiding Principles, op.cit. 40 Ibid. 41 See, I.E. Koch, “Dichotomies, Trichotomies or Waves of Duties,” Human Rights Law Review, 2005, 103; Report on the Right to Adequate Food as a Human Rights Submitted by Mr.  Asbjørn Eide, Special Rapporteur, u.n. Doc. E/CN.4/Sub.2/1987/23, para 66 (1987);

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topology has been criticized,42 but it was a clear attempt to harmonize his framework with international law.43 It is with this approach in mind that the ungps’ division of labour forms the underpinning of the recommendations in this Chapter. The power of the host state to exercise regulatory controls in the extractive industries is restricted by investment contracts, international investment treaties and domestic laws on investment or natural resources, but only to the extent it consents to. The state’s obligation to protect human rights against the negative impacts from extractive investments requires the state to construct its investment consent in a way that allows it to meet its obligations on a continual basis. Embedding the responsibilities recognized in the ungps can help the state realize its human rights obligations while pursuing foreign investors for its extractive industries. The next section considers how this can be done in the extractive industry. The burden of the ungps rests on States, which are required to regulate corporate behavior regardless of their capacity to do so.44 The ungps were drafted with the recognition that states may be unable or unwilling to exercise the necessary control over corporate actors,45 yet they still recognize an obligation on states to “[e]nsure that other laws and policies governing the creation and ongoing operation of business enterprises, such as corporate law, do not constrain but enable respect for human rights.”46 This proves difficult if human rights are isolated within the state’s legal or policy framework. An integrated approach that embeds human rights protections within the other legal provisions is necessary to ensure “departments and agencies which directly shape business practices” are apprised of the state’s obligations and find it within their capacity to consider human rights.47 Applying the ungps to the extractive industry, the state is expected to ­provide policy coherence between ihrl and the terms and conditions of

42 43 44 45 46 47

M.M. Sepúlveda Carmona, The nature of the obligations under the International Covenant on Economic, Social and Cultural Rights (Intersentia, 2003) 157,162. See, e.g., Letnar Cernic, “Corporate Human Rights Obligations” op.cit., 1269. See, Ruggie, “Business and Human Rights: The Evolving International Agenda,” 838. See, Framework, op.cit., paras 47–49. See, ibid., para 14; see also, Ruggie, “Business and Human Rights: The Evolving International Agenda,” 830. ungps, op.cit., para. 3. A Framework for Business and Human Rights, op.cit., paras 35–41; Report of the Special Representative of the Secretary-General on the Issue of Human Rights and Transnational Corporations and Other Business Enterprises, J. Ruggie, Business and Human Rights: First Steps Towards Operationalization of ‘Protect, Respect and Remedy’ Framework, u.n. Doc. A/HRC/14/27, para 18 (2010).

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investment contracts. States should ensure provisions do not allow or facilitate a business’s negative impact on human rights. The state must not relinquish its ability to adopt new human rights compliant legislation or new regulations, or enforce those standards on the business. Where negative impacts are an inherent part of the operation, the state is expected to require advanced planning for addressing these impacts in a human rights compliant manner, including the provision of compensation for impacted individuals and communities. Finally, where the business has had an unforeseen negative impact, the contract must not exempt the business from local courts or from an obligation to pay compensation. Businesses, on the other hand, have a responsibility to respect human rights even where the State fails to regulate. The ungps advance a ‘do no harm’ philosophy which places the corporation’s obligations primarily in negative terms: the corporation should not interfere with the enjoyment of a human right, and should avoid complicity when a state violates human rights.48 In addressing these demands, businesses are expected to undertake due diligence to determine the risks they pose to human rights, and to establish grievance mechanisms for addressing complaints about human rights violations.49 In advance of signing a contract, businesses should conduct due diligence on the impact of their operations and establish means for addressing grievances. Respecting human rights, though, also demands that businesses not seek exemptions from the state’s human rights laws, or pressure the state to avoid seeking new human rights compliant regulations.50 Finally, due diligence must not simply be conducted before an investment, but should function as a continuous part of the business’s operations.51 While businesses are expected to create non-judicial mechanisms by which they can resolve complaints by individuals and communities harmed by their actions,52 the burden for ensuring corporations meet their obligations rests with the territorial host state. While the ungps reflect a voluntary framework for businesses – noting a responsibility, not an obligation or duty to respect human rights – the expectation is that the host state will work to ensure enforcement of the corporation’s responsibility. Home states may also regulate the 48 49

A Framework for Business and Human Rights, op.cit., paras 24, 54–64, 73. See, ungps, Principles 17–21 and accompanying commentary; see also, R. Lindsay et al., “Human Rights in the Oil and Gas Sector: Applying the un Guiding Principles,” Journal of World Energy Law and Business, 2013, 18, 21. 50 Ibid. 51 ungps, Principle 17, Commentary. 52 ungps, Principle 28; see also, Lindsay, et al., op.cit., 31.

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activities of their corporations when abroad,53 but the ungps indicate an expectation that the actions taken by a territorial host state in line with its duty to protect will lead to a clear framework of binding expectations on the corporation’s responsibility to respect human rights. This has been appropriately criticized elsewhere as not reflecting the full obligations of a state,54 but it does emphasize the importance of host states’ laws embedding the duty to protect and the corporation’s responsibility to respect human rights in a clear and integrated framework. In this sense, the ungps recognize that human rights act as a constraint on sovereignty while also expecting the state to utilize its sovereignty in restraining corporate impacts on human rights through, inter alia, fil. 3

Incorporating the ungps into Investment Contracts

This section considers ways in which the un Guiding Principles can be incorporated, utilizing the example of the Qara Zaghan Contract.55 Investment contracts can initially make an explicit reference to the un Guiding Principles or to human rights as a specific term. The Qara Zaghan Contract, for instance, provides in art. 29 that the investor will manage its operations in a “technically, financially, socially, culturally and environmentally responsible manner to achieve the environmental protection and sustainable development objectives and responsibilities required by” the Contract and the laws of Afghanistan but also “any applicable international conventions to which Afghanistan is a signatory.” This could allow for Afghanistan to consider its international environmental and human rights obligations when interpreting the provisions of this contract. However, the wording of this entire subsection is not very strong and is slightly confusing. It is unclear how an interpreting court or tribunal would apply this provision in light of the Mineral Law stabilization clause in art. 27(2) of the Contract. Integrating the ungps into investment contracts, though, needs to be more comprehensive than a simple acknowledgment of the ungps or human rights within the contract. Instead, the principles of the un Guiding 53 54

55

See, ungps, Principle 2 and Commentary. See, N. Jagers, “un Guiding Principles on Business and Human Rights: Making Headway Towards Real Corporate Accountability?” Netherlands Quarterly of Human Rights, 2011, 159, 161. This section focuses on incorporating the ungps into one type of investment protection instrument: investment contracts. International investment treaties and national laws on resource extraction and investment promotion are also important components of fil, but due to space constraints, the analysis necessary to address the specifics of treaties and national laws is not included here.

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Principles need to be embedded throughout the instrument, in order for the state to fulfill its duty to protect. As John Ruggie recognized, investment can touch on a large variety of human rights. Investment contracts can be improved to include very direct provisions for the protection of specific human rights most relevant to that specific field. With the extractive industries, past cases indicate states need to be particularly concerned about the following issues: indigenous and minority rights; freedom from detention and torture; freedom of expression and association; freedom of religion; right to an adequate standard of living; right to health; cultural rights; property rights; and the right to an adequate remedy.56 This piece cannot address all of these issues, so it focuses on contract provisions in the extractive industries that interfere with right to property and right to an adequate standard of living. Investment contracts establish the special legal framework within which the investor will carry out exploitation of natural resources. The investment contract will normally operate within and comply with the laws of the host state, including its investment treaty commitments. In the extractive industries, contracts typically include provisions on the rights and obligations of both the government and the license holders throughout their license period, dispute settlement, termination clauses, and fiscal aspects of resource extraction. While these areas appear relevant only to the relationship between the investor and the state, the issues covered by them may interfere with the enjoyment of third parties’ human rights. Third party individuals that are most significantly affected by oil, gas and mining activities typically include the members of local communities living at or around the resource site and the labour force involved. Natural resource extraction may impact the right to property and right to an adequate standard of living in a variety of ways. Conducting business in this industry may require removal of local communities from their lands, which would interfere with their livelihoods. Communities may lose shelter, food and water resources due to their removal from land. Activities of a mining or an oil and gas company may cause contamination of air, water and soil, which would negatively impact the food and water sources as well as the health of the communities. These adverse impacts could be also created by the suppliers or subcontractors of the foreign investor. Investment contracts may be silent on the potential impact of the investor’s activities on the human rights of third parties or may provide inadequate 56

See, Interim Report of the Special Representative of the Secretary-General on the Issue of Human Rights and Transnational Corporations and Other Business Enterprises, u.n. Doc. E/CN.4/2006/97, para 25 (2006).

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safeguards. In order to avoid or mitigate the adverse consequences, contracts may include certain provisions, obliging the company and the relevant public authorities to act or not to act in a particular way. However, the formulation and implementation of these provisions are of utmost importance if they are to achieve the necessary protection. Otherwise, they will fail to satisfy the expectations of the human rights obligations of the host state. The following section will demonstrate how provisions of a contract are relevant to the protection of human rights by looking at Qara Zaghan Contract. The adequacy of the provisions of this contract will be investigated with specific focus on right to property and right to an adequate standard of living. Right to Property, Land Use and Right to an Adequate Standard of Living The impact of oil, gas and mining activities are strongly felt on communities’ right to property and right to an adequate standard of living. These projects often involve resettlement of communities, which directly interferes with their use of land and thus with their property rights in connection with that their right to housing and food. The right to property is guaranteed in art. 17 of the udhr57 and in regional human rights instruments such as the European Convention on Human Rights58 (art. 1 of Protocol i), art. 14 of the African Charter on Human and Peoples’ Rights59 and art. 21 of the American Convention on Human Rights.60 Under the European system the right to property has been interpreted in a broad manner to cover “all manner of things which have an economic value”61 while the Inter-American Court of Human Rights recognizes interests beyond mere ownership of property.62 Wide interpretation of property rights extends the protection guaranteed in these instruments to individual or collective occupants or users of land who do not hold the title to

3.1

57 58 59 60 61 62

Universal Declaration of Human Rights (adopted 10 December 1948. unga Res 217 A(iii) (udhr)). Convention for the Protection of Human Rights and Fundamental Freedoms (European Convention on Human Rights (echr)). African Charter on Human and Peoples’ Rights (African Charter) (adopted 27 June 1981, entered into force 21 October 1986). American Convention on Human Rights (achr) (adopted 21 November 1969, entered into force 18 July 1978). C. Ovey and R.C.A. White, The European Convention on Human Rights, (Oxford University Press, 4th ed., 2006), 350. Inter-Am. Ct. H.R., Mayagna (Sumo) Awas Tingni Community v Nicaragua Judgment of August 31, 2001, (Ser. C) No. 79 (2001), para. 144.

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the land.63 Removal from land will deprive communities from use of land for shelter, production of food and other means for generation of income, such as artisanal mining. This interferes with property rights, as well as depriving communities from their means of subsistence, adversely impacting their livelihood and at times their cultural rights. Contracts relating to oil, gas and mining activities should be drafted in a way to prevent or minimize any adverse impacts of the business activities on the communities’ livelihood. Safeguards should be incorporated to each stage of the oil, gas and mining activity stretching from the pre-licensing stage to post expiration or termination of the license. The main considerations of the host state negotiators related to use of land should be community consultation and consent, compensation and terms of resettlement. These issues are analyzed in turn below. 3.2 Consent and Community Consultation The first step to achieving human rights protection in oil, gas and mining ­projects is to engage with communities at every stage of the project through an  open consultation process. The international standards require not only consultation, but also ‘consent’ for natural resource extraction in areas populated by indigenous peoples. Free, prior and informed consent (‘fpic’)64 is the ­standard found in the un Declaration on the Rights of Indigenous Peoples. According to art. 10 of the Declaration, indigenous peoples cannot be removed from their lands without obtaining fpic. This standard is also found in instruments considered as benchmarks such as the The Indigenous and Tribal Peoples Convention,65 ifc Performance Standards,66 International Bar Association’s

63

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65 66

In many African countries, land is owned by the state and used or occupied by the people based on customary system of property rights. See, Cotula, Human rights, natural resource and investment law op.cit., 19–20. According to un-redd Programme Guidelines on Free Prior and Informed Consent, Free refers to a consent given voluntarily and absent of “coercion, intimidation or manipulation.”; Prior means “consent is sought sufficiently in advance of any authorization or commencement of activities.”; Informed refers mainly to the nature of the engagement and type of information that should be provided prior to seeking consent and also as part of the ongoing consent process.; Consent refers to the collective decision made by the rightsholders and reached through the customary decision-making processes of the affected peoples or communities. Consent must be sought and granted or withheld according to the unique formal or informal political-administrative dynamic of each community, available at http://www.un-redd.org/Launch_of_FPIC_Guidlines/tabid/105976/Default.aspx. ilo Convention No. 169, at art. 16, entry into force 5 September 1991. Performance Standard 7.

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Model Mining Development Agreement67 and the World Bank Policy on Involuntary Resettlement. Beyond the rights of the indigenous peoples, the last three instruments recognize the right of the affected non-indigenous communities to informed consultation and participation at every stage of the project that interferes with their rights on land.68 These standards on community consultation and consent should be incorporated into investment contracts. In Afghanistan, a country sitting on vast valuable mineral deposits,69 the 2010 Minerals Law does not include any clear provisions on public consultation and consent process.70 The Qara Zaghan Contract, which is governed by this law, also does not require the parties to carry out public consultation prior to commencement of the exploitation of the mine. Art. 7 implies that the exploitation license has been granted but cannot be proceeded with until the  Ministry of Mines and Petroleum (MoMP) accepts the Environmental and  Social Impact Assessment (esia) and the Environmental and Social Management Plan (esmp).71 Pursuant to art. 7(1), the MoMP has to accept or reject the Feasibility Study, which contains the esia and the esmp within a month after submission. This does not give sufficient time to the MoMP for effective consultation with affected populations. It is unclear whether the esia and esmp have requirements that will make it conducive to human rights. It is also unclear from the contract, if the community in the area around the mine was already consulted regarding the plans for mine development or during the preparation of the esia and the esmp. This is exacerbated by art. 7(2) which deprives the MoMP from revoking the license if it is not convinced about the company’s ability to avoid the bad impacts of its intended activity from the 67 68 69 70

71

Available at http://www.mmdaproject.org/. See for instance the ifc Performance Standard 1. K. Mahr, Treasure Land: The Mines of Afghanistan by Yuri Kozyrev, Time Lightbox (29 August 2013). There is no clear provision on community consultation in the 2014 Minerals Law either. It vaguely refers to a consultation with local communities in preparation of the Community Development Plan. The Law does not contain details on the procedure and the standards to be followed. These are left to the regulations which are not available on th website of the Ministry of Mines. Pursuant to art. 7(1)(E), the esmp will address: “i. the environmental impact as noted in the esia and mitigating the effects to the environment and include measures to safeguard the environment from unnecessary damage; ii. the social impacts as found in the esia and what measures will be taken to mitigate the negative impact of the proposed mining to the local populations. The plan will outline development projects to assist the local peoples in social development; iii. the health and safety of the employees as detailed in a Health and Safety Plan.”

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feasibility study. Instead, under art. 7(2) it must “…. cooperate with aknr to remediate the concerns resulting in the rejection.” In order to comply with its duty to protect under the ungps, states must ensure that their investment contracts contain provisions requiring the affected community to be consulted, pursuant to the internationally recognized standards, throughout the development of the project by both the state and the investor at relevant stages and allowed to provide insight into how to mitigate the harm they will face from the project. The state should also reserve the right to suspend or revoke the license, if the investor is in serious breach of the consultation requirements. 3.3 Compensation and Terms of Resettlement Interference with property rights are typically compensated monetarily. Some laws also include the option of resettlement as a form of reparation, where affected communities have to be removed from the land. In cases where communities or individuals are removed from land, compensation alone may not be the most appropriate remedy. Removal from land, in particular for rural communities, may cause loss of shelter, food, income sources and cultural attachment. As others have noted “displacement caused by development largely occurs in a manner that violates human rights and leads to the increased impoverishment of the displaced.”72 Resettlement and compensation is a complex issue, but the harmed individuals need to have a range of options available for reparation, not simply financial compensation. Restitution has long been the preferred method for redressing loss of land as a result of widespread armed conflict or human rights abuse.73 Where restitution is impossible, though, human rights law calls for a combination of responses to violations and negative impacts. The Van Boven-Bassiouni Basic Principles and Guidelines on the right to a Remedy and Reparation for Victims of Gross Violations of International Human Rights Law and Serious Violations of International Humanitarian Law make it clear that where restitution is impossible, reparations must include the combination of substantive reparations most aptly suited for redressing the violations and returning the ­individual to a 72 Inclusive Development International, et al., Reforming the World Bank Policy on Involuntary Resettlement: Submission to the World Bank Safeguards Review, 2, (2013), available at http://www.inclusivedevelopment.net/wp-content/uploads/2013/04/Reforming -the-World-Bank-Policy-on-Involuntary-Resettlement.pdf. 73 See, Centre on Housing Rights and Evictions, The Pinheiro Principles: United Nations Principles on Housing and Property Restitution for Refugees and Displaced Persons, available at http://2001-2009.state.gov/documents/organization/99774.pdf.

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state as close as possible to what they would have enjoyed had the harm not occurred in the first place.74 This may include social and legal rehabilitation.75 The investor and/or the state need to ensure an opportunity for social rehabilitation, either through the reconstruction of a community via relocation or additional social support through integration into new communities, adapting the economic skills of the community, or other forms of ensuring the social welfare of the individuals harmed. It is important to note that the World Bank recognizes resettlement as “depending on the case, include[ing] (a) acquisition of land and physical structures on the land, including businesses; (b) physical relocation; and (c) economic rehabilitation of displaced persons (dps), to improve (or at least restore) income and living standards.”76 It also recognizes that resettlement should be “avoided where feasible” because “resettlement can be severely harmful to people and their communities.”77 While the World Bank’s policy seems to recognize a wide range of possible responses under the heading of “resettlement,” the obligation for redressing human rights impacts requires the option that is most responsive to the victim’s needs. Consequently, it is not the investor, the financer or the state that should be determining the restitution on its own, but rather resettlement and rehabilitation again need to be considered in consultation with the victims. As such, adequate laws will ensure the wide range of options for remedies and reparations, instead of simply dictating compensation as an adequate standard. The obligation to recognize the range of reparations is not solely on the state, as businesses also have a responsibility to remedy impacts,78 but this article is specifically addressing the obligations of the state. The state can transfer the burden of rehabilitation and restitution to the licensee in the legislation but a truly human rights-compliant act would require this broader range of potential reparations also be imputed to the state. The Qara Zaghan Contract does not include any provision on remedies for loss of land. It provides in art. 29 that the MoM shall provide the land and rights of way necessary for the operation of the investor and grant exclusive 74

Basic Principles and Guidelines on the Right to a Remedy and Reparation for Victims of Gross Violations of International Human Rights Law and Serious Violations of Inter­ national Humanitarian Law, General Assembly Resolution 60/147, Annex, Principles 15–23 (2005). 75 Ibid., at Principle 21. 76 World Bank Group, Involuntary Resettlement Sourcebook: Planning and Implementation in Development Projects, 5 (2004). 77 Ibid. 78 ungps, op.cit., Principles 28–29.

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rights to use such land; however, it does not specify the conditions for obtaining this land and remedying its potential impacts on the local communities. Since the contract is governed by the Laws of Afghanistan, the 2010 Minerals Law can fill in the gaps where the contract fails to address an issue. The 2010 Minerals Law provides that land can be expropriated for mining activities in accordance with the law, but does not specifically refer to compensation.79 Exploitation license holders are required to submit an Environmental Impact Assessment and an Environment Management Plan, which includes measures for resettlement or compensation of affected communities and issuance of financial bond by the holder to guarantee its obligations towards the affected communities.80 Besides a reference to international best practice,81 no specific guidelines are included in the mining regulations as to the conduct of resettlement. It is further provided, in art. 66, that the license holder shall compensate third parties for damage caused as a result of its activities. The procedure for and evaluation of compensation is laid out in arts. 91 and 92 of the Mining Regulations, which include compensation for damage to property, land, infrastructures, livestock and crops. The contract itself need not include detailed provisions on how the remedies provided will be implemented, if these are already addressed in the national law. The contract can simply refer to the national law provisions. If the applicable national law does not have the appropriate provisions, like the Afghan Minerals Law, the contract should incorporate the international standards found in the documents such as the ifc Performance Standards, iba’s mmda or the World Bank’s standards on involuntary resettlement, In any case, the contract shall ensure that removal of communities from land is conducted in compliance with the internationally accepted standards. 4 Conclusion While fil instruments are both an expression and constraint on the sovereign interests, the state’s ability to enact investment protections is in turn constrained by its human rights commitments. By embedding the un Guiding Principles into fil, states can begin to adapt a comprehensive and integrated approach to their responsibility to protect human rights against negative 79

The Minerals Law [Afghanistan], art. 65 (14 February 2010), available at http://mom.gov .af/Content/files/Minerals%20Law_Feb_14_2010.pdf. 80 Ibid., at arts. 78, 79. 81 Ibid., at art. 88.

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impacts caused by foreign investment. Investment contracts play an important role in providing privileges and guarantees to investors, but they can also have an important role to play in advancing human rights protection from impacts of business activities. This piece has examined the Qara Zaghan Contract as a  case study to identify good practices and current weaknesses in states’ approach to human rights issues in their investment contracts. It is only a limited contribution to the effort of identifying best practices, and more comprehensive research needs to occur. As discussed in this Chapter, the Qara Zaghan Contract was tied to Afghanistan’s 2010 Minerals Law, limiting the ability of the state to protect human rights on an on-going basis. That law did not require community consultation, did not adequately address the economic and social rights of affected communities, and relies heavily on resettlement rather than preferred forms of  remedies for affected communities. Since the contract, Afghanistan has adopted a new law, which appears to better take into account the needs of affected communities,82 but as these developments will not help the individuals and communities affected by operations agreed to in the Qara Zaghan Contract, the case sits as a cautionary tale not just for Afghanistan but other states. If states are to meet their human rights obligations, their fil must make clear the investors’ obligations to respect human rights, provide adequate substantive and procedural remedies for affected individuals and communities, and allow the state to continually develop their human rights standards. .

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See, supra note 34 and note 70.

chapter 12

The Role of International Environmental Principles in Investment Treaty Arbitration: Precautionary and Polluter Pays Principles and Partial Compensation Tomoko Ishikawa 1 Introduction High-profile investment disputes over the last decade such as the Sakhalin ii oil and gas project case1 Chevron v. Ecuador2 and Vattenfall v. Germany i3 and ii4 have highlighted the ever-increasing issue of conflict between the protection of foreign investment and the protection of the environment. There are circumstances where host state’s environmental measures5 may result in the 1 The project involved rights that were originally owned by Royal Dutch Shell, Mitsubishi Corporation and Mitsui & Co. In 2005–2006, Russian authorities claimed that Sakhalin ii violated Russian environmental regulations. Amid this controversy, the state gas monopoly (Gazprom) took a 50% plus one share of the operator of the project (Sakhalin Energy) in December 2006. 2 The Chevron and TexPet oil exploration and extraction project in the Amazon region of Ecuador has given rise to a long-standing dispute over alleged environmental and social damage, resulting in two investment arbitration cases (Chevron Corporation and Texaco Petroleum Company v. Ecuador, uncitral, pca Case No. 34877, Final Award of 31 August 2011; and Chevron Corporation and Texaco Petroleum Corporation v. Ecuador, uncitral, pca Case No. 2009–23). 3 In 2009, a Swiss energy company challenged environmental restrictions imposed by the City of Hamburg, claiming that they were in violations of the Energy Charter Treaty (ect). The dispute was settled in 2011 (icsid, Vattenfall ab and others v. Germany, Award of 11 March 2011, icsid Case No. ARB/09/6). 4 In 2012, the German government’s decision to phase out nuclear energy for the commercial generation of electricity in Germany resulted in an investment treaty arbitration based on the ect (icsid, Vattenfall ab and others v. Germany, Decision pursuant to icsid Arbitration Rule 41(5) of 2 July 2013, icsid Case No. ARB/12/12). 5 For the purposes of this chapter, the term ‘environmental measures’ refers generally to host state’s domestic regulatory measures that cover environmental issues in general, ranging from ecological conservation to the protection of public health. Broad definitions of the term ‘environmental legislation’ are incorporated into certain investment treaties, e.g. the

© koninklijke brill nv, leiden, ���6 | doi 10.1163/9789004305663_014

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restriction of a foreign investor’s interests and give rise to a dispute between the affected investor and the host state. If the dispute cannot be settled by negotiation, the investor may bring a claim to investment treaty arbitration, arguing that such measures amount to a breach of investment treaty obligations. The case law of investment treaty arbitration confirms the existence of such conflicts – indeed, a number of cases (recent examples include Glamis v. us,6 Clayton/Bilcon v. Canada,7 Unglaube v. Costa Rica,8 Pac Rim Cayman v. El Salvador,9 Renco v. Peru10 and Abengoa v. Mexico11) indicate that investment treaty arbitration has now become an important international forum in which environmental issues are discussed. This chapter addresses this tension, focusing on investor-state arbitration that has dramatically increased in importance for the protection of foreign investment. The need for a proper balance between international environmental norms and investment protection provisions in such ‘environment-investment’ conflicts is indeed widely recognised. Despite consensus on the need for balance, however, the question of how such a balance should be sought has been less explored. Without guidance on how to go about it, it has proven to be difficult for tribunals to incorporate the balancing of these interests in the outcome of the disputes before them. This chapter addresses the vexing question of how to properly balance the interests of foreign investors against environmental concerns, focusing on the remedy phase of legal disputes. Once the liability of the host state is established, the concern of the parties is how much they may receive or have

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Belgium–Luxembourg Economic Union/Mauritius bit (adopted 30 November 2005, entered into force 16 January 2010). In certain contexts, environmental issues are distinguished from public health issues in that the latter may have a higher level of protection (N. De Sadeleer, “The Precautionary Principle in European Community Health and Environmental Law: Sword or Shield for the Nordic Countries’,” N. De Sadeleer (ed), Implementing the Precautionary Principle: Approaches from the Nordic Countries, eu and usa (Earthscan, 2007) 15). Yet the purpose of this chapter is not to assess the level of environmental protection in investment treaty arbitration but to address the relationship between investment protection and environmental protection, and therefore this chapter does not exclude measures to protect public health from the concept of ‘environmental measures.’ Glamis Gold, Ltd. v. us, uncitral, Award of 8 June 2009. William Ralph Clayton, William Richard Clayton, Douglas Clayton, Daniel Clayton and Bilcon of Delaware Inc. v. Canada, uncitral, pca Case No. 2009–04, Award on Jurisdiction and Liability of 17 March 2015. icsid, Marion Unglaube v. Costa Rica, Award of 16 may 2012, icsid Case No. ARB/08/1; icsid, Reinhard Unglaube v. Costa Rica, Award of 16 May 2012, icsid Case No. ARB/09/20. icsid, Pac Rim Cayman llc v. El Salvador, icsid Case No. ARB/09/12. icsid, The Renco Group, Inc. v. Peru, icsid Case No. UNCT/13/1. Abengoa v. Mexico, Award of 18 April 2013, icsid Case No. ARB(AF)/09/2.

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to pay.12 There are cases where, even if the host state is found to have breached investment protection obligations, awarding full compensation is inappropriate, and this applies to cases that involve difficulty in balancing between public interest such as environmental protection, and the protection of foreign investment. In other words, the investment-environment balance should be considered not only at earlier stages but also at the remedy stage, and partial compensation is indeed an effective way to make the outcome less of an all-or-nothing proposition. As will be demonstrated below (Section ii), partial compensation13 has been widely accepted in international law, and investment arbitration tribunals have awarded partial compensation on various grounds. Against this background, this chapter proposes that the precautionary principle and the polluter pays principle, widely accepted international environmental principles, may provide other grounds for awarding partial compensation. This chapter is structured as follows. Section ii demonstrates the possibility and appropriateness of awarding partial compensation in investment treaty arbitration by examining cases of international tribunals (ii.1) and investment arbitration (ii.2). Section iii first provides a brief summary of the precautionary and polluter pays principles (iii.1), and then demonstrates that they may provide a theoretical basis for the reduction of compensation when investment-environment balance is at issue (iii.2). Section vi concludes this chapter by applying the theory to a specific case with the following question in mind: If the tribunals had taken into account these environmental principles in the process of interpretation, would any practical effect on their approach have resulted? For this analysis, the classic Santa Elena v. Costa Rica case14 is revisited. While the tribunal’s pronouncement on the investment-environment relationship in this case has been endorsed by subsequent tribunals, it is also criticised for not being “premised on an approach that treats the protection of private property rights and the protection of the environment in an integrated manner.”15 It is argued that the aforementioned 12 13

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I. Marboe, Calculation of Compensation and Damages in International Investment Law (Oxford University Press, 2009) 2. In this chapter, the term ‘partial compensation’ is used in a broad sense which includes the approximation of compensation and the subsequent reduction of the amount of compensation. icsid, Compañía del Desarrollo de Santa Elena, s.a. v. Costa Rica, Award of 17 February 2000, icsid Case No. ARB/96/1. P. Sands, “Litigating Environmental Disputes: Courts, Tribunals and the Progressive Development of International Environmental Law,” T. Malick Ndiaye and R. Wolfrum

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environmental principles may well have altered the tribunal’s approach in determining the amount of compensation. 2

Partial Compensation in Investment Arbitration

This section first demonstrates the appropriateness of awarding partial compensation in investment treaty arbitration. Waelde and Sabahi point out the desirability of partial compensation as a way to balance the public interest and the protection of foreign investments: Probably, the proper course is to reduce full compensation (or enhance partial compensation) by taking into account the relative legitimacy of the state’s regulation (intention, good faith, legitimate purposes pursued, proportionality of measure and purpose) on one hand and the investor’s special hardship (e.g. disappointment of legitimate expectation on property; good-faith efforts to come to a solution; time and trouble to find a replacement purpose for the property; or finding another property) on the other.16 This view is supported by case law of international tribunals, as examined below. 2.1 Cases Outside Investment Treaty Arbitration Outside the investment treaty arbitration regime, there are several investmentrelated disputes where international tribunals have adjusted the amount of compensation. First, in Himpurna v. pln, in which damnum emergens and lucrum cessans were awarded for a contractual breach, the ad hoc arbitration tribunal significantly limited the amount of lucrum cessans on the basis of the

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(eds), Law of the Sea, Environmental Law and Settlement of Disputes: Liber Amicorum Judge Thomas A. Mensah (Brill, 2007) 324. T.W. Waelde and B. Sabahi, “Compensation, Damages, and Valuation,” P. Muchlinski, F. Ortino and C. Schreuer (eds), The Oxford Handbook of International Investment Law (Oxford University Press, 2008) 1081. Although speaking outside the context of investment treaty arbitration, Brownlie also argues that a rigid rule for full compensation “would in reality render any major economic or social programme impossible, which would be contrary to the principles of self-determination, independence, sovereignty and equality” (I. Brownlie, Principles of Public International Law (Oxford University Press, 7th ed., 2008) 513).

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general principles of law and the doctrine of ‘abuse of right.’17 This tribunal pointed out that the calculation of lost profits must take into account “the risk of default, not by intentional breach…but by default due to larger forces – political, social, and, in any event, macroeconomic – which de facto paralyses contractual performance,” and consequently increased the discount rate applied to establish the present value of lucrum cessans from 8.5% to 19%.18 It also stated that in the calculation of compensation, “approximations are inevitable…considerations of fairness enter into the picture, to be assessed – ­inevitably – by reference to particular circumstances,”19 and in order to avoid double-counting, the qualification of lost profits must result in a lower amount.20 As a result, the tribunal awarded only 6% of the amount of lucrum cessans claimed.21 In Starrett Housing v. Iran, the Iran-us Claims Tribunal used the Discounted Cash Flow (dcf) method to determine the amount of compensation for expropriation. It then adjusted the amount of compensation on the grounds that: (1) a reasonable businessman purchasing the project would have expected that revenues would be lower for various reasons; (2) where it was impossible to calculate a precise quantification, the tribunal has a wide margin of appreciation to make reasonable approximations; and (3) it is obliged to exercise its discretion to ‘determine equitably’ the amount involved.22 Considering the tribunal’s recognition that the circumstances of the case militated against calculation of a precise figure (as the calculation depended on the exercise of judgmental factors that are better expressed in approximations or ranges), it is observed that in this case, the tribunal applied equitable considerations “to come to a ‘reasonable approximation’ of the fmv 17

The tribunal stated that giving the full amount of lucrum cessans would have constituted an abuse of right. Himpurna California Energy Ltd v. pt. pln (Persero), uncitral, Final Award of 4 May 1999, Yearbook Commercial Arbitration xxv (2000) 13-108 paras. 332–335. Waelde observes that the tribunal’s use of the doctrine of abuse of right presumably meant equitable considerations. T. Waelde, “Investment Arbitration under the Energy Charter Treaty: An Overview of Selected Key Issues based on Recent Litigation Experience,” N. Horn and S. Kroll (eds), Arbitrating Foreign Investment Disputes (Kluwer Law International, 2004) 225. 18 Himpurna California Energy Ltd v. PT. pln (Persero) cit., para. 364. 19 Ibid., para. 441. 20 Ibid., para. 446. 21 S. Ripinsky and K. Williams, Damages in International Investment Law (British Institute of International and Comparative Law, 2008) 354. 22 Iran-us Claims Tribunal, Starrett Housing International, Inc. v. The Government of the Islamic Republic of Iran, Bank Omran, Bank Mellat, Bank Markazi, Award of 19 December 1983, 4 Iran-us ctr 122, paras. 337–345.

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[fair market value] of the property expropriated,” rather than to reduce the award to less than full market value.23 2.2 Cases of Investment Arbitration Investment arbitration tribunals have awarded partial compensation by adjusting, or reducing, the amount of compensation in certain circumstances, as demonstrated below. The question is on what grounds tribunals may do so, because (unlike the European Court of Human Rights (echr))24 most investment treaties do not provide an authorisation to award partial compensation. Tribunals have based their decisions to award partial compensation primarily on the following grounds: equitable considerations; the conduct of investors such as the failure to mitigate losses; the principle of ‘contributory negligence’ on the part of the investor; and adjustments in light of other international obligations.25 Each of these is explained in detail below. 2.2.1 Equitable Considerations In Azurix v. Argentina, in which compensation based on the fmv of the Concession was adopted as appropriate for multiple breaches of treaty obligations including expropriation,26 the tribunal stated that “a significant adjustment 23

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British Institute of International and Comparative Law, “Starrett Housing Corporation, Starrett Systems, Inc., Starrett Housing International, Inc., v. The Government of the Islamic Republic of Iran, Bank Omran, Bank Mellat (Case No. 24),” at: . Art. 1 of the Protocol to echr explicitly states that the determination of compensation is “subject to the conditions provided for by law and by the general principles of international law.” Partial compensation in cases of lawful expropriations is common in the jurisprudence of the European Court of Human Rights (ECtHR), where the Court has held that the legitimate objectives of ‘public interest’ may justify reimbursement of less than the full market value of the assets taken. European Court of Human Rihgts, James and Others v. the United Kingdom, Application n. 8793/79. For other ECtHR cases, see Ripinsky and Williams, Damages in International Investment Law op. cit., 81–82; H.R. Fabri, “The Approach Taken by the European Court of Human Rights to the Assessment of Compensation for “Regulatory Expropriations” of the Property of Foreign Investors,” New York University Environmental Law Journal, 2002, 165–166. There are also cases where the tribunals reduced the amount of compensation because the host state successfully invoked the ‘necessity’ defense (e.g. icsid, LG&E v. Argentina, Decision on liability of 3 October 2006, icsid Case No. ARB/02/1 paras. 226–266). Strictly speaking, however, these are not cases where partial compensation was awarded, because in these cases the host states were exempted from ‘liability’ for a certain period of time, and in this sense compensation that corresponds to the ‘partial liability’ is awarded. icsid, Azurix Corp v. Argentine Republic, Award of 14 July 2006, icsid Case No ARB/01/12, para. 420.

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is required to arrive at the real value of the Canon paid by the Claimant.”27 It concluded that “no more than a fraction of the Canon could realistically have been recuperated under the existing Concession Agreement,” considering that (1) the fmv should be determined according to what an independent and wellinformed third party would have been willing to pay for the Concession, and (2) such third party would have been aware of the unstable situation surrounding the Concession.28 In amt v. Zaire, in which compensation for a breach of full protection and security was at issue, the tribunal stated that it must “take into account the existing conditions of the country and not by making abstraction based on a criterion for the assessment which does not correspond at all to the reality, nor the current happenings in Zaire.”29 It also referred to the role of  equitable considerations and the tribunal’s discretionary power to determine the quantum of compensation, taking into account all the circumstances of the case.30 2.2.2 Conduct of Investors In Middle East Cement v. Egypt, the tribunal accepted that an investor’s duty to mitigate damages can be considered to be “part of the General Principles of Law which, in turn, are part of the rules of international law which are applicable in this dispute according to Art. 42 of the icsid Convention,” even though such a duty was not expressly mentioned in the Greece/Egypt bit.31 With regard to the facts, however, the tribunal did not find that the investor was under a duty to mitigate, and therefore concluded that the claims did “not have to be reduced due to a duty to mitigate.”32 More recently, in edfi v. Argentina, the tribunal stated that “[t]he duty to mitigate damages is a wellestablished principle in investment arbitration,” citing the statement referenced above by the Middle East Cement v. Egypt tribunal.33 Applying this 27 28 29 30 31

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Ibid., para. 425. Ibid., paras. 426–429. icsid, American Manufacturing and Trading, Inc. v. Zaire, Award of 21 February 1997, icsid Case No ARB/93/1, paras. 7.13–7.15. Ibid., paras. 7.16, 7.21. icsid, Middle East Cement v. Egypt, Award of 12 April 2002, icsid Case No. ARB/99/6, paras. 167–171. See also, Iurii Bogdanov, Agurdino-Invest Ltd and Agurdino-Chimia jsc v. Moldova, Award of 22 September 2005, scc, para. 5.2; B. Sabahi, Compensation and Restitution in Investor-State Arbitration: Principles and Practice (Oxford University Press, 2011) 176–177. icsid, Middle East Cement v. Egypt cit., paras. 170–171. icsid, edf International s.a., saur International s.a. and León Participaciones Argentinas s.a. v. Argentine Republic, Award of 11 June 2012, icsid Case No.ARB/03/23, paras. 1302–1303.

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principle to the facts of the case, the tribunal concluded that the claimants failed to take reasonable steps to minimize damages,34 and thereby failed to comply with their duty to mitigate damages.35 Accordingly, the tribunal subtracted 50% of the value of their participation in edemsa from the amount of damages to be awarded.36 2.2.3

The Principle of Contributory Negligence on the Part of the Investor In the international law context, the principle of contributory negligence is endorsed in Art. 39 of the International Law Commission Articles on State Responsibility.37 The Annulment Committee in mtd v. Chile stated that although Art. 39 is concerned with claims between States (“though it includes claims brought on behalf of individuals”), “[t]here is no reason not to apply the same principle of contribution to claims for breach of treaty brought by individuals.”38 In mtd v. Chile, the failure of the investors to adequately assess the investment risk led to a reduction in the damages. The tribunal found that the investors “had made decisions that increased their risks in the transaction and for which they bear responsibility, regardless of the treatment given by Chile to the Claimants,” and concluded that “the Claimants should bear part of

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This failure refers to the fact that although the renegotiation between the government and edemsa (an Argentine gas company controlled by the claimant’s consortium) was in progress, the claimant sold the investment in edemsa to iadesa without including any provision in the share purchase agreement “for the case that the renegotiation ended up with a tariff increase and/or any other measure that might re-establish all or part of the enterprises’ potential value.” Ibid., paras. 1296 and 1310. Ibid., para. 1310. Ibid., para. 1312. Other investment arbitration cases in which the duty to mitigate damages was discussed include: icsid, aig Capital Partners, Inc. and cjsc Tema Real Estate Company Ltd. v. Kazakhstan, Award of 7 October 2003, icsid Case No. ARB/01/6; National Grid plc v. Argentina, uncitral, Award of 3 November 2008. “In the determination of reparation, account shall be taken of the contribution to the injury by willful or negligent action or omission of the injured State or any person or entity in relation to whom reparation is sought.” See also Sabahi, Compensation and Restitution in Investor-State Arbitration op. cit., 175–176; W. Sadowski, “Yukos and Contributory Fault,” tdm Advance Publication, 2014, at: , 1–4. icsid, mtd Equity Sdn. Bhd. and mtd Chile s.a. v. Chile, Decision on Annulment of 21 March 2007, icsid Case No. ARB/01/7, para. 99 (citing International Law Commission Articles on State Responsibility, Art. 33(2) and commentary, para. (4)). For the view that certain qualifications may be necessary to such an approach, see Sadowski, “Yukos and Contributory Fault,” op. cit., 28–36.

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the damages suffered and the Tribunal estimates that share to be 50% after deduction of the residual value of their investment calculated.”39 The ad hoc annulment committee, refusing to annul this decision, stated that: “the Tribunal had a corresponding margin of estimation” on this issue, and in the circumstances of the case, “it is not unusual for the loss to be shared equally.”40 In Occidental v. Ecuador ii (in which the claimants were awarded approximately 17.7 billion usd), the tribunal reduced the amount of compensation awarded by 25% on the grounds that “as a result of their material and significant wrongful act, the Claimants have contributed to the extent of 25% to the prejudice which they suffered…,” and that the resulting apportionment (25% and 75%] was “fair and reasonable in the circumstances of the present case.”41 Arbitrator Stern, in her dissenting opinion, argued that the majority underestimated the contribution of the claimants to the damage, and that in this case, “the split 50/50 would have been even more justified [than the mtd v Chile case], as the Claimants have acted both very imprudently and illegally.”42 Most recently, the concept of contributory negligence resulted in the reduction of the amount of compensation by 25% in the Yukos v. Russia cases43 in which the tribunal ordered Russia to pay approximately 50 billion usd to the majority shareholders of oao Yukos Oil Company (Yukos). These cases, which the tribunal described as ‘mammoth arbitrations,’44 arose out of various measures taken by Russia against Yukos that resulted in the demise of the latter’.45 The 39

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icsid, mtd Equity Sdn. Bhd. and mtd Chile s.a. v. Chile, Award of 24 May 2004, icsid Case No. ARB/01/7, paras. 242–243. Vinuales observes that, in this case, the tribunal reduced the amount of compensation “to take into account the degree of diligence or reasonableness of the investor” (J.E. Vinuales, “Foreign Investment and the Environment in International Law: an Ambiguous Relationship,” British Yearbook of International Law, 2010, 328). icsid, mtd v. Chile (award) cit., para. 101. icsid, Occidental v. Ecuador ii, Award of 5 October 2012, icsid Case No. ARB/06/11, para. 687 Dissenting opinion of arbitrator Stern, para. 7. Veteran Petroleum Limited (Cyprus) v. Russia, uncitral, pca Case No. aa 228, Final Award of 18 July 2014; Hulley Enterprises Limited (Cyprus) v. Russia, uncitral, pca Case No. aa 226, Final Award of 18 July 2014 and Yukos Universal Limited (Isle of Man) v. Russia, uncitral, pca Case No. aa 227, Final Award of 18 July 2014 (collectively, ‘Yukos awards’). Yukos awards cit., para. 4. Such measures include “criminal prosecutions, harassment of Yukos, its employees and related persons and entities; massive tax reassessments, vat charges, fines, asset freezes and other measures against Yukos to enforce the tax reassessments; the forced sale of Yukos’ core oil production asset; and other measures culminating in the bankruptcy of

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claimants argued that these measures constituted a breach of arts. 10(1)46 and 13(1) (pertaining to expropriation) of the Energy Charter Treaty (ect). Russia denied any breach of the ect, and contended that the tax reassessments were a consequence of Yukos’ activities relating to the tax fraud scheme, in particular, its abuse of the low-tax region program by establishing sham ‘trading companies’ in the region.47 At the liability phase, the tribunal found, inter alia, that: [W]hile Yukos was vulnerable on some aspects of its tax optimization scheme, and possibly even would have faced ‘substantial tax claims’ that might have resulted in ‘significant losses,’ principally because of the sham-like nature of some elements of its operations in at least some of the low-tax regions, the State apparatus decided to take advantage of that vulnerability by launching a full assault on Yukos and its beneficial owners in order to bankrupt Yukos and appropriate its assets while, at the same time, removing Mr. Khodorkovsky from the political arena.48 The tribunal concluded that the measures adopted by Russia with respect to Yukos had an effect ‘equivalent to nationalization or expropriation’ that did not meet the conditions for lawful expropriation, and therefore Russia was in breach of its treaty obligations under Art. 13 of the ect.49

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Yukos in August 2006, the subsequent sale of its remaining assets, and Yukos being struck off the register of companies in November 2007” (Yukos awards cit., para. 63). Art. 10(1) of the ect requires the contracting states “to accord at all times to Investments of Investors of other Contracting Parties fair and equitable treatment. Such Investments shall also enjoy the most constant protection and security and no Contracting Party shall in any way impair by unreasonable or discriminatory measures their management, maintenance, use, enjoyment or disposal.” Yukos awards cit., paras. 93 and 109. Yukos awards cit., para. 515. This finding contrasts with the findings of the ECtHR in Khodorkovsky and Lebedev v. Russia that “none of the accusations against them concerned their political activities stricto sensu, even remotely.” European Court of Human Rights, Case of Khodorkovsky and Lebedev v. Russia, Applications nos. 11082/06 and 13772/05, para. 906. See also European Court of Human Rights, Case of oao Neftyanaya Kompaniya Yukos v. Russia, Application no. 14902/04, para. 665. For criticism of the Yukos tribunal’s finding of a political motive, see S. Nappert, “Mammoth Arbitrations: the Yukos Awards of 18 July 2014,” tdm Advance Publication, 2014, at http://www.transnational-dispute-management .com/journal-advance-publication-article.asp?key=548. Yukos awards cit., paras. 1580–1585.

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At the remedy phase, however, the tribunal reduced the amount of damages awarded to the claimants by 25%, which resulted in the reduction of the award from usd 66.7 billion to usd 50 billion. The tribunal stated that: While the Tribunal has concluded, on the basis of the totality of the evidence, that Respondent’s tax assessments and tax collection efforts against Yukos were not aimed primarily at the collection of taxes, but rather at bankrupting Yukos and facilitating the transfer of its assets to the State, it cannot ignore that Yukos’ tax avoidance arrangements in some of the low-tax regions made it possible for Respondent to invoke and rely on that conduct as a justification of its actions against Mr. Khodorkovsky and Yukos…. the Tribunal concludes that there is a sufficient causal link between Yukos’ abuse of the system in some of the low-tax regions and its demise which triggers a finding of contributory fault on the part of Yukos.50 It then concluded that: …in the exercise of its wide discretion, finds that, as a result of the material and significant misconduct by Claimants and by Yukos [which they controlled], Claimants have contributed to the extent of 25 percent to the prejudice which they suffered as a result of Respondent’s destruction of Yukos. [T]he resulting apportionment of responsibility as between Claimants and Respondent, namely 25 percent and 75 percent, is fair and reasonable in the circumstances of the present case.51 It should be noted that the tribunal’s application of contributory negligence in this case is criticised on the following grounds. First, there is no causality between the injury and the blameable conduct of Yukos. If,: as the tribunal found, the tax proceedings were merely a pretext to expropriate Yukos, “the impact of the tax structure on the destruction of Yukos should be accepted as nil”; and “the clearly disproportionate reaction of Russia would have trumped the implications of (such) causality.”52 Second, “the estimation of contributory fault by way of proportional reduction of damages by a given percentage” would be much more than “the justifiable amount of Yukos re-assessed tax arrears.” With regard to the latter, it is also argued that the only yardstick for 50 51 52

Yukos awards cit., paras. 1614–1615. Yukos awards cit., para. 1637. Sadowski, “Yukos and Contributory Fault,” op. cit.

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such proportional reduction of damages is ‘the arbitrators’ internal conviction of what is just and equitable in the given circumstances, and therefore this approach would be non-transparent and unpredictable.53 2.2.4 Adjustments in Light of Other International Obligations In spp v. Egypt, the tribunal rejected Egypt’s argument that its obligations under the relevant investment agreements were inconsistent with its obligation under the Convention Concerning the Protection of the World Cultural and Natural Heritage (unesco Convention), on the grounds that the latter entered into force only after the former had been concluded and after the various permits had been issued by Egypt.54 Nevertheless, the tribunal recognised the relevance of the obligations derived from the unesco Convention after 1979 (when Egypt nominated ‘the pyramid fields’ and the World Heritage Committee accepted that nomination, and thus the relevant international obligations emanating from the Convention became binding on Egypt)55 in terms of determining the method for valuing the investment, i.e. rejecting the dcf method. It first observed that the dcf method “would in effect award lucrum cessans through the year 1995 on the assumption that lot sales would have continued through that year,” but such lot sales in the areas registered with the World Heritage Committee under the unesco Convention would have been illegal under both international law and Egyptian law after 1979.56 The tribunal held that the allowance of lucrum cessans may only involve those profits that are legitimate, and concluded that “even if the Tribunal were disposed to accept the validity of the Claimants’ dcf calculations, it could award lucrum cessans until 1979,”57 because [f]rom that date forward, the Claimants’ activities on the Pyramids Plateau would have been in conflict with the Convention, and therefore 53

54 55 56 57

Ibid. Other investment arbitration cases in which the concept of contributory negligence was discussed (but not applied, based on the finding of the facts) include: Gemplus s.a., slp s.a., Gemplus Industrial s.a. de c.v. v. Mexico, Award of 16 June 2010, icsid Case No. ARB(AF)/04/3; icsid, Ioan Micula, Viorel Micula et.al., v. Romania, Award of 11 December 2013, icsid Case No.ARB/05/20; Anatolie Stati, Gabriel Stati, Ascom Group sa and Terra Raf Trans Traiding Ltd v. Kazakhstan, scc, Award of 19 December 2013. icsid, spp (me) v. Egypt, Award of 20 May 1992, icsid Case No. ARB/84/3, paras. 151–157. Ibid., para. 154. Ibid., para. 190. As noted, the tribunal actually adopted the hybrid approach rather than the dcf method based on the ‘out-of-pocket’ expenses complemented by the value of lost commercial opportunity (paras. 198–218).

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in violation of international law, and any profits that might have resulted from such activities are consequently non-compensable.58 3

The Role of the Precautionary and Polluter Pays Principles at the Remedy Phase

Having demonstrated that international tribunals, including investment arbitration tribunals, have awarded partial compensation on various grounds, this section examines the potential role of the precautionary and polluter pays principles at the remedy phase. It is demonstrated herein that, where environmental measures are concerned, these principles may provide another basis for awarding partial compensation. In this regard, Fauchald argues that, where the investment project at issue caused actual environmental harm: if measures that ensure integration of the costs related to the environmental harm into the costs of the investment exist, there can be no question that such costs must be taken into account when determining the compensation. He then argues that, in the absence of such measures, case law from investment treaty arbitrations (such as Santa Elena and Metalclad) indicates the reluctance of tribunals to accept a reduction of compensation on the basis of the costs of cleaning up existing pollution or restoring the environment. It is submitted that the precautionary and polluter pays principles may reduce this reluctance by providing a theoretical basis for the reduction of compensation in such cases. In this section, a brief overview of these principles will be provided, before examining their role in the context of awarding partial compensation. The Precautionary Principle and the Polluter Pays Principle: An Overview 3.1.1 The Precautionary Principle In the 1990s, the precautionary principle was recognised as a legal principle capable of general applicability in international law.59 It was explicitly recognised in four out of the five instruments adopted in the United Nations Conference on 3.1

58 59

icsid, spp (me) v. Egypt cit., paras. 190–191. Bergen Ministerial Declaration on Sustainable Development in the ece Region, 16 May 1990, un Doc. A/CONF.151/PC/10 (1990), para. 7. J. Cameron and J. Abouchar, “The Status of the Precautionary Principle in International Law,” D. Freestone and E. Hey (eds), The Precautionary Principle and International Law: The Challenge of Implementation (Kluwer Law International, 1996) 28.

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Environment and Development (unced), namely: the Rio Declaration;60 Agenda 21;61 the United Nations Framework Convention on Climate Change (unfccc);62 and the Biodiversity Convention.63 Since then, it has been observed that “the precautionary concept has been included in virtually every recent treaty and policy document related to the protection and preservation of the environment,”64 and the principle is also a mandatory treaty principle in eu law by virtue of Art. 191(2) of the Treaty on the Functioning of the European Union (ex. Art. 174(2) of the ec Treaty), which endorses the precautionary principle as a general principle. There are various definitions of the precautionary principle, ranging from the weak version that lack of decisive evidence of harm should not be used as a basis for the postponement of measures65 to the strong version that requires the reversal of the normal burden of proof (i.e. regulation is required unless potential polluters prove that their activities are not causing environmental harm).66 Nevertheless, it is generally recognised that this principle consists 60

61 62 63

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Principle 15. This was to extend the precautionary principle to the whole environment. P. Harremoes et al. (eds), The Precautionary Principle in the 20th Century: Late Lessons from Early Warnings (Earthscan, 2002) 5. Principles 17.1, 22.5(c). Art. 3(3). Preamble. Art. 8 also provides that an action to regulate or manage the relevant processes and categories of activities is required only where a significant adverse effect on biological diversity is determined pursuant to Art. 7 (Identification and Monitoring). D. Freestone and E. Hey (eds), The Precautionary Principle and International Law: The Challenge of Implementation (Kluwer Law International, 1996) 3. The list includes, but is not limited to: Bamako Convention (1991); Convention for the Protection of the Marine Environment of the North-East Atlantic (1992) (ospar Convention); Convention on the Protection and Use of Transboundary Watercourses and International Lakes (1992) (Helsinki Water Convention); Convention on the Protection of the Marine Environment of the Baltic Sea Area (1992) (Baltic Sea Convention); the Protocol to the 1979 Convention on Long-Range Transboundary Air Pollution on Persistent Organic Pollutants (1998) (Aarhus Protocol on pop s). E.g. Principle 15 Rio Declaration; unfccc, Art. 3(3). International instruments that stipulates a shift of the burden of proof include: 1989 Oscom Decision 89/1 of 14 June 1989 on the reduction and cessation of dumping industrial wastes at sea; ec Commission, Communication from the Commission on the Precautionary Principle (2 February 2000) com (2000) 1, Section 6.4; ospar Convention, Art. 3(3)(c); unga, World Charter for Nature, 28 October 1982, A/RES/37/7, para. 11(b). See also, Wingspread Statement on the Precautionary Principle (); H. Hohmann, Precautionary Legal Duties and Principles of Modern International Environmental Law: the Precautionary Principle: International Environmental Law between Exploitation and Protection (Graham & Trotman, 1994) 334; P. Birnie, A. Boyle and C. Redgwell, International Law & the Environment,

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of the following elements:67 (i) clean production methods, best available technology and best environmental practices must be applied; (ii) comprehensive methods of environmental and economic assessment must be used in deciding upon measures to enhance the quality of the environment; (iii) scientific and economic research that contributes to a better understanding of the long-term options available must be stimulated;68 (iv) there is a shift of the burden of proof (in certain circumstances); and (v) there is a duty to environmentally educate and inform decision-makers.69 3.1.2 The Polluter Pays Principle Since the early 1990s, the polluter pays principle has been recognised in a number of international instruments as a binding principle or a guiding principle.70 (Oxford University Press, 3rd ed., 2009) 161. Steele regards reversal of the burden of proof as the strongest version of the precautionary principle as it “operates as a veto” in the sense that safety should be prioritised whatever the costs, once doubt is identified. She argues that “this kind of uncompromising approach to precaution is unlikely to succeed in attaining legitimacy or support,” and it should not be adopted as a general principle rather than individual instances of precaution with specific application. J. Steele, Risk and Legal Theory (Hart Publishing, 2004) 194–195. 67 Christoforou argues that the diversity in the formulation of the principle does not “affect the core and basic rational of the principle” (T. Christoforou, The Precautionary Principle in European Community Law and Science, J. Tickner (ed), Precaution, Environmental Science, and Preventive Public Policy (Island Press, 2003) 243). See also, O. Mclntyre and T. Mosedale, “The Precautionary Principle as a Norm of Customary International Law,” Journal of Environmental Law, 1997, 235. 68 O. Mclntyre and T. Mosedale, “The Precautionary Principle,” op. cit., 236, citing H. Hey, “The Precautionary Concept in Environmental Policy and Law: Institutionalizing Caution,” Georgetown International Environmental Law Review, 1992, 311. They argue that these three elements constitute customary international law. 69 See, J. Cameron and J. Abouchar, “The Precautionary Principle: A Fundamental Principle of Law and Policy for the Protection of the Global Environment,” Boston College International and Comparative Law Review, 1991, 22–23. 70 E.g. ospar Convention, Art. 2(2)(b); Preamble of the Stockholm Convention on Persistent Organic Pollutants; Prologue and Art. 2 United Nations Convention to Combat Desertification in Countries Experiencing Serious Drought and/or Desertification, Particularly in Africa (1994); Baltic Sea Convention; Helsinki Water Convention, Art. 2.5(b); Convention on the Protection of the Alps (1991), Art. 2.1; wssd, Johannesburg Declaration on Sustainable Development, 4 September 2002, A/CONF.199/20, paras. 15(b), 19(b). It should be noted that the principle was endorsed as early as 1972 by the oecd (the 1972 Recommendation of the Council on Guiding Principles concerning International Economic Aspects of Environmental Policies, 26 May 1972, C(72)128, at ).

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Principle 16 of the Rio Declaration71 arguably incorporates the polluter pays principle,72 although it is not expressed in obligatory terms and is considered to ‘simply lack(s) the normative character of a rule of law.’73 The principle is included in Art. 191(2) of the Treaty on the Functioning of the European Union (ex Art. 174(2) ec Treaty) and thus forms part of eu law. Preambles of some international environmental treaties refer to the principle as “a general principle of international environmental law.”74 The United Nations Environment Programme (unep) Draft Guidelines for the Development of National Legislation on Liability, Response Action and Compensation for Damage Caused by Activities Dangerous to the Environment states: “[t]he objective of these Guidelines is to provide an effective regime on liability, redress and compensation for damage caused by activities dangerous to the environment, taking into account, particularly, the polluter pays principle.”75 ‘The Future We Want,’ the outcome document of the 2012 un Conference on Sustainable Development (Rio + 20),76 reaffirmed all the principles of the Rio Declaration, including the precautionary and polluter pays principles.77 The essence of the polluter pays principle is that a (potential) polluter should internalise the cost of complying with environmental measures or the negative externalities that they impose on society at large.78 The rationale 71

“National authorities should endeavour to promote the internalization of environmental costs and the use of economic instruments, taking into account the approach that the polluter should, in principle, bear the cost of pollution, with due regard to the public interest and without distorting international trade and investment.” 72 Cf. Smets argues that principle 16 does not refer to the polluter pays principle but to a broader principle of internalisation of environmental costs because the latter refers to a set of costs broader than the “costs of pollution prevention, control and reduction measures.” H. Smets, “The Polluter Pays Principle in the Early 1990s,” L. Campiglio, L. Pineschi, D. Siniscalco and T. Treves (eds), The Environment after Rio: International Law and Economics (Martinus Nijhoff, 1994) 134–135. 73 Birnie, Boyle and Redgwell, International Law & the Environment op. cit., 322. 74 E.g. the International Convention on Oil Pollution Preparedness, Response and Co-operation (1990); the Convention on the Transboundary Effects of Industrial Accidents (1992). 75 Note by the Executive Director in the fourth programme for the Development and Periodic Review of Environmental Law at the Governing Council of the unep in 2008, UNEP/GC/25/INF/15/Add.3. 76 It was endorsed by the General Assembly in its resolution 66/288. unga, Res. 66/288 (27 July 2012), The Future We Want (A/RES/66/288) at: . 77 Ibid., paras. 14–18. 78 T.W. Merrill, “Incomplete Compensation for Takings,” nyu Environmental Law Journal, 2002, 133.

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underlying the principle is that “[p]rices that are paid by producers and consumers should accurately reflect the full cost of their production and/or consumption (i.e. including the environmental costs).”79 This indicates that environmental costs should be considered as costs associated with the ownership of the property. 3.1.3 Their Legal Status Within the framework of international law, the status quo regarding these principles suggests that it is difficult for investment arbitration tribunals to definitively conclude that they have become customary international law or general principles of international law. As demonstrated below, the purpose of this chapter is to examine the role of these principles to provide ‘guidance’ in the exercise of wide discretion of investment arbitration tribunals to determine the amount of compensation, rather than to ‘apply’ these principles to the dispute as legally binding rules. Therefore, detailed examination of the criteria for ascertaining the existence of customary international law is outside the scope of this chapter, and it suffices here to rely on the most orthodox criteria proposed in North Sea Continental Shelf: a norm needs to be of a fundamentally norm-creating character; and it must be supported by state practice and opinio juris (i.e. the conviction of states that the practice is in conformity with international law).80 Although there are divergent views on these criteria (in particular regarding the combination of state practice and opinio juris81), 79 80

81

OECD Joint Working Party on Trade and Environment, “The Polluter-Pays Principle as It Relates to International Trade”, 23 December 2001, COM/ENV/TD(2001)44/FINAL, 9. icj, North Sea Continental Shelf [1969], Judgment of 20 February 1969, icj Reports, 1969, 3, paras. 70–77. Sands identifies the factors that are used to distinguish between principles reflecting customary law and those reflecting only an emerging rule, which are consistent with these three conditions. They are: textual context, specificity of its drafting, circumstances in which it is relied upon, its use in treaties, and reliance on it by international tribunals. P. Sands, “International Law in the Field of Sustainable Development: Emerging Legal Principles,” W. Lang (ed), Sustainable Development and International Law (Kluwer Law International, 1995) 56. See also, W. Lang, “un-Principles and International Environmental Law,” Max Planck Yearbook of United Nations Law, 1999, 162. It is observed that, in contrast with the ‘strict inductive approach’ adopted in the North Sea Continental Shelf case, the icj in the Nicaragua case (icj, Military and Paramilitary Activities in and against Nicaragua (Nicaragua v. us), Judgment of 27 June 1986 (Merits), icj Reports, 1986, 14) adopted the ‘flexible deductive approach’ which does not require “complete uniformity of State practice” and which loosens “the requirements for inference of the existence of opinio juris.” A. Alvarez-Jiménez, “Methods for the Identification of Customary International Law in the International Court of Justice’s Jurisprudence: 2000–2009,” International and Comparative Law Quarterly, 2011, 686–689.

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these criteria have been reaffirmed in subsequent icj cases82 and remain influential. In light of these criteria, the lack of consistent state practice,83 divergent views held by scholars,84 and lack of general recognition of the precautionary and polluter pays principles as customary international law by international courts and tribunals85 indicates that it cannot be decisively 82 E.g. icj, Libya/Malta Continental Shelf,’ Judgment of 3 June 1985 (merits), icj Reports, 1985, 13, para. 27: “[i]t is of course axiomatic that the material of customary international law is to be looked for primarily in the actual practice and opinio juris of States.” 83 For the precautionary principle, Wiener and Rogers argue that no clear and binding norm (on the issue of precaution) can be discerned, as state practice on precaution is diverse and inconsistent and the formulations of the principle are varied (J.B. Wiener and M.D. Rogers, “Comparing Precaution in the United States and Europe,” Journal of Risk Research, 2002, 343. See also J.B. Wiener, “Comparing Precaution in the United States and Europe,” Duke Journal of Comparative & International Law, 2003, 229). For the polluter pays principle, Sands observes that: “Over the long term, the polluter pays principle has not achieved the broad geographic and subject matter support that has been accorded to the principle of preventive action, nor has it received the attention that has been given to the principle in recent years, particularly by environmentalists” (Sands, “International Law in the Field of Sustainable Development,” op. cit., 66). It should be also noted that the Minamata Convention on Mercury as the most recent global multilateral environmental agreement lacks clear endorsement of the precautionary and polluter pays principles apart from noting the reaffirmation of the Rio principle in Rio + 20 in the preamble. This is so, despite several suggestions during the negotiations that there be clear mention of the precautionary principle and “widespread support among developing countries for the ‘polluter pays’ principle’” (UNEP, “Report of the intergovernmental negotiating committee to prepare a global legally binding instrument on mercury on the work of its third session,” 31 October 2011, UNEP(DTIE)/Hg/INC.3/8, para. 45); UNEP, “Report of the intergovernmental negotiating committee to prepare a global legally binding instrument on mercury on the work of its first session,” 15 July 2010, UNEP(DTIE)/Hg/INC.1/21). 84 For the precautionary principle, compare e.g. Cameron and Abouchar, “The Precautionary Principle,” op. cit., 20–21 and Birnie, Boyle and Redgwell, International Law & the Environment op. cit., 159–163. For the polluter pays principle, see Sands, “International Law in the Field of Sustainable Development,” op. cit. 85 For example, regarding the precautionary principle, the wto Appellate Body in ec – Hormones remains valid: “[w]hether it [the precautionary principle] has been widely accepted by Members as a principle of general or customary international law appears less than clear” (wto, ec – Measures Concerning Meat and Meat Products, Report of the Appellate Body of 16 January 1998, WT/DS26/AB/R, para. 123). In Pulp Mills, the icj did mention ‘a precautionary approach,’ but in a rather perfunctory way and in a limited context: “while a precautionary approach may be relevant in the interpretation and application of the provisions of the Statute, it does not follow that it operates as a reversal of the burden of proof” (icj, Pulp Mills on the River Uruguay (Argentina v. Uruguay), Judgment of 20 April 2010, icj Reports, 2010, 14, para. 164). However, it should be noted that the

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concluded that these principles have attained customary international law status. This certainly limits the function of these principles in two ways: (a) they may not be employed as applicable law balanced against investment protection provisions (as is the case with spp v. Egypt, examined above);86 and (b) they may not provide justification that the host state’s measure is the implementation of its obligation under a binding treaty.87 Nevertheless, these principles may still play an important role as ‘guiding principles’ in assessing the amount of compensation, the matter in which the tribunal has wide discretion. The following subsection demonstrates these points. Partial Compensation in Light of the Polluter Pays and Precautionary Principles As noted above, the essence of the polluter pays principle is the internalisation of the cost of complying with environmental measures. In this regard, it should be noted that under the influence of the precautionary principle, the meaning of pollution for the polluter pays principle has evolved from harm resulting in detrimental effects88 to a broader concept that encompasses the

3.2

International Tribunal for the Law of the Sea, in its Advisory Opinion on Responsibilities and Obligations in the Area, went further to state that: “[t]he Chamber observes that the precautionary approach has been incorporated into a growing number of international treaties and other instruments, many of which reflect the formulation of Principle 15 of the Rio Declaration. In the view of the Chamber, this has initiated a trend towards making this approach part of customary international law” (Responsibilities and Obligations of States sponsoring persons and entities with respect to activities in the Area (Request for Advisory Opinion submitted to the Seabed Disputes Chamber), itlos Case No. 17, para. 135). See also P. Sands, J. Peel, A. Fabra, R. MacKenzie, Principles of International Environmental Law (Cambridge University Press, 3rd ed., 2012) 217–228. 86 In Glamis v. us cit., the Quechan Indian Nation, in its amicus curiae brief, argued that Art. 31(3)(c) vclt mandated that the tribunal (under nafta, Art. 1131(1)) to construe arts. 1105 and 1110 “so that they do not require or authorize State conduct of the kind that would conflict with international norms protecting indigenous people” (including the International Covenant on Civil and Political Rights and the World Heritage Convention). 87 In Chemtura v. Canada, one of the grounds on which the tribunal concluded that the measure at issue did not constitute a breach of the nafta obligations was that the measure was in accordance with Canada’s international commitments under the Aarhus Protocol on pop s (Chemtura Corporation v. Canada, uncitral, Award of 2 August 2010). 88 The concept of pollution was originally “the introduction by man, directly or indirectly, of substances or energy into the environment resulting in deleterious effects of such a nature as to endanger human health, harm living resources and ecosystems, and impair or interfere with amenities and other legitimate uses of the environment.” oecd,

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risk of environmental degradation in general.89 Furthermore, the purpose of the principle, which is essentially and initially the prevention of environmental harm, as well as clearing up the environmental damage caused,90 may now be considered to encompass “the recognition that environmental regulations are bound to become stricter as societies and technology progress.”91 This justifies extending the meaning of ‘the internalisation of environmental costs’ so that it also requires a potential polluter to share the burden associated with the risk of future environmental degradation, and such a burden includes the precautionary measures the host state adopts in order to avoid or reduce such risk. Lastly, the concept of strict liability included in the precautionary principle and the polluter pays principle92 indicates that environmental costs should be borne by those responsible for such damage (rather than the community at large), even when there is no fault on the part of the polluter.93 This being so, where bona fide environmental measures were adopted in response

89

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Recommendation of the Council on Principles concerning Transfrontier Pollution, 14 November 1974, oecd Doc. C(74) 224. E.g. In the Convention on Civil Liability for Damage Resulting from Activities Dangerous to the Environment (the Lugano Convention, not yet in force), the term ‘damage’ is defined to include “the costs of preventive measures and any loss or damage caused by preventive measures” (Art. 2.7(d)). Directive 2008/1/EC of the European Parliament and of the Council of 15 January 2008 concerning integrated pollution prevention and control (2008) oj L24/8, which codified the ippc Directive (Council Directive 96/61/EC of 24 September 1996 concerning integrated pollution prevention and control (1996) oj L257/26), defines pollution as “the direct or indirect introduction, as a result of human activity, of substances, vibrations, heat or noise into the air, water or land which may be harmful to human health or the quality of the environment, result in damage to material property, or impair or interfere with amenities and other legitimate uses of the environment” (emphasis added). See also, N. De Sadeleer, Environmental Principles: from Political Slogans to Legal Rules (Oxford University Press, 2002) 40–41. See Opinion of Advocate General Leger in Case C-293/97, The Queen v Secretary of State for the Environment and Ministry of Agriculture, Fisheries and Food, ex parte H.A. Standley and Others and D.G.D. Metson and Others (1999) ecr I-02603, paras. 93–95. M.A. Orellana, “Science, Risk and Uncertainty: Public Health Measures and Investment Disciplines,” P. Kahn and T. Waelde (eds), New Aspects of International Investment Law (Martinus Nijhoff Publishers, 2007) 761. See also, De Sadeleer, “The Precautionary Principle in European Community Health and Environmental Law,” op. cit., 33–34. For example, the preamble of the Lugano Convention provides that: “Having regard to the desirability of providing for strict liability in this field taking into account the ‘Polluter Pays’ Principle.” This is based on the proportion that if one of two innocent persons must suffer the consequences of an occurrence, he who caused it must be the one to bear the loss. De Sadeleer, Environmental Principles op. cit., 51–52.

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to environmental concerns associated with the investment project at issue, the polluter pays principle requires making downward adjustments to the compensation amount, so as not to entirely shift the environmental costs and negative externalities onto the general public. For example, these principles justify the approximation of fmv by incorporating future environmental costs into the calculations when using the dcf method for measuring the incomegenerating potential of a business. dcf is the measure most commonly relied on in investment arbitration (such as adc v. Hungary;94 cms v. Argentina,95 Enron v. Argentina,96 Sempra v. Argentina,97 and National Grid v. Argentina98), where the expropriated enterprise was actually a ‘going concern.’99 The dcf method consists of the following steps. First, it values an income-producing asset by estimating the cash flow (revenue) the asset would be expected to generate, year by year, over the course of its life. Secondly, the resulting revenue is discounted by different calculation methods100 that reflect the following factors: (a) the time value of money, (b) expected inflation, and (c) the risk associated with realising the cash flow under realistic circumstances (the ‘risk factor’).101 Elements that are considered in the second step include the following: the assessment of the future revenue and expenses of the enterprise; a comparative assessment of other possibly available investment opportunities;

94

icsid, adc v. Hungary, Award of 2 October 2006, icsid Case No. ARB/03/16, paras. 444–448. 95 icsid, cms v. Argentina, Award of 12 May 2005, icsid Case No. ARB/01/8, paras. 416–417. 96 icsid, Enron v. Argentina, Award of 22 May 2007, icsid Case No. ARB/01/3, para 386. 97 icsid, Sempra Energy International v. Argentine Republic, Award of 28 September 2007, icsid Case No ARB/02/16, paras. 407–415. 98 National Grid v. Argentina cit., paras. 275–289. 99 The application of the dcf method is subject to the condition that the projected cash flows of the business must be reasonably capable of determination. This condition has been recognised by investment arbitration tribunals. E.g. National Grid v. Argentina cit., para. 276: “[i]n order to function properly, the dcf approach requires that the concern in question must have a history of profitable operation”(citation omitted); Rumeli Telekom A.S. and Telsim Mobil Telekomunikasyon Hizmetleri A.S. v. Kazakhstan, Award of 29 July 2008, icsid Case No ARB/05/16, paras. 801–804. 100 Sabahi identifies the two primary ways to calculate the discount rate: (1) the weighted average cost of capital; and (2) build-up methods. Sabahi, Compensation and Restitution in Investor-State Arbitration op. cit., 120–121. 101 C.F. Dugan, D. Wallace Jr, N.D. Rubins and B. Sabahi, Investor-State Arbitration (Oxford University Press, 2008) 587; A.C. Smutny, “Compensation for Expropriation in the Investment Treaty Context,” Transnational Dispute Management, 2006, 1; Sabahi, Compensation and Restitution in Investor-State Arbitration op. cit., 118.

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and the possibility “that the projected revenue in fact will be realized.”102 The polluter pays and precautionary principles can contribute to an appropriate balance by affecting the calculation of the discount rate of the net cash flow and by providing guidance on the determination of the risk factors.103 While some controversy exists over whether the discount rate actually affects the amount of compensation,104 there are cases in which discount rates did have a significant impact on the amount of compensation. In National Grid v. Argentina, for example, different experts presented significantly different discount rates, i.e., whereas the claimant’s expert proposed a discount rate of 10.84%, the tribunal-appointed expert suggested that a more appropriate discount rate would be in a range from 11.76% to 14.18%.105 Likewise, in cms v. Argentina, the same experts presented significantly different discount rates under different scenarios, ranging from 13.45% to 41.05% (or 45.04%).106 In the Amco v. Indonesia cases, the compensation awarded by the second tribunal was approximately half the amount awarded by the first tribunal “for the same wrongs, using the same dcf method of valuation,” with the discount rate being one of the factors that led to this disparity.107 Given the possibility that discount rates can significantly affect the amount of compensation, analysis turns to a discussion of risk to determine the discount. In the practice of investment treaty arbitration, the most common risk factor taken into account in assessing the amount of compensation (although not necessarily in the context of the determination of the discount rate) is the existence of an economic crisis in the host state, as exemplified by cases such 102 A.C. Smutny, “Some Observations on the Principles Relating to Compensation in the Investment Treaty Context,” icsid Review-Foreign Investment Law Journal, 2007, 12. 103 These principles are unlikely to play any role in determining expected inflation and the time value of money (P.D. Friedland and E. Wong, “Measuring Damages for the Deprivation of Income-Producing Assets: icsid Case Studies,” icsid Review-Foreign Investment Law Journal, 1991, 400, 417; Sabahi, Compensation and Restitution in Investor-State Arbitration op. cit., 566). 104 Marboe argues that “[t]he discounft rates selected by the parties are ofte not very far apart from each other”, and therefore the tribunal tends to focus more on the estimation of the cash flow projections. Marboe, Calculation of Compensation and Damages op. cit., 257-8. 105 National Grid v. Argentina cit., para. 289. 106 icsid, cms v. Argentina cit., 450. 107 Friedland and Wong, “Measuring Damages for the Deprivation of Income-Producing Assets,” op. cit., 419; K. Khamsi, “Compensation for Non-expropriatory Investment Treaty Breaches in the Argentine Gas Sector Cases: Issues and Implications,” M. Waibel et al. (eds), The Backlash against Investment Arbitration: Perception and Reality (Kluwer Law International, 2010) 172–174.

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as cms v. Argentina108 and Enron v. Argentina.109 However, economic crisis is by no means the only risk factor. The precautionary and the polluter pays principles both lead to the proposition that the possibility of changes in environmental regulations that cause business fluctuations should be considered as one of the general risk factors in certain circumstances. According to these principles, when a party invests in a project that has a (potential) environmental impact, the investor is required to share the burden associated with the risk of future environmental degradation, and such burden includes the possibility that the host state may adopt precautionary measures against such risk. Outside the context of the dcf method, the costs the investor would have incurred to prevent and control environmental risk if the investment project had continued to operate under the new regulation can be calculated in terms of percentage reduction in compensation. Turk provides the following example of how the polluter pays principle may actually be used in adjusting of the amount of compensation for expropriation: Suppose a factory is constructed at a cost of $25 million. The factory emits air pollution that will cost the government $20 million to clean up. According to the polluter pays principle, the factory owner would have to pay for the cost of the clean-up. However, suppose that instead of requiring the factory owner to pay for the pollution it has caused, the government enacts a law prohibiting the operation of the factory. In such a case the government should compensate the investor $5 million – the difference between the cost of his investment and the harm averted.110 Admittedly, there is no clear-cut formula for how to measure the contribution of such factors to the reduction of compensation. Quantifying the ‘environmental costs’ that should be borne by the potential polluter is a complex operation that requires the consideration of multiple factors such as “the nature of  the nuisance, the hazards it presents, the means available to remedy its harmful effects, and the cost of meeting an environmental quality objective, 108 icsid, cms v. Argentina cit., para. 248: “(Argentina’s economic crisis) must to some extent be attributed to the business risk the Claimant took on when investing in Argentina.” 109 The tribunal made downward adjustments in the dcf valuation presented by the claimant’s experts, stating that “[s]uch adjustments reflect the reality of the crisis that took place in Argentina and the specific influence it has in connection with valuation and compensation.” icsid, Enron v. Argentina cit., paras. 405–407. 110 J. Turk, “Compensation for “Measures Tantamount to Expropriation” under nafta: What It Means and Why It Matters,” International Law & Management Review, 2005, 71 (citation omitted).

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including the administrative costs directly linked to carrying out anti-pollution measures.”111 However, as Ripinsky and Williams point out, valuation is as much an art as it is a science, in which multiple variables may be taken into account.112 Moreover, as demonstrated above, equitable considerations, the principles of the duty to mitigate damage or contributory negligence, the application of which are no less vague113 than that of the polluter pays principle, have been applied in the assessment of compensation by tribunals ‘in the exercise of its discretion.’114 Further, these concepts do not take into account the nature, purpose and effect of the regulatory measure at issue.115 The polluter pays principle may well complement the limitations of these concepts. 4

Application – the Santa Elena Case Revisited

This final section applies the theoretical basis for partial compensation in light of the precautionary and polluter pays principles to the facts of the Santa Elena case.116 Santa Elena is one of the ‘classic’ cases in which the balance between the protection of property rights and the environment was at issue. While this case is unique in the sense that the decision was based solely on the customary international law of expropriation rather than investment

111 De Sadeleer, Environmental Principles op. cit., 47. 112 Ripinsky and Williams, Damages in International Investment Law op. cit., 212. 113 Ripinsky and Williams observe that the notion of equity is inherently subjective, the application of which largely “depends on the personal and collective views and beliefs of the members of the tribunal and their reading of the facts of the case” (ibid., 126). 114 Yukos awards, para. 1633. It should also be noted that equitable factors do not necessarily sit well with the established calculation methods to determine the fmv. Elihu Lauterpacht argues that where the relevant investment treaty provides the fmv standard, “there is little room for the exercise of an equitable discretion” (E. Lauterpacht, “Issues of compensation and nationality in the taking of energy investments,” Journal of Energy & Natural Resources Law, 1990, 249). Moreover, Marboe argues that: while “a certain uncertainty and imprecision” inherent in the calculation and valuation of compensation and damages allows for the consideration of equitable principles, “equity or estimation…cannot be used as an excuse for not conducting a calculation as precisely and understandably as possible” (Marboe, Calculation of Compensation and Damages op. cit., 147–148). 115 This may be because the public interests protected by regulatory measure are not easily valued in monetary terms. Merrill, “Incomplete Compensation for Takings,” op. cit., 129. 116 icsid, Santa Elena v. Costa Rica cit.

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treaty law,117 the award does include a statement that directly addresses the investment-environment relationship. The tribunal consisted of three distinguished scholars, and their pronouncement on this balance has been endorsed in a number of subsequent awards, recent of which are the Unglaube v. Costa Rica cases.118 It is, however, argued that the precautionary and polluter pays principles may well have altered the tribunal’s approach in determining the amount of compensation. The facts of this case can be summarised as follows: Having acquired the subject property in Costa Rica’s Guanacaste Province in the 1970s with the intention of developing it as a tourist resort and residential community, the claimant investors proceeded to design a land development program and undertook various financial and technical analyses of the property. However, on 5 May 1978, Costa Rica issued an expropriation decree (1978 Decree) for the property, for the purpose of expanding the Santa Rosa National Park. The claimant consented to the expropriation but contested the amount of compensation offered in the Decree (which was $1,919,492).119 While both parties agreed that this was a case of expropriation, and that the claimant was “entitled to compensation on the basis of the fair market value of the property,”120 they disagreed on the date on which the expropriation actually occurred. The tribunal therefore had to examine what constituted expropriation in order to determine the ‘date of expropriation’ on which the fmv of the property was to be assessed.121 The claimant argued that the actual date of expropriation was sometime later than the date of the 1978 Decree, and the fair market value of the property “based on its highest and best use in the market place” was equivalent to its present day value.122 The respondent countered that the “relevant date at which the fair market value of the Property is to be assessed” was the date of the 1978 Decree.123 The tribunal adopted the latter, based on the finding that “[a]s of that date, the practical and economic use of the Property by the Claimant was irretrievably lost, notwithstanding that cdse [the claimant] 117 This case is not based on an investment treaty, but on Costa Rica’s agreement to submit the dispute to icsid arbitration as a result of political pressure from the u.s. See, British Institute of International and Comparative Law, Case Summary: Compañía del Desarrollo de Santa Elena, s.a. v The Republic of Costa Rica at: . 118 icsid, Marion Unglaube v. Costa Rica and Reinhard Unglaube v. Costa Rica cit., para. 214. 119 icsid, Santa Elena v. Costa Rica cit., paras. 15–19. 120 Ibid., para. 35. 121 Ibid., para. 74. 122 Ibid., para. 75. 123 Ibid.

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remained in possession of the Property,”124 and that “[t]here is no evidence that its value at that date was adversely affected by any prior belief or knowledge that it was about to be expropriated.”125 Therefore the date used for valuation of the property was 5 May 1978, leaving the determination of the fmv on that date as the remaining issue. fmv is defined as “the price that a willing buyer would pay to a willing seller in circumstances in which each had good information, each desired to maximize his financial gain, and neither was under duress or threat.”126 Essentially, a subjective concept, fmv depends, for example, on different opinions and estimates of future earning power and degree of risk.127 These elements are reflected in various calculation techniques to determine the fmv,128 and yet the Santa Elena tribunal did not discuss such valuation techniques. Neither did the tribunal take into account that the expropriated property is located in an area that contains “flora and fauna of great scientific, recreational, educational, and tourism value, as well as beaches that are especially important as spawning grounds for sea turtles.”129 In fact, the tribunal explicitly denied the relevance of this fact in the following oft-cited statement: While an expropriation or taking for environmental reasons may be classified as a taking for a public purpose, and thus may be legitimate, the fact that the Property was taken for this reason does not affect either the nature or the measure of the compensation to be paid for the taking. That is, the purpose of protecting the environment for which the Property was 124 Ibid., para. 81. 125 Ibid., para. 83. 126 Starrett Housing v. Iran cit., 201. See also, Iran-us Claims Tribunal, ina Corporation v. The Islamic Republic of Iran, Award of 13 August 1985, 8 Iran-us ctr 373, 380; the ilc Commentaries to the Draft Articles on State Responsibility, commentary to Art. 36, para. 22. 127 Merrill, “Incomplete Compensation for Takings,” op. cit., 128. Ripinsky and Williams however point out that fmv also has a certain objective value, for “the marketplace balances the various subjective perspectives of value by a large number of buyers and sellers.” Ripinsky and Williams, Damages in International Investment Law op. cit., 182–183. 128 Sabahi identifies the following valuation techniques: (i) market capitalization; (ii) market comparison; (iii) negotiations, prior transactions, and offers to buy an asset; and (iv) discounted cash flow (Sabahi, Compensation and Restitution in Investor-State Arbitration op. cit., 112–123). Waelde and Sabahi point out that fmv is easily manipulated for various reasons, including the irrationality of markets, i.e. they “can move within quite short periods between extreme highs and extreme lows.” Waelde and Sabahi, “Compensation, Damages, and Valuation,” op. cit. 129 The 1978 Decree para. 2.

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taken does not alter the legal character of the taking for which adequate compensation must be paid. The international source of the obligation to protect the environment makes no difference.130 This statement has been relied upon by a number of subsequent tribunals and is described by a commentator as “the most convincing response to those arguing for…the exceptionality of environmental regulations as suggested by the iisd and wwf.”131 When considered in the context of the case, however, the normative impact of this statement is not as dramatic as may have been suggested. This is a case of lawful132 direct expropriation in which the parties, according to the tribunal, agreed that the compensation “should be based on the fair market value of the property calculated by reference to its ‘highest and best use.’”133 In such circumstances, it was probably natural that the tribunal held that the purpose of the expropriation to protect the environment did not affect the applicability of the customary international law of expropriation requiring adequate compensation. Rather, the central issue in this case was the application of the law, that is, how to calculate the fmv of the property as adequate compensation in terms of applying the law to the date of calculation. It is indeed unfortunate that the tribunal did not consider the environmental issues at this stage of assessment. Instead, it referred to ‘equitable considerations’ in the determination of compensation,134 stating that “[i]t can safely be assumed that the actual and true fair market value of the Property was not higher than the price asked by the owners and not lower than the sum offered by the Government.” Accordingly, the tribunal then set the compensation amount at $4,150,000, just between the respondent’s valuation ($1,900,000) and the claimant’s valuation ($6,400,000). In this approach, the international source of the obligation to protect the environment indeed had no role to play, 130 icsid, Santa Elena v. Costa Rica cit., para. 71 (with the following note: “For this reason, the Tribunal does not analyse the detailed evidence submitted regarding what Respondent refers to as its international legal obligation to preserve the unique ecological site that is the Santa Elena Property”). 131 J.R. Marlles, “Public Purpose, Private Losses: Regulatory Expropriation and Environmental Regulation in International Investment Law,” Journal of Transnational Law & Policy, 2006– 2007, 309. 132 It should be noted that the tribunal treated this case as a case of lawful expropriation despite the fact that ‘the expropriation in question had taken place 22 years before the close of the arbitration proceedings’ (Sabahi, Compensation and Restitution in InvestorState Arbitration op. cit., 148–149 (footnote)). 133 icsid, Santa Elena v. Costa Rica cit., para. 70. 134 para. 92.

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neither in determining the nature or the measure of compensation, nor in assessing the actual amount of compensation. Although the approximation through the dcf method is not appropriate for the valuation of the development project at issue in this case, which cannot qualify as a going concern at the time of expropriation,135 the polluter pays and precautionary principles may still provide a more solid basis for achieving a balance between investment interests and environmental interests than the selection of the middle ground between the parties’ valuations based on equitable considerations. For example, these principles provide theoretical grounds for the reduction of the amount of compensation by approximating the fmv. It should be recalled that given the environmental value of the area in which the property is located, (a) even if the expropriation did not take place, the property would at some point be subject to some environmental laws and regulations applicable to the area that would restrict its use; and (b) the investor should have expected the introduction of such environmental measures.136 Accordingly, the owner of the property could incur costs in order to comply with them. As discussed above, the polluter pays and precautionary principles support the proposition that the risk of environmental degradation and the possibility that the host state may adopt precautionary measures against such risk should be borne by the owner of the property. These ‘environmental’ costs associated with the property may be calculated in terms of a percentage reduction in compensation. This approach could also be applied to the more recent Unglaube v. Costa Rica cases. These case have many similarities with Santa Elena: the properties in question were located in an environmentally important area;137 the Costa Rican government took direct action to expropriate property in order to create a national park; and the central issue was the amount of compensation for expropriation based on the fmv standard. As in Santa Elena, the tribunal did not provide a detailed analysis on its calculation of the fmv. The tribunal 135 For the concept of going concern in the context of the Iran-us Claims Tribunal, see A. Mouri, The International Law of Expropriation as Reflected in the Work of the Iran-u.s. Claims Tribunal (Martinus Nijhoff Publishers, 1994) 421–429. See also, icsid, Merrill & Ring Forestry L. P. v. Canada, Award of 31 March 2010, uncitral, icsid Administered case, para. 264; M. Kantor, Valuation for Arbitration (Kluwer Law International, 2008) 136. 136 This consideration is supported by Turk as follows: “[p]erhaps a better option would be to take realistic investor expectations into account when evaluating the right to compensation” (Turk, “Compensation for “Measures Tantamount to Expropriation” under nafta,” op. cit., 75). 137 The area was “one of the world’s most important nesting sites for the highly endangered leatherback turtle” (para. 163).

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found that the expropriation took place after 22 July 2003 when the respondent first began to take actions that effectively deprived Mrs. Unglaube of her normal rights of ownership of the property,138 stating that: Had Mrs. Unglaube’s property not been burdened by the effects of the various ineffectual efforts to expropriate the 75-Meter Strip, she would have remained free to deal with or dispose of her property at whatever date she wished between July 2003 and the present date – including the peak period in July 2006 when prices were rising sharply and buyers were plentiful.139 Curiously, this tribunal did not choose the peak market period as the basis of the calculation of the fmv. It stated that: [I]t is more reasonable…to assume a sale of the property on January 1, 2006 – six-months before the market peak, and at a figure which gives some consideration to the normal fears and negative contingencies which are present in the minds of sellers and buyers making important investment decisions.140 Accordingly, the tribunal concluded that the fmv of the property was $3.1 million, about 30% lower than the amount offered by the claimants’ expert. As mentioned, in reaching this conclusion, the tribunal did not provide explanation on how it calculated the fmv, or indeed why it chose “six-months before the market peak” as the date on which the calculation was made. This appears to be an attempt to balance the claimants’ property rights against the right of Costa Rica to expropriate the property for public purposes.141 This purpose would have been better achieved by approximating the fmv or awarding partial compensation, taking into account the probable costs of complying with future environmental regulations, as supported by the polluter pays and precautionary principles. Admittedly, there is uncertainty as to how to quantify future environmental costs that should be borne by the potential polluter. Nevertheless, incorporating these principles into the analysis is a better 138 139 140 141

Ibid., para. 223. Ibid., para. 316. Ibid., para. 318. The tribunal stated that accepting the claimant’s expert’s calculation would in effect “credit Mrs. Unglaube with perfect judgment regarding a highly changeable real estate market as well as perfect market timing” (para. 317).

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approach for achieving a balanced outcome, instead of relying on equitable considerations or the notion of reasonableness, in that they squarely address the issue at the heart of these cases, i.e., the investment-environment balance, thereby treating foreign investment and environmental interests in an integrated manner. 5

Concluding Remarks

This chapter proposed the use of the precautionary and polluter pays principles as a theoretical basis for awarding partial compensation and conducted a hypothetical application of this theory to the facts of a case that is important in the context of the investment-environment balance: Santa Elena v. Costa Rica. While the outcome of this case (i.e., the amount of compensation awarded) may well be regarded as appropriate, the tribunals’ failure to incorporate obvious environmental implications of this case in its analysis is unfortunate. The sidestepping of environmental issues discourages the development of foreign investment law towards integration with environmental and other public interests. Had these environmental principles been taken into account by the tribunals in the way advocated by this chapter, more convincing, ­principle-based reasons to justify the same conclusions would have been the result. It is hoped that the approach proposed in this chapter provides solid guidance for greater integration of the protection of foreign investments and environmental protection.

chapter 13

Exploration and Extraction of Natural Resources: miga’s Role in the Promotion of Responsible Investments in Developing Countries Inesa Stolper 1 Introduction Exploration and extraction of natural resources projects require a long-term commitment and large sunk costs. Hence, when investors take a decision to invest into a developing country, they carefully assess commercial and noncommercial risks. Non-commercial risks include, inter alia, direct and indirect expropriation, civil unrest, restriction of capital transfer, and corruption. Multilateral Investment Guarantee Agency (miga) was established to provide insurance to investors for non-commercial risks occurring in the event of disturbances. Therefore, miga’s insurance provides confidence to investors that they will be able to recover their financial losses. miga’s decision to guarantee an investment project has a direct influence on the economic development of a state, since without such insurance investors might not even consider investing into a region with high political risks. As miga’s decisions have a direct impact on the economy of a state, it is assumed that it should be accountable for its actions. The accountability of international organizations covers a range of standalone concepts,1 and it is wider than responsibility for international wrongful acts.2 The notion of accountability has often served as an umbrella term encompassing concepts such as good governance, responsiveness, transparency, democracy, or the rule of law.3 The principle of good governance is a central concept.4 It includes the following: 1 Council of Europe, Committee on legal affairs and human rights, “Accountability of International Institutions for Human Rights Violations,” 10 May 2013, as/Jur (2013) 17, para. 7. 2 M.N. Shaw, International law (Cambridge University Press, 6th ed., 2008) 1317. 3 Council of Europe, “Accountability of International Institutions for Human Rights Violations,” op. cit., para. 7. 4 Third Report of the ila Committee on Accountability of International Organizations, Co-Rapporteurs M. Shaw and K. Wallens, “Report of the Seventieth Conference,” New Delhi, 2002, 772–806.

© koninklijke brill nv, leiden, ���6 | doi 10.1163/9789004305663_015

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[t]ransparency in both the decision-making process and the implementation of the ensuring institutional and operational decisions; a large degree of democracy in the decision-making process; access to information open to all potentially concerned and/or affected by the decisions at stake; […]; sound financial management; and appropriate reporting and evaluation mechanisms.5 This paper seeks to explore whether miga’s practices for ensuring investment projects correspond to the principle of good governance. However, the focus of this paper is not only on economic area of miga’s work. miga also encourages companies to make responsible investments through its environmental and social standards. miga monitors the implementation of standards and the compliance with these standards throughout the whole period of project’s performance. Hence, miga’s work can raise awareness among investors that their conduct should be environmentally and socially sound. This paper examines miga’s institutional structure, assessment standards and procedure, the decision-making process, and the reporting and evaluation mechanism in relation to its environmental and social policies. 2

miga’s Institutional Structure

2.1 miga’s Aims and Principles miga is an international organization that operates on the basis of the Con­ vention establishing the Multilateral Guarantee Agency (miga Convention).6 The agency is a member of the World Bank Group and carries out independent work on insuring and reinsuring risks of investors. It is possible to distinguish the following rules that govern miga’s activities. First, the core principles are incorporated in the miga Convention. The Convention defines aims, purposes, structure, budget, and regulation of miga. It also specifies eligible investors7 and types of risks it is empowered to cover.8 It should be pointed out that miga has an ability to cooperate with “national entities of members and regional entities the majority of whose capital is owned by members, which carry out activities similar to those of the Agency.”9 5 Ibid. 6 The Convention establishing the Multilateral Investment Guarantee Agency (miga Convention) (11 October 1985, entered into force 12 April 1988) 24 ilm 1598. 7 Ibid., art. 13. 8 Ibid., art. 11. 9 Ibid., art. 19.

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miga may issue “reinsurance in respect of a specific investment against a loss resulting from one or more non-commercial risks underwritten by a member or agency or by a regional investment guarantee agency.”10 Similarly, miga may enter into a reinsurance contract with private investment guarantee agencies.11 The purpose of entering into a reinsurance contract is to “increase capacity to insure eligible projects in developing countries.”12 When reinsuring others, miga applies its environmental and social standards policy.13 It assesses projects using the same eligibility criteria it applies to projects where miga is the primary insurer.14 This approach allows miga to promote its environmental and social policy to a broader scope of investment projects.15 It is worth mentioning that miga is the only organization of its kind that follows not only purely economic or political objectives but also social and environmental ones.16 Although other insurance funds, notably controlled by a state, incorporate such standards, the practice of their application is limited.17 Second, miga has its own internal set of rules that apply to insurance assessment of projects. miga’s Performance Standards on Social and Environmental Sustainability18 deserve special attention because they contribute greatly to the responsible investment. When an investor applies to miga for coverage, the agency conducts a due diligence procedure against its Performance Standards on Environmental and Social Sustainability.19 The due diligence procedure is a part of the broader objective established in the art. 12 of the miga Convention, namely contribution of the investment project to the development of the host state.20 In this context, by the ‘development’ it is understood the environmental and social impact of the investment project on 10 11 12

Ibid., art. 20. Ibid., art. 21. miga, “Syndications: Facultative Reinsurance and Cooperative Underwriting Program,” at http://www.miga.org/documents/cup_FacRe.pdf. 13 Ibid. 14 Ibid. 15 Ibid. 16 miga Convention, art. 12e (i, iii). 17 Comparison with other insurance funds is provided in the part 2.2. 18 For further information about the relationship between miga and the World Bank group, see http://www.miga.org. 19 miga, “miga’s Policy on Social & Environmental Sustainability,” October 1, 2013, at http:// www.miga.org/documents/Policy_Environmental_Social_Sustainability.pdf. 20 The World Bank, “Environmental Sustainability: an evaluation of World Bank Group support,” Independent Evaluation Group, 2008, Washington D.C., at http://ieg.worldbank .org/Data/reports/environ_eval_0.pdf.

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the host state. The Performance Standards are used as guidance for investors to identify risks and impacts of their projects. Third, as a member of the World Bank Group, miga adheres to the principles followed by other institutions within the group, specifically the International Finance Corporation’s Guidance Notes on Performance Standards on Social and Environmental Sustainability and the World Bank Group policy on combating fraud and corruption.21 2.2 miga’s Insurance and Advising Capacity The miga Convention envisages two main purposes of the organization. First, miga is acting as an international insurance agency that provides “guarantees against non-commercial risks in respect of investment.”22 The organization covers the following types of non-commercial risks: expropriation, currency inconvertibility, war, terrorism, civil disturbances, and transfer restriction. When applying for a guarantee, an investor may request coverage of risks required for a ‘safe’ operation of the project. The reason behind covering noncommercial risks is that investors consider the regulatory and political atmosphere when investing into a specific region. Although many developing countries relax their regulations and initiate the privatization of a certain industry sector in order to attract investors, investors do not rush to invest given the past regulatory experience of a state and political stability. miga’s guarantee allows an investor to concentrate on the commercial aspects of an investment. miga covers not only financial losses23 but also assists in negotiation with the host state in order to resolve a conflict peacefully.24 In addition, according to art. 15 of the miga Convention, the guarantee cannot be issued without the approval of the host state. This provision of the Convention ensures a certain degree of transparency and ‘good intention’ on the part of the host state. On the one hand, the representatives of the host state have the opportunity to review the project and assess its benefits and possible adverse consequences, thus sharing its expertise, knowledge of the region and its particularities. On the other hand, approval of the host state shows that it has an intention toward a project and would not engage in unlawful practices, 21 22 23 24

miga, “miga Sanctions Procedures,” 28 June 2013, at http://www.miga.org/documents/ miga_Sanctions_Procedures.pdf. miga Convention, art. 2(a). Ibid., art. 17. Ibid., art. 23.b(i). For specific cases, see miga, “Dispute Resolutions and Claims: helping keep sustainable investment on track,” April 2013, at http://www.miga.org/documents/ Dispute_Resolution_and_Claims.pdf.

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such as expropriation, without legitimate purpose or events beyond its control (for example, war). According to the goals of the organization, miga issues guarantees to cover investment projects only for developing countries.25 2.3 Particular Qualities of miga’s Investment Insurance miga’s investment insurance has several advantages compared with governmental guarantees and private investment agencies. First, miga’s insurance is able to not only insure an investment project but also provide services in the event of a claim. This is different from private investment guarantee agencies that are primarily interested in the profit. Governmental guarantee agencies, in this respect, are similar to miga as they have diplomatic links with other governments that they can use to resolve an investment dispute. However, a governmental guarantee agency’s ability to assist in resolving an issue peacefully may depend on the general state’s policies toward the host state and the level of diplomatic relations. miga is an international organization and thus all its member states are represented in the governing bodies; they follow the aims incorporated in the miga Convention. Moreover, it is for the benefit of miga to resolve conflicts peacefully because it would be obliged to pay out under the guarantee to any harmed investor. In addition, miga has greater capacity to cover expensive investment projects compared to other private investment guarantee agencies. Second, miga “carries out other appropriate complementary activities to promote flow”26 of investment. The ability of the agency to conduct complementary activities to promote flow of investments is an important mission of miga compared with other guarantee agencies. Being an international organization, comprising 179 member states, miga is an international forum for finding a compromise between states. To attain this goal, the organization performs different tasks. It conducts negotiations with its member states about steps to attract investors into the region; dissimilates information about investment climate; and promotes the conclusion of agreements between states on promotion and attraction of investments.27 If the rights of an investor have been breached, it provides an important consultation forum for negotiation with the host state. Similarly, miga observes that investors conduct the investment project in accordance with Performance Standards. The capacity of the organization to organize complementary activities in the promotion and attraction of investments is an unusual activity of a guarantee agency and can be specifically associated with miga. 25 26 27

miga Convention, art. 14. Ibid., art. 2 (b). Ibid., art. 23.

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Consequently, miga’s objectives are clearly defined in the miga Convention and it actively takes part in the process of insuring investment projects and mediation of conflicts. However, the miga Convention incorporates only general objectives, namely development. Therefore, miga’s policy on environmental and social protection is the tool to ensure performance of the objectives outlined in the miga Convention. The next part of this paper will analyze the abovementioned standards in greater detail. 3

miga’s Role in Environmental and Social Protection

Despite the global movement for corporate social responsibility28 the call for responsible investment, and the consideration of human rights issues, there are an insufficient number of compulsory mechanisms to restrict harmful activities of companies toward the local population and environment. A number of international documents envisage the importance of these principles. Most prominent are the un Rio Declaration,29 the Universal Declaration of Human Rights,30 and the oecd Guidelines for Multinational Enterprises. However, these documents are non-binding. The voluntary oecd Guidelines are more common at industry level, in particular in relation to corporate social responsibility.31 Conversely, miga’s policy requires investors to comply with its standards on environmental and social protection, and hence restricts potentially harmful activities of companies. Therefore, the extent of miga’s contribution to the environmental and social protection deserves a close examination. All projects applied for miga insurance have to satisfy eight Performance Standards. miga Performance Standards include: social and environmental assessment and management; labor and working conditions; pollution prevention and abatement; community, health, safety and security; land acquisition and involuntary resettlement; biodiversity conservation and sustainable 28

29 30 31

oecd, “oecd Guidelines for Multinational Enterprises,” (2011), at http://www.oecd.org/ corporate/mne/; un, “United Nations Global Compact,” at http://business.un.org, Communication from the Commission to the European Parliament, the Council, the European and Social Committee and the Committee of the Regions, “A renewed eu strategy 2011–14 for Corporate Social Responsibility, 25 October 2011, com (2011) 681. Rio Declaration on Environment and Development, Doc. A/conf.151/26 (vol. I), 14 June 1992, 31 ilm 874. The Universal Declaration of Human Rights, unga Res. 217 A (iii), ungar, 3rd Sess., Supp. No. 13, (1948). P. Muchlinski, F. Ortino, C. Schreuer, The Oxford Handbook of International Investment Law (Oxford University Press, 2008) 18.

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natural resources management; indigenous people; and cultural heritage.32 When an investor applies for miga’s insurance, the agency cumulatively assesses the project’s impact against each standard. All projects covered by miga are divided in three categories: A, B, and C. An A-type project is a project with “potential significant adverse social and environment impacts that are diverse, irreversible or unpredicted.”33 A B-type project is a project with potential limited adverse social or environmental impacts that are few in number generally site-specific.34 A C-type project includes projects with minimal harm or no adverse social and environmental effects.35 Most projects that cover extractive industries or construction in relation to future extraction of natural resources are categorized as A-type due to the wide range of impacts.36 When a project is under assessment, a company is required to submit extensive information about the project’s impacts.37 Moreover, after the project is insured, the investing company is obliged to report to the organization about the effects of the project on a yearly basis.38 When the project triggers adverse social and/or environmental effects, miga works closely with an investor to reestablish the compliance and exercises remedies where appropriate.39 miga’s role is to review assessment; minimize, mitigate or compensate any identified harm; and monitor the project’s social and environmental performance throughout the period of the guarantee.40 However, since 2002 miga has been criticized for the lack of independent information investors’ projects and a proper monitoring system.41 It has been established that miga does not conduct its own assessment of the potential risks and therefore relies on 32 miga’s Policy on Social & Environmental Sustainability, op. cit. 33 Ibid., para. 19. 34 Ibid. 35 Ibid. 36 See miga’s website for information about categorization of projects at http://miga.org. 37 miga, “Performance Standards on Social and Environmental Sustainability” (miga Performance Standards), 1 October 2013, at http://www.miga.org/documents/performance _standards_env_and_social_sustainability.pdf. 38 Ibid. 39 miga’s Policy on Social & Environmental Sustainability, op. cit., para. 27. 40 Ibid., para. 22. 41 Independent Evaluation Group, “Review of miga’s Experience with Safeguards and Sustainability Policies (1999–2008)” (ieg Review), Independent Evaluation Group Working Paper 2011/2; Independent Evaluation Group, “Assessing the Monitoring and Evaluation Systems of ifc and miga,” Biennial Report on Operational Evaluations, (2013), at http://ieg.worldbankgroup.org/Data/reports/broe_eval_0.pdf., 48.

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information provided by investors.42 Lack of a proper assessment can be explained by limited resources capacity. Nevertheless, miga has undertaken considerable effort to improve its monitoring and evaluation system. The agency has established the Economic and Policy Group and the Environmental and Social Unit equipped to help miga to analyze development impacts and environmental and social impacts.43 Although there is room for improvement in miga’s monitoring and evaluating mechanisms, credit should be given to its initiatives that have been implemented with scarce resources. miga’s assessment of the project includes three key components: first, the assessment of social and environmental risks as presented by the client; second, the commitment and capacity of the client to manage expected negative effects; and third, the role of third parties in the project’s compliance with the Performance Requirements.44 The protection of social guarantees is not something new and unknown. Most miga member states are parties to the International Covenant on Economic, Social and Cultural Rights (icescr) as well as members of the United Nations, which addresses many issues of environmental and social protection.45 In order to appraise completely miga’s contribution to the promotion of responsible investment into developing countries, all seven Performance Standards should be analyzed taking into account practical experience. Performance Standard 1: Social and Environmental Assessment and Management Performance Standard 1 on social and environmental assessment and management system requires an investor to make a general assessment of the environmental and social risks of the project.46 Standard 1 is the key safeguard that covers under its umbrella management of risks under the other seven safeguards. It prescribes to establish a management system. ‘Management system’ is defined as an action plan undertaken by the company to mitigate identified 3.1

42

43 44 45 46

cao, “Insuring Responsible Investment? A review of the application of miga’s Environ­ mental ad Social Review Procedures,” Final Report, (2002 December), at http://www .cao-ombudsman.org/howwework/advisor/documents/migareportofcao-Webpdf03 -05-03.pdf. Independent Evaluation Group, “Assessing the Monitoring and Evaluation Systems of ifc and miga” (Biennial Report 2008), Biennial Report on Operational Evaluations, (2008) 47. miga’s Policy on Social & Environmental sustainability, cit., para. 10. International Covenant on Economic, Social and Cultural Rights (icescr) (adopted 16 December 1966, entered into force 3 January 1976) 993 unts 3. miga’s Performance Standards, op. cit., para. 2.

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environmental and social negative effects. The management system is designed to address harmful effects of the project at the early stage.47 Standard 1 obliges investors to include the following elements into the management system: assessment of harmful effects (and if found, identify mitigation and performance measures); organizational capacity; training; community engagement; monitoring; and reporting.48 miga recognizes that throughout the project the circumstances may change, and therefore the management system should be flexible and responsive to new challenges.49 Past assessment of miga’s policies on Standard 1 has identified imperfections in its monitoring methodology.50 An audit in 2008 conducted by the Independent Assessment Group revealed a number of violations by companies covered by the miga guarantee.51 The following case study will examine the requirements on the management system content and its compliance. It is also a good example how companies manage community consultations required by Standard 1. In 2010 the Compliance Advisor/Ombudsman (cao)52 received a complaint about pt Weda Bay Nickel company (wbn) that conducted a project on the development of a nickel and cobalt mine in Indonesia.53 The main concerns about the project were the environmental impacts on forests and the communities dependent on it. The cao thoroughly examined the complaint and identified that there was a need for improvement in the wbn’s management system, including quality and completeness of the assessment, impact on local water resources, fair process of land acquisition, active engagement with local communities, design, and implementation of grievances mechanisms to address the concerns of individuals/communities.54 In summary, the cao advised to engage in community consultation in order to resolve issues arising out of the project. Moreover, the cao offered to conduct a workshop for the company and community representatives to share experiences and strengthen mutual understanding.55 Following the examination of the project, the case 47 48 49 50 51 52

Ibid., para. 1. miga’s Performance Standards, op. cit., para. 3. Ibid., para. 15. ieg Biennial Report 2008, op. cit., 11. Ibid., at 12. For more information about Compliance Advisor/Ombudsman please see part 4 of this article. 53 See cao, Indonesia/ pt Weda Bay Nickel 01/Weda Bay, at http://www.cao-ombudsman.org. 54 cao, Ombudsman Assessment Report: Complaint Regarding the miga pt Weda Bay Nickel Project Halmahera Island, North Maluku, Indonesia, (June 2011), at http://www.cao -ombudsman.org, para. 4.2. 55 Ibid., para. 4.3.2. The dispute resolution mechanism available at cao was not acceptable for complaints.

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was transferred to cao Compliance to verify whether miga had conducted a meticulous assessment of the project.56 The cao Compliance Office examined closely whether miga had analyzed the project under its environmental and social performance standards. It concluded that miga had diligently reviewed and assessed issues and potential negative effects.57 Many issues identified by the complaints had been addressed by miga and had related to the general development of the project. 3.2 Performance Standard 2: Labor and Working Conditions Under Performance Standard 2, investing companies are required to comply with the host country’s laws and regulations as well as miga’s minimum guidelines on working conditions and workers’ relations.58 miga’s activities in relation to ensuring the fulfillment of the Standard 2 requirements may be described as the most satisfactory. The Independent Evaluation Group concluded that in 100 percent of the Category B projects investor’s human resource policies have been reviewed and found satisfactory.59 3.3 Performance Standard 3: Pollution Prevention and Abatement Standard 3 outlines a project approach to pollution prevention and aims at minimizing adverse effects on human health and environment as well as promoting the reduction of emissions.60 Although Standard 3 does not detail greatly requirements covered under this standard, the International Finance Corporation (ifc) Guidelines Notes (which correspond to miga’s Performance requirements standards), provide helpful explanation in this respect. Under the ifc Guidelines Notes, environmental impact includes the following: air emissions and ambient air quality; energy conservation; wastewater and ambient water quality; water conservation; hazardous material management; waste management; noise; and contaminated land.61 The Guidelines themselves are very technical and require scrutiny.62 56 57

Ibid., para. 4.3.1. cao, Appraisal Audit of miga: Case of miga’s Guarantee Linked to the Engineering and Feasibility Phase of Developing the pt Weda Bay Nickel Project, cao Compliance, October 2011, C-M-R5-Y11-F146, part 4. 58 miga’s Performance Standards, Standard 2. 59 ieg Review, 8. 60 miga’s Performance Standards, op. cit., Standard 3. 61 International Finance Corporation (ifc), “Environmental, Health and Safety (ehs) Guidelines,” (2007), at http://www.ifc.org., Sections 1.1.–1.8. 62 See ifc ehs Guidelines for detailed explanation to each requirement.

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Standard 3 envisages actions for specific pollution concerns that the company should undertake. As with Standard 1, the monitoring of the compliance with Standard 3 objectives is rather weak and miga generally relies heavily on the company’s assurance.63 As the audit group noted, the problems with environmental issues could be mitigated at an earlier stage if miga could visit the plant during the due diligence process.64 3.4 Performance Standard 4: Community Health, Safety and Security The objective of Standard 4 is to “avoid or minimize risks to and impacts on the health and safety of the local community during the project” and “to ensure that the safeguard of personnel and property is carried out in a legitimate manner that avoids or minimizes risks to the community’s safety and security.”65 The standard is divided into subsections providing guidance on specific issues that may arise within the context of health, safety and security standards.66 Standard 4 is similar to states’ obligations under art. 12 icescr. Under art. 12 icescr, states are obliged to ensure the right of every person to the enjoyment of the highest attainable standard of physical and mental health.67 The right to health and security is closely connected with other rights, including rights to housing, work, education, and human dignity.68 In the context of art. 12 icescr, the right to health is interpreted under socio-economic preconditions and available resources.69 A similar approach may be applied to Standard 4. It would be inappropriate to oblige investors to provide health, safety, and security beyond possible available resources. However, it is unclear how miga should determine the level of commitment on the part of the investor to Standard 4. It seems that miga generally checks whether a company addresses issues of prospective community risks and how it plans to manage them. Furthermore, it was identified in a review of miga’s policies that practical monitoring of fulfillment of obligations under Standard 4 is difficult due to miga’s limited resources capacity.70 63 64 65 66 67 68 69 70

ieg Review, 14. Ibid., 14. miga’s Performance Standards, Standard 4, para. 1. See for specific requirements Performance Standards, Standard 4, paras. 4–15. icescr, art.12. un Committee on Economic, Social and Cultural rights, General Comment No. 14 (2000), E/C.12/2000/4, para. 3. Ibid., para. 9. ieg Review, 8.

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Standard 4, unfortunately, does not address properly the issue of security. It does provide general guidance about security to personnel and property, but there is nothing prescribed in the standard in respect of the effect of the project on the security in the region. Earlier (before miga’s revision of the performance standards in 2007), miga faced a situation where the project potentially triggered conflict in the region and was advised to make necessary amendments to its due diligence procedure. The following case study illustrates the potential impact the project may have on security in the region. The allegation concerned the activities of Avil Mining Corporation on providing logistical support to the armed forces of Congo in 2005.71 The armed forces regained control and allegedly killed civilians and were engaged in other crimes. Interesting to note is that one of the minority shareholders was listed in the report as a company ‘in apparent breach’ of the oecd Guidelines for Multination Enterprises.72 However, it was indicated in the report that the issue was resolved. The cao’s report did not provide any further information about this fact. miga has conducted its due diligence procedure in respect of the security of the project, namely, whether there was a risk for the mining to take place.73 However, the review procedure failed to examine the possibility of conflict elevation in the region.74 The cao could not establish a causal link between the conflict and the mine, but did note that it was likely that the mining project had an impact on the overall security in the region and that miga should carry out the due diligence procedure in this respect.75 The cao office is very careful with allegations about project’s impact on security. In 2002 the cao Ombudsman has received a very similar complaint alleging that mining activities in Tanzania has led to elevation of the conflict caused by unfair distribution of revenues.76 The cao concluded that the case does not have a merit, but, for the first time, pointed out to security issues.77 In Avil Mining case the cao came to the conclusion that it is not competent to decide whether miga could continue to insure the project, but 71

72 73 74 75 76 77

cao, cao Audit of miga’s due diligence of the Dikulishi Copper-Silver Mining Project in the Democratic Republic of Congo (Mining project in drc), Final Report, (November 2005), at http://www.cao-ombudsman.org/cases/document-links/documents/Dikulushidrcfinal version02-01-06.pdf., para. 2.1.3. Ibid., para. 2.3.1. Ibid., para. 3.1.2. Ibid., para. 4.1. Ibid., para. 3.1.3. cao, Assessment Report Summary: complaint regarding miga’s guarantee of the Bulyanhulu Gold Mine, Tanzania, (2002). Ibid., para. 8.

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did recommend that it took ‘essential steps’ to limit future incidents.78 As a last resort, miga is able to terminate the agreement if a company breaches environmental and social performance standards.79 Unfortunately, there is no information about miga’s further actions. The absence of further information, considering the seriousness of the allegations, does not contribute positively to miga’s transparency in decision-making. It may only be presumed that the company and miga found a suitable solution to the incident. In the completion of the audit, miga was required to engage with Avil in order to mitigate the consequences. Despite the positive conclusion by the cao that miga engaged for the first time with ngo, the case may greatly influence miga’s image as a credible organization for overseeing social and environmental issues. Performance Standard 5: Land Acquisition and Involuntary Resettlement miga’s Standard 5 corresponds to art. 11(1) of icescr, which recognizes the right to adequate housing, food, and clothing. icescr Comment No. 7 to art. 11 specifically addresses the issue of forced resettlement.80 Comment No. 7 indicates that forced resettlement may occur during “development and infrastructure projects, such as the construction of dams or other large-scale energy projects.”81 States shall refrain from forced evictions and enforce its laws against third parties that may violate this fundamental right.82 Similarly, states may not encourage such activities. Thus, Standard 5 has its roots in international obligations of miga member states for ensuring appropriate housing and protection against forced resettlement. Under the general policy of miga, investors applying for a guarantee insurance are obliged to present the information about land acquisition and, if appropriate, resettlement of people.83 In some cases it was found that miga’s client identified a land as inhabitable, but that it was later discovered that there were people residing there.84

3.5

78 Audit of Mining project in dcr, op. cit., para. 4.1. 79 See miga, “Contract for Equity Investments,” at http://www.miga.org/documents/disclosure/ Contract%20of%20Guarantee%20for%20Equity%20Investments.pdf, art. 13.4 (e). 80 un Commissioner for Human rights, icescr Comment No. 7, (1997), E/1998/22, Annex iv. 81 Ibid., para. 7. 82 icescr, Comment No. 7, para. 8. 83 For information about involuntary resettlement, also see miga’s Performance Standards, Standard 7. 84 ieg Review.

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Performance Standard 6: Biodiversity Conservation and Sustainable Natural Resources Management Standard 6 on biodiversity conservation and sustainable natural resources addresses issues of protection of biodiversity and sustainable management of natural resources.85 The wording of the standard suggests that the company in its assessment is obliged to make an extensive review of the biodiversity and natural resources in the region, predict the likelihood of negative effects, and mitigate these effects through its management system. Compared with compliance under other performance standards, it is possible to conclude that miga effectively monitors the implementation of this standard.86 Particularly, it was identified that many projects “support the sustainable use of natural resources by incorporating environmentally friendly, energy-efficient, and resource-saving technologies which ensure that their impact will be positive in comparison to the facilities they replace and local comparators.”87

3.6

Performance Standards 7 and 8: Indigenous People and Cultural Heritage The objective of Standard 7 is to ensure protection and due respect toward indigenous people throughout the project life.88 The standard identifies specific requirements in connection with traditional or customary lands used by indigenous people. Currently there is a case under the cao dispute resolution mechanism that addresses the issues closely connected with indigenous people. In 2012 the complaint was filed by the ot Watch and Gobi Soli (ngos) on behalf of nomadic herders.89 The complainant’s main concern was the relocation of indigenous people and the overall effects of the project on their way of life and employability.90 Particularly, the company did not take into account the living conditions of indigenous people when it has taken a decision about the place of resettlement. The case remains open and under the cao dispute resolution mechanism that intends to resolve issues raised peacefully.91 3.7

85 miga’s Performance Standards, Standard 6, para. 1. 86 ieg Review, 17. 87 Ibid. 88 See miga’s Performance Standards for specific requirements, Standard 7. 89 For more detailed information about the case, see cao, Mongolia/ Oyu Tolgoi-01/Southern Gobi case at http://www.cao-ombudsman.org/cases/case_detail.aspx?id=191. 90 cao, Letter of Complaint: Mongolia / Oyu Tolgoi-01/Southern Gobi project, 12 October 2012, at http://www.cao-ombudsman.org/cases/case_detail.aspx?id=191. 91 cao, News on Negotiation between Herders’ Representatives of Khanbogd Soum and Oyu Tolgoi Company, Joint Statement, 3–4 November 2014, at http://www.cao-ombudsman .org/cases/case_detail.aspx?id=196.

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This is not the first time the cao Compliance Office has to review violations of indigenous peoples’ rights. In 2000–2004, it examined a case in Peru where the rights of indigenous people were violated in an action filed by the complainant in 2000. It found deficiencies in miga’s assessment of Standard 7;92 however, there is no specific information about advices from the cao Compliance Office or any other details. Under Standard 8, companies are required to protect cultural heritage from the negative effects of the project, and support its preservation.93 Standard 8 obliges investors to comply with the national legislation of the host state, consult, and promote the conservation of the cultural heritage.94 There has been no complaint about the Standard 8 appraisal, and, overall, as noted by Independent Assessment Group, states laws are enforced effectively. 3.8 Other Issues miga requires investors to comply with Performance Standards even if the outcomes depend on third parties.95 In this context, the third party will be a government agency, contract party, a principle contractor, a supplier with whom the project has a sustainable involvement, or an associated facility.96 miga also requires investors to make consultations with affected communities. In situations where the project will have wide, adverse effects, miga will check whether there is a broad support from the local community.97 Broad community support in this context means “collection of expressions by the affected communities, through individuals or their recognized representatives, in support of the project.”98 miga incorporates additional commitments in regard to specific industries. For the purposes of this paper, the extractive industry (that is connected with natural resources) is analyzed. miga makes an assessment of governance risks to expected benefits, and promotes transparency of revenue payments from the extractive industry to the host government.99 miga ensures compliance with the Performance Standards at the stage of assessment and then monitors the project throughout its performance cycle. 92

cao, Peru / Compania Minera Antamina S.A.-01/Huarmey for the summary of the case, at www.cao-ombudsman.org. 93 miga’s Performance Standards, Standard 8, para. 1. 94 Ibid. para. 10. 95 miga Policy on Social & Environmental Sustainability, para. 26. 96 Ibid., para. 25. 97 Ibid., para. 28. 98 Ibid. 99 miga’s Policy on Social & Environmental Sustainability, para. 23.

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Investors are required to report on their activities.100 If an investor fails to comply with its obligations, miga is empowered to require it to comply ‘to the extent feasible’ and may even impose remedies where appropriate.101 Furthermore, miga has committed itself to encouraging compliance of investors with the Performance Standards after the client has decided that the miga guarantee is not needed or it was cancelled.102 The role of the cao is to conduct an independent assessment of projects insured by miga and to ensure conformity with its policies. The next part of this article will focus on the cao office that helps to monitor performance of standards and generally, to improve assessment process. 4

The Role of the Compliance Advisor/Ombudsman

The cao was created by the World Bank Group as “the independent recourse and accountability mechanism”103 of the ifc and miga to ensure that projects are environmentally and socially sound. The key component of the cao’s work is effective communication with affected communities – raising awareness of a possibility to lodge a complaint. In order to reach the communities, the cao dissimilates information through civil society organizations, World Bank Group offices, partner independent accountability mechanisms, the business community and academia.104 In addition, the cao seeks advice from experts to enhance its outreach.105 Any individual or group has a right to file a complaint about a project to the cao.106 The cao examines only complaints related to projects covered by miga or the ifc.107 Although the cao uses different channels of information to reach the communities, the complaint should be sent in writing to cao’s office located in Washington D.C. in any language.108 Therefore, it should be presumed that the affected individuals must be able to lodge a complaint. Considering that all miga’s projects operate in developing countries where the 100 Ibid., para. 27. 101 miga’s Policy on Social & Environmental Sustainability, para. 27. 102 Ibid. 103 cao, “cao Operational Guidelines (2013),” at http://www.cao-ombudsman.org/documen ts/caooperationalGuidelines_2013.pdf, para. 1.1. 104 Ibid., para. 1.6. 105 Ibid. 106 Ibid., para. 2.1.1. 107 Ibid., cao Dispute resolution. 108 Ibid., para. 2.1.3.

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outreach capacity of communities is rather limited, the cao has to rely on civil society organizations to provide help with filing a complaint. For example, in 2005 a uk-based ngo (on behalf of a number of ngos) wrote to the President of the World Bank about the concerns over a mining project in Congo covered by miga.109 In most cases the complaint is filed by local or international ngos. When the cao receives a complaint, it undertakes the following actions. First, it responds to complaints from people about negative social and environmental impacts of projects covered by miga.110 Second, cao Compliance Office oversees audits of miga’s social and environmental performance.111 The cao Compliance mechanism may be triggered if the cao Dispute Resolution Office transfers a case to the Compliance Office, or at the request of the cao President, or at the request of miga’s President or senior management.112 The power of miga to request the cao Compliance Office to assess the project covered by miga suggests that this could be one of the solutions for miga’s monitoring shortcomings as it allows the use of the cao’s resources to examine the project’s conformity with miga’s Performance Standards. For example, in 2000 a complaint was lodged with the cao Ombudsman from the Peru about the largest mining project, Compania Minera Antamina, covered by miga.113 After assessment of the complaint by the Ombudsman, the complaint was transferred to the Compliance Office to conduct an audit of miga’s policies. The audit found non-compliance in the application of policies relevant to indigenous people and resettlement standards.114 Unfortunately, there is no further information whether miga has undertook any specific measures to improve its policies. In contrast to miga, the Compliance Office devotes special attention to verifying the evidence.115 However, the Compliance Office is prescribed to deal only with projects that may raise substantial concerns.116 This provision of the operational guidelines provides safeguard for the cao Compliance Office to deal only with the most important cases and excludes the possibility of miga addressing any project for compliance check. After 109 cao, Democratic Republic of Congo / Anvil Mining Congo, sarl-01/World Bank President Request (2005), at http://www.cao-ombudsman.org/cases/case_detail.aspx?id=94. 110 Ibid. 111 Compliance’s role; miga’s Policy on Social & Environmental Sustainability, para. 34. 112 Ibid., para. 4.2.1. 113 cao, Peru/Compania Minera Antamina S.A. 114 Ibid. 115 cao operational guidelines, para. 4.3. 116 Ibid., para. 4.2.1.

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the investigation the Compliance Office will monitor whether miga takes corrective measures.117 Third, the cao Advisor provides recommendations to miga about improving social and environmental standards.118 The advisory procedure similar to the compliance procedure can be started upon the request of the miga President or senior management staff.119 miga may seek advice on the improvement of environmental and/or social performance, making it more effective by addressing deficiencies.120 To summarize, the importance of the cao’s role in the accountability of miga is undoubted. Its goal is to promote justice, namely, to provide redress to all interested parties. It exercises supervision over miga’s projects and provides an alternative forum to address imperfections of miga’s monitoring policy. In addition, it identifies weaknesses and provides recommendations. 5 Conclusion miga’s role in the promotion of social and environmental responsibility is important. The agency has incorporated environmental and social framework into its practices. miga not only provides protection from political risks through its insurance program, and thereby promoting investment into developing countries, but also takes a responsibility for critically assessing proposed projects and monitoring the activities of insured investors. In most situations miga’s assessment of investment projects is transparent and diligent. It uses its main performance standards and project categorization to ensure that its policies are satisfied. Although the initiative of miga deserves positive recognition, the lack of capacity in terms of financial and human resources enables loopholes in the system. The organization cannot practically receive independent information about negative effects of the project in the region, and is unable to effectively monitor the obligations undertaken by investors. This gives rise to transparency concerns in the decision-making processes of the organization and its overall ‘good governance.’ 117 Ibid., para. 4.4.5. cao in most cases has a field trip to analyze the impact of the project. For example, pt Weda Bay Nickel-01/Weda Bay case, at http://www.cao-ombudsman.org. 118 cao operational guidelines, para. 5.1.1. 119 Ibid., para. 5.2.1. 120 Ibid., para. 5.2.2.

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Despite the abovementioned inadequacies, a number of positive aspects should be pointed out. The organization has undertaken an obligation to assess a substantial number of documents provided by investors with limited resources. However, miga addresses its deficiencies timely and makes adjustments to its methodology. In addition, miga fosters communication between investors and host states in the event of disputes. It undertakes actions for negotiation with its member states on investment opportunities. The cao office has a particular importance in miga’s work. It performs a double function. First, it serves as a place where affected or potentially affected communities can file a complaint about insured projects. Second, it conducts audits to evaluate miga’s policies and provides recommendations to miga for improvement of its assessment and monitoring strategies. Thus, the cao helps miga to make its assessment and evaluation system more effective. To conclude, miga’s policies on environmental and social responsibility have a positive contribution to raising awareness among investors about these issues. Its assessment and monitoring system obliges investing companies to pay attention to responsible conduct and to implement specific measures.

chapter 14

On the World Bank’s Efforts in Defence of the Human Right to Land Francesco Seatzu 1 Prologue The last century saw a significant rise in land deprivation cases especially in Asia and Africa. The number of rural landless in Africa grew from 2,000 families in 1969/1970 to 359,000 in 1979/1980, thus increasing the number of people living in extreme poverty (less than $1/day) in rural areas.1 During the same period, the proportion of landless households rose by 22 percent.2 Between 1970 and 1990 the rural labor force which was landless increased more than five-fold in absolute numbers, and from 1998 to 2010 alone the number of people suffering deprivation of use of land rights increased by several percent.3 As the world entered the 21st century, the plight of the landless has remained a global problem of huge proportions and it has been aggravated by globalization.4 Of the world’s six billion people, up to 1.5 billion is estimated

1 See R. Hunter Wade, “Is Globalization Reducing Poverty and Inequality?”, World Development, 2004, 571 (stressing that up to one quarter of the world’s population is estimated to be landless, including 200 million people living in rural areas). 2 See M. Kugelman, The global farms race: land grabs, agricultural investment, and the scramble for food security (Island Press, 2013) 134. 3 Amplius T. Allan, “Can improving returns to food-water in Africa meet African food needs and the needs of other consumers?”, in T. Allan (ed.), Handbook of land and water grabs in Africa: foreign direct investment and food and water security (Routledge, 2013) 5; H. Saragih, “Les paysans du monde ont besoin d’une convention protégeant leurs droits: le rôle attendu de l’ONU pour abolir l’oppression et l’exploitation des paysans,” in J. Duchatel et F. Rochat (eds.), onu: droits pour tous ou loi du plus fort?: regards militants sur les Nations Unies (cetim, 2005), 349. 4 See O. De Schutter, “How not to think of land-grabbing: three critiques of large-scale investments in farmland,” The Journal of Peasant Studies, 2011, 260, stressing that globalization has increased the number of displaced farmers as more land is now being used for the largescale, commercial, export-led production of cash crops, and this has reduced the demand for wage employment in agriculture. © koninklijke brill nv, leiden, ���6 | doi 10.1163/9789004305663_016

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to be landless.5 Of those, nearly 200 million live in rural areas.6 While in rich countries the percentage of farm workers that are landless or near-landless is marginal, in poor countries that percentage is high – up to 70 percent.7 Notwithstanding endless efforts to address the issue of landless peasants and small farmers in Asia and Africa, the spoliation of fertile land keeps mounting. A study conducted by the International Institute for Environment and Development (iied), a research unit located in the United Kingdom, assessed that nearly 2.5 million hectares of African farmland had been assigned to ­foreign-owned entities between 2004 and 2009 in just five countries (Ethiopia, Ghana, Madagascar, Mali and Sudan) which it had considered in depth.8 The World Bank’s approach to land rights and ownership in the developing world has not been able to reverse this trend.9 The earlier optimism that the Principles for Responsible Agricultural Investment (rai)10 would automatically lead to an end to the grabbing of fertile soils has faded in light of the data on poverty.11 The grabbing of fertile land going on in Asia and Africa is a major example of the increasing South to North division.12 Although its incidence has been partially mitigated by the action of the World Bank13 in support of agriculture, 5

6 7

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12

13

See N. McKeon, “‘One does not Sell the Land upon which the People Walk’: Land Grabbing, Transnational Rural Social Movements, and Global Governance,” M.E. Margulis, N. McKeon and S.M. Borras Jr. (eds.), Land grabbing and global governance (Routledge, 2014), 105. See R. Schiffman, “Hunger, Food Security, and the African Land Grab,” Ethics and International Affairs, 2013, 239 ff. References are in R. Sinha, Landless: a growing problem (fao, 1984) 36. See also G. Ondetti, Land, protest and politics: the landless movement and the struggle for agrarian reform in Brazil (University Park: Pennsylvania State University Press, 2008) 20. See more at: http://www.un.org/africarenewal/magazine/special-edition-agriculture-2014 /africa%E2%80%99s-land-grabs#sthash.my98E8wC.dpuf. Amplius F. Seatzu, “On the Roles and Responsibilities of the World Bank and its Affiliate Institutions in Agriculture and Water (Mis)Investments,” Indian Journal of International Law, 2011, 485, 501. World Bank, “Principles for responsible Agricultural Investment that respects rights, Livelihoods and resources,” available at. See F. Seatzu, “The World Bank Guidelines on the Treatment of Foreign Direct Investment 20  Years on: Reflecting on the Past, Considering the Present and Developing a New Foreign Investment Strategy of the World Bank Group for the Future,” in T. Treves, F. Seatzu, S. Trevisanut (eds.), Foreign investment, international law and common concerns (Routledge, 2014), 120. See R. Hall, “Land grabbing in Southern Africa: the many faces of the investor rush,” Review of African Political Economy, 2011, 193, 214, at: http://www.tandfonline.com/loi/ crea20#.VEV2oCKsXCk. For the aims of the present work, ‘World Bank’ or ‘Bank’ solely indicates the International Bank for Re-construction and Development (ibrd), the largest organization under the

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farmland-grabbing continues to happen in countries less developed but rich in natural resources, more than is tolerable in this period of globalization.14 As of today, as a result of land grabbing 4 million hectares of fertile soils annually leave the planet’s agriculture turnover in China alone.15 Notwithstanding its perseverance in the developing countries, until a decade ago land grabbing had only been a fear for some international ngo s operating in the human rights field. Global financial organizations such as the World Bank16 had mostly overlooked the issue until the late-1990s when it commenced occupying an important position in international policy settings. While farmers and peasants’ concerns in general had, since the end of the 1990s, been on the agenda of the World Bank’s financing of social programs against poverty and hunger,17 as a secondary issue supplementary to its usual primary concern of financing ‘bricks and mortar’ projects,18 land grabs had received little attention within the World Bank Group until ngo s, the media and international civil society began raising international awareness, thus compelling the Bank to take action.19

14 15 16

17

18 19

World Bank Group structure. See World Bank Group, About Us, Organization, Five Agencies, One Group, at http:// www.worldbank.org/. The World Bank Group also includes the International Finance Corporation, the International Development Association, the Multilateral Investment Guarantee Agency, and the International Centre for Settlement of Investment Disputes. Id. See M.E. Margulis, N. McKeon, S.M. Borras Jr., “Land Grabbing and Global Governance: Critical Perspectives,” Globalizations, 2013, 2–5. See F. Pearce, The land grabbers: the new fight over who owns the earth (Beacon Press, 2012) 135. See L. Jensen, M. Padma, “The World Bank and its Renewed Attention to Poverty Alleviation,” W. van Genugten, P. Hunt, S. Mathews (eds.), World bank, imf and human rights (Wolf, 2003), 227 ff; F. Groen, P.N. García, “The reduction of poverty: an issue of (inter)national concern,” Griffin’s View on International and Comparative Law, 2001, 35. Poverty Reduction Strategy Papers (prsp s) were introduced in 1999 by the World Bank and the imf as a new framework to enhance domestic accountability for poverty reduction reform efforts; a means to enhance the coordination of development assistance between governments and development partners; and a precondition or access to debt relief and concessional financing from both institutions’ hipc Initiative. On the subject, see C. Pérez Bustillo, “Towards International Poverty Law?: the World Bank, Human Rights, and Indigenous Peoples in Latin America,” W. van Genugten, P. Hunt, S. Mathews (eds.), World bank, imf and human rights (Wolf, 2003), 157. Amplius T.D. Zweifel, International organizations and democracy: accountability, politics and power (Lynne Rienner Publishers, 2006) 87. Amplius C.J.N. Gibbs, ‘Nongovernmental organizations in World Bank–supported projects: a review,’ (Washington: oed study series, 1998), at: http://ieg.worldbank.org/Data/ reports/ngo_book.pdf.

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The aim of this work is to provide an account of the World Bank’s mounting involvement in the global fight against land grabbing; consider the substance of the Bank’s take on global land grab from both the normative and development policy perspective; detect the similarities and differences between the Bank’s approach and the one taken by other institutions and agencies advocating the cause; record the dynamics of the inter-agency debate on land grab between the World Bank and the European Union, eventually resulting in the eu’s enactment of an approach similar to the Bank’s with its plan against poverty and hunger; and end with a critical note on the Bank’s recent adoption of the Principles for Responsible Agricultural Investment (rai), which cover all types of investment in agriculture, including between principal investors and contract farmers.20 2

A Historical Description of the World Bank’s Commitment in the Global Fight Against ‘Land Grabbing’

The Absence of Interest of the World Bank in Land Grabbing Issues until the late 1990s Until the late 1990s, the Bank did not tackle the issue of land grabbing as a noticeable and/ or free concern in its activities. The Bank’s approach changed with international society’s increasing awareness of the issue and acknowledgment of its urgency. This change of approach may be found in particular, although not entirely, in the correspondence of some human rights ngo s with the World Bank’s at that time President James Wolfensohn, who in 1996 introduced the Heavily Indebted Poor Countries Initiative (hipc).21 The Agency of the United Nations (fao) and international civil society also called on the main institutions of the World Bank Group to exercise their financial powers to press their borrowing members to incorporate the principles of the un Convention on Economic, Social and Cultural Rights (icescr)22 into their 2.1

20

21

22

WORLD BANK, ‘Principles for responsible agricultural investment that respects rights, livelihoods and resources (prai),’ available at: http://unctad.org/en/Pages/DIAE/G-20/ PRAI.aspx. On the hipc, see e.g. R. Mc Gee, A. Norton, Participation in Poverty Reduction Strategies: A Synthesis of Experience with Participatory Approaches to Policy Design, Implementation and Monitoring, (Brighton: ids Working Paper 109, 2000), at: http://bldscat.ids.ac.uk/cgi -bin/koha/opac-detail.pl?biblionumber=121066. International Covenant on Civil and Political Rights (iccpr) (adopted 16 December 1966, entered into force 23 March 1976).

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national legal orders, and to advance the enactment and fulfillment of these principles by Bank borrowers which were parties to this convention.23 Before this pressure from ngo s and international civil society, the Bank had addressed the issue of land grabbing only indirectly24 and under other different titles, for instance in the Poverty Reduction Strategy Papers (prsp s), which had established a new structure to increase domestic accountability for poverty eradication reform efforts.25 The 2001 poverty reduction support operations (poverty eradication support grants or credits), one of the International Development Association (ida)’s main tools to help low-income countries in executing their prsp s, also focused on poverty issues.26 World Bank analysts had concentrated more on the issue of land grabbing. Notwithstanding the absence of an operational policy on land grabbing, the Bank contributed to the fight against land and other natural resources grabbing through its financing of projects for nutrition, social safety nets and population. The World Bank had therefore acknowledged the linkage between land grabbing and poverty. ngo’s Accusations of (Mis)investments at the Origin of the World Bank’s Interest on the Topic In the late 1990s, land grabbing turned out to be the main focus of the international discussion on the positive and negative consequences of globalization

2.2

23

24

25

26

See F. Coomans, “Application of the International Covenant on Economic, Social and Cultural Rights in the Framework of International Organisations,” Max Planck unyb 2007, 367, 368. Amplius F. Seatzu, above n. 8, stressing that…. “the internal organs of any international development institution will find it objectively difficult to publicly recognise that laudable initiatives, such as supporting and funding foreign direct investments in agriculture since they are generally economically rewarding, can be detrimental to the fundamental rights and interests of the local populations where such investments are made.” See F. Stewart, M. Wang, “Poverty Reduction Strategy Papers within the Human Rights Perspective,” P. Alston, M. Robinson (eds.), Human rights and development: towards mutual reinforcement (Oxford University Press, 2005), 445 ff; A. Manji, “Remortgaging Women’s Lives: The World Bank’s Land Agenda in Africa,” Feminist Legal Studies 2003, 139, 162. prso s are a subset of programmatic dpl and therefore follow the dpl operational policy, Operational Policy (op)/Bank Procedure (bp) 8.60. prso s are intended for well-performing ida-eligible countries with a demonstrated track record of reform, stable macroeconomic framework, adequate financial management systems, and the commitment to a national development strategy and a Poverty Reduction Strategy (prs). Amplius L. Yiu, R. Saner, “Development Diplomacy and Poverty Reduction Strategy Papers for Least Developed Countries: Non-State Actor Advocacy and Multistakeholder Diplomacy,” J. Kurbalija, V. Katrandjiev (eds.), Multistakeholder diplomacy: challenges and opportunities (Diplo, 2006), 105.

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in the economic field.27 Numerous ngo s operating in the human rights sector made the case before the Bank’s management to tackle land grab issues in a more direct and dedicated manner,28 while large segments of international civil society and public opinion called for World Bank new loan conditions in support of landless peasants and small farmers.29 World Bank management perceived that the time was right for the World Bank Group to advance a more explicit view on the issue of land grabbing. At various meetings of its senior management board the International Finance Corporation (ifc), the World Bank’s private sector arm,30 took stock of the analysts’ findings on land grabbing in Africa and Asia as well as the question of the Bank’s direct involvement in land grab issues from a normative perspective.31 Consent among senior management was soon reached. The management maintained that land grabbing in terms of development economics was a difficult subject, and that the discipline and its changing schools of thought have helped to bring about changes in Bank policies and procedures ever since the establishment of the World Bank in 1944. Although frequently detrimental elsewhere, the exploitation of natural resources – especially of renewable natural resources – by foreign companies and investors was a fact of life in various developing countries, and it was neither necessarily detrimental nor disruptive 27 28

29 30 31

See e.g. M. Manfredi, “Land Investments and “Land Grabbing”: the Need for a Legal Framework,” Diritto del commercio internazionale 2013, 803, 836. References are found in A. Zoomers, M. Kaag, “The global land grab as modern day corporate colonialism,” at: http://www.thebrokeronline.eu/Articles/The-global-land-grab-as -modern-day-corporate-colonialism. See M.E. Margulis, N. McKeon, S.M. Borras Jr., above n. 14, 5.10. Articles of Agreement of the World Bank’s International Finance Corporation (ifc) (adopted 22 July 1944, entered into force 27 December 1945). Incidentally, it is worth stressing that through advisory services and technical assistance to poor countries, the ifc spurs land grabs in three general ways. First, it works closely with governments to rewrite investment and industry specific laws and regulations, which allow investors easier access and fewer constraints and less oversight once operating within countries. Second, they work with governments to carry out land policy reform. In many African countries most land is traditionally unestablished or unregistered and controlled by local communities. By encouraging governments to create land registries, ifc helps consolidate land into the land banks of central governments and, to a lesser extent, regional governments, which they can then make it available to potential investors. In either case local communities are stripped of sovereignty over the land on which they live and are often displaced as a result of these deals. Third, the ifc seeks to establish Investment Promotion Agencies to promote a pro-fdi climate from within African countries, which can continue to facilitate land grabs long after the ifc stops its direct services. Amplius F. Seatzu, above n. 9, footnote 7.

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to their environment and overall well-being.32 If it does not surpass certain proportions in terms of the type and amount of resources exploited by foreign investors, and the circumstances in which they use them, the exploitation of natural resources may instead help farmers and local communities to acquire skills and build self-reliance. Nevertheless, if it amounts to over-exploitation, as is the case in the most disgraceful cases of land grabbing, water grabbing and other natural resources grabbing like minerals, it threatens farmers’ rights to own land and frequently their existence.33 From a legal viewpoint, the World Bank’s senior management was advised that the Bank’s mandate places restrictions on the configuration and contents of Bank lending conditionalities as, unlike fao, the Bank is not an international agency with a commitment to establishing standards, nor is it part of the machinery for the enforcement of international standards by conditioning lending on a borrowing country’s fulfillment of such standards. However, nothing would validly inhibit the Bank from financing programs that prolonged incentives to landless peasants and farmers. In the light of the analysts’ evaluation of land grabbing in the development setting, and of the possible means of the Bank’s contribution to the struggle against land grabbing under its normative mandate, the World Bank senior management expressed the following view. For a development organization like the World Bank, solutions such as the requirement of only taking economic considerations into account prior to the loan concession raise the risk of deteriorating the situation of landless peasants and farmers, as the adverse social and economic effects of the exploitation of natural resources are ignored. Failure to take into account such adverse effects would make the Bank an organization that fails to recognize the primacy of its human rights responsibilities and obligations, and this approach is not acceptable for institutions that are un agencies.

32

33

References are found in F. Cabo, G. Martín-Herrán, M.P. Martínez-García, “On the Effect of Resource Exploitation on Growth: Domestic Innovation vs. Foreign Direct Investment,” at: http://www2.dse.unibo.it/soegw/paper/Cabo_MartinHerran_MartinezGarcia.pdf. See also R. Marschinski, S. Behrle, “The World Bank: Making the Business Case for the Environment,” in F. Biermann, B. Siebenhüner (eds.), Managers of global change: the influence of international environmental bureaucracies (mit Press, 2009), 101. See e.g. L. Afedraru, “Body devises means to fight for farmers rights to own land,” at http:// www.monitor.co.ug/Magazines/Farming/Body-devises-means-to-fight-for-farmers -rights-to-own--land/-/689860/2447926/-/5c7mmfz/-/index.html (stressing that one of the greatest challenges farmers are faced with as they go about with their day to day farming activity is the issue of land grabbing mainly by people who claim to be investors).

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Consequently, in order to remain faithful to its institutional mandate and at the same time avoid escaping from its binding obligations to the un Charter (and the human rights therein), the World Bank would support its developing members by sponsoring programmes against land grabbing. However, it would not condition its global lending on the members’ record in terms of the eradication of land grabbing activities. In other words, the World Bank was to give an alternative for peasants, farmers and their families in order to prevent the situation where farmers and peasants would be left landless as a result of foreign investors having dispossessed them. 2.3 The Principles for Responsible Agricultural Investment (rai) In January 2010 the World Bank, jointly with the un Food and Agriculture Organization (fao), the International Fund for Agriculture Development (ifad) and the United Nations Conference for Trade and Development (unctad), adopted the Principles for Responsible Agricultural Investment (rai).34 This step was grounded on the belief that exploitation of natural resources in developing countries, in particular if undertaken by foreign individuals and foreign private entities, may have (and often does have) a negative impact on the social and environmental well-being of local populations. These (seven) Principles – which cover all types of investment in agriculture, including between principal investors and contract farmers – were strongly inspired by the fao Guidelines for the Responsible Governance of Land and Natural Resources Tenure.35 It is worth mentioning that the rai principles were never submitted for approval to the governing bodies of these organizations.36 For this and other reasons the rai principles have been heavily criticized by several ngo s operating in the human rights field.37 Among the reasons cited are: the lack of any reference to ‘land grab investments’ and (or) ‘(mis)investments’; the fact that (contrary to what is indicated by their statutory aims) these Principles ignore human rights and are not self-executing; and 34 35

36

37

For the text of the Principles, above n. 20. fao Voluntary Guidelines on Responsible Governance of Tenure of Land and other Natural Resources, available at. For a commentary, see P. Seufert, “The fao Voluntary Guidelines on the Responsible Governance of Tenure of Land, Fisheries and Forests,” in M.E. Margulis, N. Mc Keon and S.M. Borras Jr., above n. 5, 181–186. grain, “It’s time to outlaw land grabbing, not to make it ‘responsible’!”, at: http://www .grain.org/article/entries/4227-it-s-time-to-outlaw-land-grabbing-not-to-make-it -responsible. Amplius F. Seatzu, above n. 9.

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the fact that they legitimize land and water grab investments by failing to provide an alternative model for agriculture. According to the rai principles, the World Bank Group’s new approach to foreign direct investments in agriculture includes: (a) raising the awareness and sensitivity of the investors that conduct large-scale farmland acquisitions in developing countries by providing them with the choice to voluntarily subscribe to the above named principles when conducting large-scale farmland acquisitions; (b) improving the traditional processes for accessing land and making related investments transparent and monitored; (c) guaranteeing that foreign direct investments in agriculture do not jeopardize food security, but rather strengthen it; (d) improving the consultation and participation of materially affected populations, as well as the recording and enforcement of the agreements from consultations; (e) improving the recognition and respect of rights to land and natural resources; (f) enhancing environmental sustainability, possibly mitigating the adverse impact of large-scale farmland acquisitions on the social and environmental conditions of local residents and producers. 3

Founding a Developmental Approach to Foreign Direct Investments in Agricultural Land

3.1 The World Bank’s Action against ‘Land Grabbing’ Legally, the World Bank has encountered some restraints in dealing with land rights and ownership issues as a result of its special mandate. Under its Constitutive Charter (the ibrd’s Articles of Agreement), the Bank’s institutional purposes are mainly to “encourage international investment for the development of the productive resources of members, thereby assisting in raising productivity, the standards of living and conditions of labor in their territories,” “facilitate the investment of capital for productive purposes” and “promote private foreign investment…for productive purposes.”38 In other words, the Bank’s overall mission is to enhance the development and socio-economic growth of its borrowing members. To successfully fulfill its purposes of assisting development, the Bank is authorized to make guarantees on loans and loans in support of definite projects and programmes.39 38

39

See art. i (i), (ii) and (iii) of the ibrd’s Articles of Agreement. On the subject, see A. Rigo Sureda, “Informality and effectiveness in the operation of the International Bank for Reconstruction and Development,” Journal of International Economic Law, 2003, 565, 596. Amplius S. Smyth, “World Bank Grants in a Changed World Order: how Do We Referee this New Paradigm?”, University of Pennsylvania Journal of International Law, 2008, 483, 497.

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The Bank is explicitly forbidden to take political issues into consideration in its decision-making.40 According to its Constitutive Charter, “the Bank and its officers shall not interfere in the political affairs of any member; nor shall they be influenced by the political character of the member or members concerned.” The World Bank’s Constitutive Agreement requires furthermore that: “only economic considerations shall be relevant to the Bank’s decisions.”41 Therefore, as a fundamentally financial development organization the Bank is banned from being involved in the internal political issues of its members. Under the Bank’s institutive agreement the Bank’s financial support to its members is explicitly related only to the financing of aid for fighting economic underdevelopment. Over time and in practice this support has evolved, with the Bank’s Executive Directors exercising their influence to interpret the Bank’s Constitutive Charter when validating this changing practice. Due to this evolution, in the 1970s social progress (for instance, public health, the fight against poverty, social marginalization and environmental concerns) turned out to be the second main objective of the Bank, along with industry and infrastructure, in other words the Bank’s initial ‘bricks and mortar business.’ In the subsequent decade, the social branch of the World Bank’s development aid widened and began to embrace the human rights issues that were neither explicitly referred to in the World Bank’s Constituent Charter nor of purely economic value. This led to some significant progress in the Bank’s perception of its overall mandate and an increasing appreciation of the link between fundamental rights and economic development on several levels.42 40 Art. iv, Section 4 of the ibrd’s Articles of Agreement. On the subject, see C. Cissé, “Should the Political Prohibition in Charters of International Financial Institutions Be Revisited?: the Case of the World Bank,” World Bank Legal Review 2012, 59 ff; R. Kirunda, “Political Prohibition and the World Bank’s Role in the Protection of Human Rights in the Saga of the Chad-Cameroon Pipeline,” East African Journal of Peace and Human Rights, 2008, 266, 309; S. Killinger, The world bank’s non-political mandate (Heymann, 2003) 99; F.I. Shihata, Prohibition of Political Activities in the Bank’s Work: Legal Opinion by the Senior Vice President & General Counsel, July 12, 1995. 41 Art. iv, Section 4 of the ibrd’s Articles of Agreement. See also N. Maldonado, ‘The World Bank’s Evolving Concept of Good Governance and its Impact on Human Rights,’ (PhD Thesis, University of Bonn, 2000), available at: which stresses that the bank provides a table with some very brief summaries of foreign investments in farmland in seven countries (see Appendix 1). Incidentally, it is worth stressing that at the last year’s Annual World Bank Conference on Land and Poverty, the Bank publicly committed to guaranteeing that its new environmental and social safeguards would be informed by the Voluntary Guidelines. President Kim held that: “additional efforts must be made to build capacity and safeguards related to land rights” (http://www.inclusivedevelopment.net/joint-statement-world-banks-draft -safeguards-fail-to-protect-land-rights-and-prevent-impoverishment-major-revisionsrequired/). See Bretton Woods Project, Update 79, 7 February 2012, at http://www.brettonwoodsproject .org/art-569561.

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However, it is too early to say to what extent this more sensible approach to the land rights of the farmers, peasants and local residents in developing countries will be shared by other international financial institutions both belonging and not belonging to the World Bank Group.

part 5 The wto Context

∵

chapter 15

The wto Members’ Right to Protect Animals in International Trade: A tbt Perspective Angelica Bonfanti 1 Introduction The protection of animal life or health under wto law is expression of the socalled ‘domestic policy space’ – i.e. the Member States’ right to regulate domestic public interests by means of national measures complying with the flexibilities established by the covered agreements. For instance, art. xx gatt1 provides Member States with the right to derogate from the main gatt rules pursuing trade liberalization when necessary to protect any of the domestic public interests specifically listed therein. Among these are public morals, human, animal or plant life or health, and the conservation of exhaustible natural resources. Likewise, the tbt Agreement (hereinafter: ‘the tbt’)2 recognizes that no country should be prevented from taking measures necessary to fulfil legitimate objectives, at the levels it considers appropriate, including the protection of human, animal, or plant life or health and the environment, and the prevention of deceptive practices.3 The topic touches on natural resources grabbing, since products are often manufactured from the meat and skins of animals fished and hunted by methods either causing inhumane sufferings or threatening the conservation of endangered species. Trade of products obtained through these methods is often the subject of regulatory measures on the part of wto Members, in the exercise of their own sovereign powers to protect public interests they deem to be essential. However, these measures can have negative impacts on international trade and be inconsistent with the gatt and the tbt. Two recently solved disputes – us/Tuna ii4 and ec/Seals5 – are particularly interesting in this regard. They concern, respectively, the consistency with the 1 2 3 4

wto, General Agreement on Trade and Tariffs, 15 April 1994. Hereinafter ‘gatt.’ wto, Agreement on Technical Barriers to Trade, 15 April 1994. Hereinafter ‘tbt.’ tbt, preamble, recital no. 6. wto, United States – Measures Concerning the Importation, Marketing and Sale of Tuna and Tuna Products (hereinafter ‘us/Tuna ii’), Panel Report of 15 September 2011, WT/DS381/R; ab Report of 16 May 2012, AB-2012-2. 5 wto, European Communities – Measures Prohibiting the Importation and Marketing of Seal Products (hereinafter ‘ec/Seals’), Panel Report of 25 November 2013, WT/DS400/R and WT/DS401/R; ab Reports of 22 May 2014, ab-2014-1 and ab-2014-2. © koninklijke brill nv, leiden, ���6 | doi 10.1163/9789004305663_017

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tbt and the gatt of the us provisions for the application of a ‘dolphin-safe’ label on tuna products and the ec ban prohibiting the sale of seal products. Previously similar cases had been dealt with under the gatt framework. The very well-known disputes us/Tuna I6 and us/Shrimps7 had led the Panel and the Appellate Body (hereinafter: ‘ab’) to conclude that the contested measures – respectively a ban on importing tuna harvested by methods resulting in killing of dolphins and trade restrictions on the import of shrimp intended to protect endangered species of sea turtles – were inconsistent with art. xi gatt and could not be justified under art. xx gatt. The purpose of this Chapter is to develop a legal analysis on the application of tbt in cases involving domestic regulatory measures adopted in the name of animal protection that impact international trade, with the aim of assessing whether and to what extent the tbt, as interpreted by the wto dispute settlement bodies, allows Members to exercise their sovereign power in implementing domestic measures in this field. In order to develop this analysis, this Chapter is divided into two parts. Part i focuses on animal protection under the tbt: after analyzing us/Tuna ii and ec/Seals (para. 2.1), the Chapter examines the applicability of the tbt to bans, ecolabels and certification schemes (para. 2.2), the relevance of hunting and fishing methods as processes and production methods (ppms) (para. 2.3), and the sovereign discretion of wto Members in identifying legitimate objectives, especially the protection of public morals (para. 2.4). Part ii focuses on the interpretation of the tbt, with particular regard to its arts. 2.1 (para. 3.1) and 2.2 (para. 3.2), on their application (para. 3.3), and on the relationship existing between the gatt and the tbt (para. 3.4). 2

Animal Protection under the tbt

2.1 us-Tuna ii and ec-Seals The us/Tuna ii dispute concerns the alleged inconsistency with arts. i:1 and iii:4 gatt and 2.1, 2.2 and 2.4 tbt of the so-called ‘Dolphin Protection Con­sumer Information Act,’8 ‘Dolphin-safe labelling standards,’9 and ‘Dolphin-safe 6 gatt, United States – Restrictions on Imports of Tuna, report not adopted, circulated on 3 September 1991, DS21/R gatt bisd 39/155. 7 wto, United States – Import Prohibition of Certain Shrimp and Shrimp Products, ab Report of 12 October 1998, WT/DS58/AB/R, AB-1998-4. 8 Dolphin Protection Consumer Information Act, United States Code, Title 16, Section  1385 et seq. 9 Dolphin-safe labelling standards, Code of Federal Regulations, Title 50, Section 216.91.

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­requirements for tuna harvested in the etp [Eastern Tropical Pacific Ocean] by large purse seine vessels,’10 as interpreted in Earth Island Institute v. Hogarth.11 The measures establish the conditions for use of a dolphin-safe label on tuna products, depending on the fishing method and the location used to harvest the tuna. Pursuant to the 2011 Panel’s report the dolphin-safe label constitutes a technical regulation within the meaning of Annex 1.1 tbt and is consistent with art. 2.1 because it does not discriminate against Mexican tuna products. Art. 2.1 tbt provides that “Members shall ensure that in respect of technical regulations, products imported from the territory of any Member shall be accorded treatment no less favourable than that accorded to like products of national origin and to like products originating in any other country”. However, according to the report, the measure is more trade-restrictive than necessary to fulfil the legitimate objectives of ensuring that consumers are not misled or deceived and furthering the protection of dolphins. As such, it is considered inconsistent with art. 2.2 tbt, which establishes “Members shall ensure that technical regulations are not prepared, adopted or applied with a view to or with the effect of creating unnecessary obstacles to international trade.” Finally, the Panel rejects Mexico’s claim under art. 2.4 tbt, concluding that the standard referred to by Mexico is not appropriate or effective to achieve the us objectives. With regard to the claims under the gatt, the Panel declines to rule, exercising judicial economy. The inconsistency with the tbt of the us dolphin-safe label is confirmed, on separate grounds, by the ab report of 16 May 2012. The report reverses the Panel’s finding that the measure complies with art. 2.1 tbt, concluding that, by excluding most Mexican tuna products from access to the dolphinsafe label, it modifies the conditions of competition in the us market to the detriment of Mexican tuna products. In the ab’s view, such a detrimental impact does not stem exclusively from a legitimate regulatory distinction, to the extent that the measure is not calibrated to the risks to dolphins arising from different fishing methods in different areas of the ocean, nor is it even-handed in addressing them. The ab report also reverses the Panel’s conclusion concerning art. 2.2 tbt, holding that the alternative measures proposed by Mexico do not make an equivalent contribution to the furtherance of the pursued objectives. Finally, the report finds that the Panel erred in exercising judicial economy.12 10 11 12

Dolphin-safe requirements for tuna harvested in the etp [Eastern Tropical Pacific Ocean] by large purse seine vessels, Code of Federal Regulations, Title 50, Section 216.92. Earth Island Institute v. Hogarth, 494 F.3d 757 (9th Cir. 2007). On the ab report in us-Tuna ii: E. Baroncini, “Il sistema di etichettatura ‘Dolphin-Safe’ e i processi produttivi non collegati al prodotto davanti all’Organo d’appello omc,” 3 June 2013, at http://www.sidi-isil.org/sidiblog/?p=347; E. Trujillo, “The wto Appellate Body

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More recently, the wto has intervened in another case concerning the trade of products obtained from animals hunted by disapproved methods, i.e. seal products. The dispute concerns the so called ‘eu Seal Regime,’13 providing for a general ban on the import and marketing of seal products, unless products derive from hunts conducted by Inuit or indigenous communities (‘ic exception’)14 and hunts conducted for marine resource management purposes (‘mrm exception’).15 Pursuant to the 2014 Panel’s report, the eu Seal Regime is a technical regulation and the ic and mrm exceptions violate art. 2.1 tbt because they accord less favourable treatment to imported seal products than that accorded to like domestic and other foreign products, and this less favourable treatment does not stem exclusively from legitimate regulatory distinctions. By contrast, in the Panel’s view, the eu Seal Regime does not violate art. 2.2 tbt, as it fulfils the objective of addressing eu public moral concerns on seal welfare and no adequate alternative measure can be found. Moreover, according to the Panel, the ic exception violates art. i:1 gatt, while the mrm exception is inconsistent with art. iii:4 gatt. These violations cannot be justified under art. xx(a) gatt because they fail to meet the requirements under the chapeau.16 The Panel report was largely reversed by the ab on 22 May 2014. Pursuant to the latter, the eu Seal Regime is not a ‘technical regulation’ within the meaning of Annex 1.1 tbt. Consequently the Panel’s conclusions under arts. 2.1 and 2.2 tbt have no legal force. By contrast, the ab report confirms that the eu Seal

13

14 15 16

Knocks Down u.s. ‘Dolphin-Safe’ Tuna Labels But Leaves a Crack for ppms,” July 2012, 16 asil Insight; W. Zhou, “us-Clove Cigarettes and us-Tuna ii (Mexico): Implications for the Role of Regulatory Purpose under Art. iii.4 gatt,” Journal of International Economic Law, 2012, 1075. Regulation (ec) No. 1007/2009 of the European Parliament and of the Council on trade in seal products, 16 September 2009 (hereinafter ‘Regulation (ec) No. 1007/2009’); Commission Regulation (eu) No. 737/2010, laying down detailed rules for the implementation of the Basic Regulation, 10 August 2010. Regulation (ec) No. 1007/2009, art. 3.1. Ibid., art. 3.2(b). On the Panel report in ec-Seals, see: X. Luan, J. Chaisse, “Preliminary Comments on the wto Seals Products Dispute: Traditional Hunting, Public Morals and Technical Barriers to Trade,” Colorado Journal of International Environmental Law and Policy, 2011, 79; A. Herwig, “Lost in Complexity? The Panel’s Report in European Communities – Measures Prohibiting the Importation and Marketing of Seal Products,” European Journal of Risk Regulation, 2014, 97; R. Howse, J. Langille, “Permitting Pluralism: The Seal Products Dispute and Why the wto Should Accept Trade Restrictions Justified by Noninstrumental Moral Values,” Yale Journal of International Law, 2012, 367; T. Peršin, “Is the eu Seal Products Regulation a Sealed Deal? eu and wto Challenges,” International and Comparative Law Quarterly, 2013, 373.

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Regime is inconsistent with art. i:1 gatt because it does not “immediately and unconditionally” extend the same market access advantage to Canadian and Norwegian seal products that it accords to seal products originating from Greenland. While recognizing that the eu Seal Regime is “necessary to protect public morals” within the meaning of art. xx(a) gatt, it concludes that the eu has not demonstrated that the Regime is consistent with its chapeau.17 Fishing and Hunting Methods under the tbt: Bans, Eco-Labels and Certification Schemes Traditionally, States implement their own domestic environmental policies in two ways: either through the adoption of bans on the utilization, trade, and import of specific products, or by providing for eco-labels and certification schemes. The two types of measures differ in their efficacy in pursuing their objectives and in their effects on international trade. The former usually grant the highest level of efficacy, while implying the most intrusive impact on international trade; the suitability of the latter in granting a satisfactory level of protection without infringing on the wto rules is not automatic and must be demonstrated on a case-by-case basis.18 The former type of measure is at issue in ec-Seals; the latter is the focus of us-Tuna ii. In both cases the wto settlement bodies were asked to verify whether the complained of measures were consistent with the tbt. To this aim, they had to make a preliminary determination concerning whether tbt was applicable ratione materiae, i.e. if the measures could be characterized as ‘technical regulations.’ To make this determination, in line with Annex i tbt – according to which technical regulation is a “[d]ocument which lays down product characteristics or their related processes and production methods, including the applicable administrative provisions, with which compliance is mandatory” – they followed the three-step test developed in ec-Asbestos:19 the document

2.2

17

18 19

On the ab report in ec-Seals see: M. Citelli, “Public Morals, Animal Welfare and Indigenous Peoples vs. International Trade Law? The ec-Seal Products Case,” Diritti umani e diritto internazionale, 2014, 623; P. Leenknegt, “What Will the eu Do with Seals,” Biores, ictsd, September 2014, 4; G. Marceau, “A Comment on the Appellate Body Report in ‘ec-Seal Products’ in the Context of the Trade and Environment Debate,” Review of European Community and International Environmental Law, 2014, 318; M. Wilke, “The Litmus Test: Non-Trade Interests and wto Law after Seals,” Biores, ICTSD, September 2014, 9. On this topic see: A. Okubo, “Environmental Labelling Programs and the gatt/wto Regime,” Georgetown International Environmental Law Review, 1999, 599. wto, European Communities – Measures Affecting Asbestos and Asbestos-Containing Products (‘ec-Asbestos’), ab Report of 5 April 2001, WT/DS135/AB/R, para. 67–70. G. Marceau, “The New tbt Jurisprudence in us-Clove Cigarettes, wto us-Tuna ii, and us-cool,” Asian Journal of wto and International Health Law & Policy, 2013, 3.

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must lay down product characteristics, it must apply to an identifiable group of products, and compliance with it must be mandatory. The issue was controversial, as one can infer from the inclusion of a dissenting opinion in the Panel report in us-Tuna ii20 and from the reversing conclusions adopted by the ab in ec-Seals. While, in the former dispute, the Panel and the ab agreed that the dolphin-free label amounted to a technical regulation since, although voluntary in nature, it imposed the conditions for its own application and prohibited the sale of tuna products bearing a label if such requirements were not met,21 the ab in ec-Seals denied that the ban could be qualified as a technical regulation.22 The ab reached this conclusion after having carefully examined the design and operation of the measure, identified its integral and essential aspects, and accepted that the eu Seal Regime was mandatory – in the sense that it prescribed rules concerning the placement on the market of seal products “in a binding or compulsory fashion.”23 Since the ab agreed to treat the eu Seal Regime as a single measure – within which the Basic and the Implementing Regulations operated in conjunction with each other, providing for intertwined permissive and prohibitive elements – it held that the Panel erred in arresting the “compartmentalized […] assessment of the various components of the eu Seal Regime”24 when it found that “the prohibition on seal-containing products laid down product characteristics in the negative form.”25 Above all, according to the ab, the Panel’s report was incorrect in treating “the identity of the hunter, the type of hunt, and the purpose of the hunt as ‘product characteristics’ within the meaning of Annex 1.1.’”26 In fact, there was “no basis in the text of Annex 1.1, or in prior Appellate Body reports, to suggest that the identity of the hunter, the type of hunt, or the purpose of the hunt could be viewed as product characteristics.”27 Consequently the exceptions to the eu Seal Regime did not set the product characteristics upon which market could be accessed, neither did the Implementing Regulation establish the related administrative provisions based on them. Thus, the ec Seal Regime could not be characterized as a technical regulation. 20 us-Tuna ii, Separate Opinion, Panel report, para. 7.146 ff., p. 152 ff. 21 wto, us-Tuna ii, Panel report cit., 133–152; ab report, 76–80. 22 wto, ec-Seals, ab report cit., 100–117. 23 wto, ec-Seals, ab report cit., para. 5.22. 24 Ibid., para. 5.28. 25 Ibid. 26 Ibid., para. 5.45. 27 Ibid.

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As a general remark it is worth noting that the approach followed in us-Tuna ii – favorable to recognizing the mandatory status of the eco-labels, as long as they are negatively prescriptive, although voluntary according to their own determination – could have the effect of broadening the notion of ‘technical regulation’ to include any measure adopted by public bodies, not only in order to condition market access, but also to set requirements that do not strictly need to be met in order to access the market.28 According to this approach, all State-backed eco-labelling standards could be covered by the tbt.29 This effect is mitigated by the restrictive interpretation of Annex i developed by the ab in ec-Seals. In its light, rejections of extensive interpretations are expected to occur in the future. 2.3 ppms under the tbt Annex i tbt establishes that a technical regulation is a “[d]ocument which lays down product characteristics or their related processes and production methods.”30 Some preliminary definitions are worthy of clarification.31 According to the wto case-law ‘product characteristics’ include “qualities intrinsic to the product itself,” “objectively definable ‘features,’ ‘qualities,’ ‘attributes,’ or other ‘distinguishing marks’ of a product.” They might relate, inter alia, to “a product’s composition, size, shape, colour, texture, hardness, tensile strength, flammability, conductivity, density, or viscosity.” ‘Process’ is to be understood as “a course of action, a procedure, a series of actions or operations directed to some end, as in manufacturing”; ‘production’ refers to “[t]he process of being manufactured commercially, esp. in large quantities” and ‘method’ to “a (defined or systematic) way of doing a thing.” The most crucial point, when, as in us-Tuna ii and ec-Seals, fishing and hunting methods are at stake, concerns the interpretation of the term ‘their related.’ In the ab’s view a ‘related’ ppm is one that is ‘connected’ or ‘has a relation’ to the characteristics of a product, and the word ‘their’ […] refers back to ‘product characteristics.’ Thus, in the context of the first sentence of Annex 1.1, […] the reference to ‘or their related processes and production methods’ […] indicate[s] that the subject matter of a technical regulation may consist 28 29

30 31

A. Arcuri, “Back to the Future: us-Tuna ii and the New Environment-Trade Dispute,” European Journal of Risk Regulation, 2012, 181. L. Sullivan, “The Epic Struggle for Dolphin-Safe Tuna: To Be Continued. A case for Accomodating Nonprotectionist Eco-Labels in the wto,” Vanderbilt Journal of Transnational Law, 2014, 861, 865. tbt, Annex i. Emphasis added. The following definitions are quoted from wto, ec-Seals, ab report cit., paras. 5.11 and 5.12.

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of a process or production method that is related to product characteristics. In order to determine whether a measure lays down related ppms, a panel thus will have to examine whether the processes and production methods prescribed by the measure have a sufficient nexus to the characteristics of a product in order to be considered related to those characteristics.32 This clearly prevents the characterization of documents laying down ppms unrelated to traded goods as ‘technical regulations.’33 Such an interpretation further restricts the possibility to consider ppms relevant under the tbt: as a matter of fact, only ppms sufficiently connected with product characteristics are suitable to be taken into account. Thus, the more narrowly the notion of ‘product characteristics’ is interpreted, the lower is the tbt’s degree of flexibility in accommodating ppms. For instance, on the basis of such an interpretation, the Inuit and mrm exceptions established by the ec Seal Regime and, more generally, the ec distinction between commercial and non-commercial hunts were not considered by the ab product characteristics’ related ppms: indeed, as long as their distinguishing features depended on the identity of the hunter and the type and purpose of the hunt – aspects which, in the ab’s view, could not be qualified as product characteristics – the related methods themselves were not relevant ppms under Annex i tbt.34 The same approach led to opposite outcomes in us-Tuna ii, wherein the us dolphin-safe label was qualified as a technical regulation because it established “labelling requirements as they apply to a product, process or production method,”35 in accordance with Annex i tbt.36 In this case, the identification of appropriate fishing methods was reflected

32 33

34 35 36

Ibid., para. 5.12. Emphasis added. R. Howse, P. Levy, “The tbt Panels: us-Cloves, us-Tuna, us-cool,” World Trade Review, 2013, 327, 358–359. On ppms in wto law see also: S. Charnovitz, “The Law of Environmental ‘ppms’ in the wto: Debunking the Myth of Illegality,” International Economic Law, 350; C.R. Conrad, Processes and Production Methods (ppms) in wto Law. Interfacing Trade and Social Goals (Cambridge University Press, 2011); R. Howse, D. Regan, “The Product/ Process Distinction – An Illusory Basis for Disciplining ‘Unilateralism’ in Trade Policy,” European Journal of International Law, 2000, 249; J. Potts, “The Legality of ppms Under the gatt. Challenges and Opportunities for Sustainable Trade Policy,” iisd, 2008. wto, ec-Seals, ab report cit., para. 5.45. wto, us-Tuna ii, Panel report, para. 7.71 ff., at para. 7.77. tbt, Annex i.

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within the identified group of products and was a prerequisite to their eligibility to bear a label. Moreover, it should be noted that in us-Tuna ii ppms were taken into account when ascertaining whether the dolphin-safe label was a technical regulation, while they were not considered relevant when assessing whether the tuna and tuna-products at the core of the dispute were like products. In conformity with the wto jurisprudence,37 in order to ascertain whether the products were like, the Panel applied four main criteria: (i) the physical properties of the products; (ii) the extent to which the products are capable of serving the same or similar end-uses; (iii) the extent to which consumers perceive and treat the products as alternative means of performing particular functions in order to satisfy a particular want or demand; and (iv) the international classification of the products for tariff purposes.38 Consumer preferences might have been decisive: as recognized by the Panel, consumer perceptions and preferences might be different with respect to dolphin-safe and not dolphin-safe tuna products, and this may have an impact on their likeness.39 The information presented to the Panel suggested that us consumers had certain preferences with respect to dolphin-safe tuna products.40 However, the Panel declined to take such information into account because there was no basis to assume that Mexican tuna were not dolphin-safe while us tuna products and tuna products originating in any other country were dolphin-safe.41 A significant step forward as regards the role played by consumers’ tastes was made by the Panel in ec-Seals. The dispute focused on the distinction between seal products prohibited under the eu Seal Regime and seal products allowed under the ic and mrm exceptions. Pursuant to the Panel’s report, “the type or purpose of the seal hunt does not affect in any way the final product’s physical characteristics, end-use, or tariff classification.”42 However, as regards consumers’ tastes, even without reaching affirmative conclusions, the Panel admitted that it could impact on products’ likeness. Nevertheless, in the instant 37 38 39 40 41 42

wto, ec-Asbestos, ab report cit., para. 101. wto, us-Tuna ii, Panel report, para. 7.235. Ibid., para. 7.248. Ibid., para. 7.249. Ibid., paras. 7.249–7.250. wto, ec-Seals, Panel report cit., para. 7.139.

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case “the complainants presented evidence to demonstrate that, prior to the eu Seal Regime, consumers did not make any distinction between seal products based on the type or purpose of the hunt.”43 2.4 Animal Protection as a Public Morals Concern under the tbt Arts. 2.1 and 2.2 tbt are at the core of us-Tuna ii and ec-Seals. Differently from the gatt, which provides domestic policy space under art. xx, the tbt does not establish general exceptions to protect essential domestic interests. Art. 2.1 tbt provides for the most-favoured nation clause and the national treatment obligation, i.e. it obliges Member States not to discriminate among like products of national origin and those originating in any other country. Pursuant to art. 2.2 technical regulations shall not create unnecessary obstacles to international trade and shall not be more trade-restrictive than necessary to fulfill a legitimate objective, taking the risks of non-fulfilment into account. An exemplary list of legitimate objectives is provided therein. The balance between trade liberalization and the protection of domestic essential interests is supported by the tbt preamble, according to which “no country should be prevented from taking measures necessary […] for the protection of its essential security interest”44 and “of human, animal or plant life or health, of the environment, or for the prevention of deceptive practices, at the levels it considers appropriate.”45 Art. 2.2 tbt must be applied following a four-step test: after having identified the objective pursued and verified that it is legitimate, a panel should consider (i) the degree of contribution made by the measure to the legitimate objective at issue; (ii) the trade-restrictiveness of the measure; and (iii) the nature of the risks at issue and the gravity of consequences that would arise from non-fulfilment of the objective pursued by the Member through the measure.46 National security requirements, the prevention of deceptive practices, the protection of human health or safety, animal or plant life or health, and the environment are listed as examples of legitimate objectives under art. 2.2. Differently form art. xx gatt the list is not exhaustive, so that States are 43 Ibid. 44 tbt, preamble, recital no. 7. 45 Ibid., recital no. 6. 46 wto, us-Tuna ii, ab report cit., para. 322.

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allowed to exercise a wider discretion in identifying policy objectives they deem to be essential. In order to determine whether the identified objectives are legitimate, the wto Panels can take into consideration not only the objectives listed in art. 2.2 tbt and in the sixth and seventh recitals of the tbt Preamble, but also those recognized in other provisions of the covered agreements.47 This point was crucial in ec-Seals, wherein the Panel had to determine whether addressing eu public moral concerns on seal welfare – an objective not included in the list provided by art. 2.2 – was legitimate.48 Public morals is explicitly recognized in arts. xx gatt and xiv gats,49 meaning that wto Members consider this objective to be particularly significant. Given that tbt aims to further the objectives of the gatt,50 the Panel concluded that “‘public morals’ falls within the scope of ‘legitimate’ objectives under Article 2.2.”51 More specifically, the fact that several wto Members have adopted measures on animal welfare and seal products, and that animal welfare is protected by international instruments suggests that it is “a globally recognized issue.”52 Therefore, considering that, as clarified by the ab in its jurisprudence, the concept of public morals needs to be defined based on “the standard of right and wrong in a given society,”53 addressing the public moral concerns on seal welfare is legitimate under art. 2.2 tbt. It is worth noting that, as highlighted by some scholars, “the ab set[s] up the public morals justification as somehow fundamentally different from other objectives wto Members can ‘protect’ under xx.”54 According to others, tbt does not apply to a measure “that is an expression of moral obbrobrium”55 and “the provisions of tbt are inherently unsuited to the determination of whether the eu ban, taken in its aspect as noninstrumental moral regulation,

47 48 49 50 51 52 53 54

55

Ibid., para. 313. See A.E. Appleton, “pil and iel: Will Seal Death Resurrect the Dream of International Legal Coherence?”, Questions of International Law, 2014, at: http://www.qil-qdi.org/, 5, 12 ff. wto, General Agreement on Trade in Services, 15 April 1994. Hereinafter ‘gats.’ tbt, preamble, recital no. 2. wto, ec-Seals, Panel report cit., para. 7.418. Ibid., para. 7.420. wto, United States – Measures Affecting the Cross-Border Supply of Gambling and Betting Services, ab Report of 7 April 2005, WT/DS285/AB/R, para. 6.465. J. Pauwelyn, “The Public Morals Exception After Seals: How to Keep It in Check?”, 27 May 2014, at: http://worldtradelaw.typepad.com/ielpblog/2014/05/the-public-morals-exception -after-seals-how-to-keep-it-in-check.html. Howse, Langille, “Permitting Pluralism,” op. cit., p. 422.

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is inconsistent with the purposes of the wto system.”56 The interpretation of the ab accommodates the two points of view: the ab does not “consider that the term ‘to protect,’ when used in relation to ‘public morals’ under Article xx(a), require[s] the Panel […] to identify the existence of a risk to eu public moral concerns regarding seal welfare,”57 nor “to identify the exact content of the public morals standard at issue.”58 Therefore, while considering the tbt applicable to the regulations that can be deemed as instrumental – and not merely expressions of moral disapproval – the ab reshapes the test as to permit a higher degree of flexibility. This conclusion is particularly favorable to considering the tbt suitable to allow Member States to adopt regulatory measures addressed to protect animal life and health under the public morals exception. However, in order to consider such technical regulations legitimate under the tbt, they must be tested against the specific requirements established under arts. 2.1 and 2.2 tbt, the content of which is dealt with here below. 3

The Interpretation of Arts. 2.1 and 2.2 tbt

3.1 The Policy-Oriented Interpretation of Art. 2.1 tbt In the author’s view the wto dispute settlement bodies show a preference for a policy-oriented interpretation of art. 2.1 tbt and for a flexible interpretation of art. 2.2 tbt.59 These interpretations are arrived at via different legal means: first, by requiring that the measures pass a test of ‘calibration’ under art. 2.1; second, by broadly construing the tests to assess that the measures fulfill a legitimate objective and are necessary under art. 2.2 tbt. The cumulative effect of the two leads the panels to consider measures that comply with art. 2.2 inconsistent with art. 2.1. As regards art. 2.1 tbt, in order to strike a balance between rights and obligations, it has been interpreted by adding an exception concerning limited legitimate regulations. The policy-oriented interpretation of art. 2.1 is taken in the context of both the other provisions of the tbt, including the preamble, and of the gatt, whose objectives the tbt aims to further.60 As more deeply 56 57 58 59 60

Ibid., p. 423. wto, ec-Seals, ab report cit., para. 5.198. Ibid., para. 5.199. J. Carlone, “An Added Exception to the tbt Agreement after Clove, Tuna ii, and cool,” Boston College International and Comparative Law Review, 2014, 103, pp. 114–115. tbt, preamble, recital no. 2.

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examined below, such an ‘holistic’61 interpretative approach conforms to the rules enshrined in art. 31 of the Vienna Convention on the Law of Treaties (hereinafter: ‘Vienna Convention’),62 especially to the contextual interpretation technique, as established under art. 31.2. In light of these premises, pursuant to art. 2.1 tbt the wto panels must ascertain whether the products at the core of the dispute are like and whether a detrimental impact on competitive opportunities for the group of imported products will occur. However, according to the developed interpretation, they can deny that the detrimental impact is inconsistent with the tbt if, and only if, it “stems exclusively from a legitimate regulatory distinction.”63 This policy-oriented interpretation is certainly favorable to recognizing that states may legitimately exercise their sovereign powers to protect animals. However, this interpretation is strictly conditioned upon the respect of several requirements that dramatically reduce the ability of measures to be consistent with art. 2.1 tbt. In fact, it is well-established in wto case-law that where a regulatory distinction is not designed and applied in an evenhanded manner – because, for example, it is designed or applied in a manner that constitutes a means of arbitrary or unjustifiable discrimination – that distinction cannot be considered ‘legitimate,’ and thus the detrimental impact will reflect discrimination prohibited under Article 2.1.64 The measures must be even-handed, calibrated, and must not amount to a means of arbitrary or unjustifiable discrimination;65 to this end, the ab requires that they pass a test in line with art. xx gatt-chapeau. This test was crucial in 61

62 63

64

65

L. Gruszczynski, “Customary Rules of Interpretation in the Practice of wto Dispute Settlement Bodies” in O.K. Fauchald, A. Nollkaemper (eds.), The Practice of International and National Courts and the (De-)Fragmentation of International Law (Hart Publishing, 2012), 41. Convention on the Law of Treaties, Vienna, 23 May 1969, entered into force on 27 January 1980 (hereinafter ‘Vienna Convention’). The expression appears for the first time in wto, United States – Measures Affecting the Production and Sale of Clove Cigarettes, ab Report of 4 April 2012 (hereinafter ‘us-Clove’), WT/DS406/AB/R, para. 71. wto, ec-Seals, Panel report cit., para. 7.172, quoting wto, United States – Certain Country of Origin Labelling (cool) Requirements, ab Report of 29 June 2012, WT/DS384/AB/R, WT/DS386/AB/R, para. 271. tbt, Preamble, recital no. 6.

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us-Tuna ii, wherein the ab concluded that the us failed to demonstrate that the requirements established by the us dolphin-safe labelling provisions were calibrated to the likelihood of injury.66 According to the ab the difference in labelling conditions for tuna products containing tuna caught by setting on dolphins in the etp, on the one hand, and for tuna products containing tuna caught by other fishing methods outside the etp, on the other hand, is [not] ‘calibrated’ to the risks to dolphins arising from different fishing methods in different areas of the ocean.67 In assessing whether measures are correctly calibrated under art. 2.1, panels must “carefully scrutinize the particular circumstances of the case, that is, the design, architecture, revealing structure, operation, and application of the technical regulation at issue.”68 In line with this narrow, policy-oriented interpretation of art. 2.1 tbt, the ab concluded that the dolphin-safe label was inconsistent with it, as it was not even-handed, and its detrimental impact on Mexican tuna products could not be deemed to stem exclusively from a legitimate regulatory distinction. Analogous conclusions were reached by the Panel in ec-Seals, holding that the text of the ic exception, its legislative history and its application casted serious doubt on its even-handedness: the rationale or cause of the exception (i.e. the distinction between the ic hunts and commercial based on their purpose) […] [is] the ‘subsistence’ of Inuit and indigenous communities in terms of their culture and tradition as well as their livelihood. However, under the measure, the ic exception is available de facto exclusively to Greenland, where the Inuit hunt bears the greatest similarities to the commercial characteristics of commercial hunts.69 Therefore “the ic exception […] [is] not designed or applied in an even-handed manner so as to make the benefits of the exception available for all potential beneficiaries.”70

66 wto, us-tuna, Panel report cit., para. 7.559. 67 wto, us-Tuna ii, ab report cit., para. 297. 68 wto, ec-seals, Panel report cit., para. 7.172. 69 Ibid. para. 7.317. 70 Ibid.

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3.2 The Flexible Interpretation of Art. 2.2 tbt As to the tests to assess whether a measure fulfills legitimate objectives under art. 2.2 tbt, in us/Tuna ii the ab clarified that the question “is concerned with the degree of contribution that the technical regulation makes toward the achievement of the legitimate objective.”71 Each wto Member, “by preparing, adopting, and applying a measure in order to pursue a legitimate objective, articulates either implicitly or explicitly the level at which it seeks to pursue that particular legitimate objective,”72 meaning that Members are allowed to set their own levels of protection and are not required to adopt measures satisfying a specific minimum degree of contribution.73 Thus, on the basis of this interpretative approach, in us/Tuna ii the ab was satisfied with the partial contribution of the dolphin-safe label to pursue consumers’ protection and animal welfare. Likewise, in ec-Seals the Panel concluded that “the eu Seal Regime is capable of making and does make some contribution to its stated objective of addressing the public moral concerns”74 and, to this extent, complies with the requirement under art. 2.2 tbt, even though “[the] degree of contribution made by the ban […] appears to be diminished by the products imported under the ic and mrm exceptions.”75 The assessment of necessity under art. 2.2 tbt “involves a relational analysis of the trade-restrictiveness of the technical regulation, the degree of contribution that it makes to the achievement of a legitimate objective, and the risks non-fulfilment would create.”76 Art. 2.2 prohibits restrictions on international trade that exceed what is necessary to achieve the specific degree of contribution to the realization of the legitimate objective and involves a comparison with possible alternative measures that may be reasonably available and less trade restrictive.77 This approach led the ab in us-Tuna ii and the Panel in ec-Seals to conclude, on different grounds, that the alternative measures proposed by the complainants were not appropriate. In the latter case, the proposed establishment of animal welfare requirements in the hunting of seals, in conjunction with a certification of conformity and a labelling scheme, could be considered 71 72 73 74 75 76 77

wto, us-Tuna ii, ab report cit., para. 315. Ibid., para. 316. Marceau, “The New tbt Jurisprudence in us-Clove Cigarettes,” op. cit., 17. wto, ec-Seals, Panel report cit., para. 7.460. Ibid., para. 7.459. wto, us-Tuna ii, ab report cit., para. 318. Ibid., para. 320.

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less trade restrictive than the eu Seal Regime; however, these alternative measures were not reasonably available to the eu, considering the risks of failure to achieve the eu’s objective.78 In the former case, the ab concluded that the degree of protection granted by us dolphin-safe label was greater than that provided for under the proposed alternative measure, consisting in applying the dolphin-safe labelling requirements established under the Agreement on International Dolphin Conservation Program (aidcp): in fact, pursuant to the latter, inside the etp tuna caught by setting on dolphins would be eligible for a dolphin-safe label, while pursuant to the complained us measure only tuna caught by different methods would be eligible.79 3.3 Legitimate Objectives vs. Legitimate Regulatory Distinctions In order to comply with the tbt, the legitimacy test must be passed twice, i.e contextually under arts. 2.1 and 2.2, as both the distinctions established by the regulatory measures and the objectives pursued must be legitimate. However, the legitimacy test can reach opposite results under arts. 2.1 and 2.2. Indeed, pursuant to art. 2.1 [t]he analysis of determining the legitimacy of a regulatory distinction is not […] simply whether there is a legitimate objective, for example, within the meaning of Article 2.2. […] [T]he existence of a legitimate objective will not automatically imbue the discrimination under Article 2.1 with legitimacy; were that to be the case, one would simply need to assess whether the detrimental impact stems from a ‘legitimate’ objective.80 ec-Seals is paradigmatic on this point: notwithstanding the legitimacy under art. 2.2 of the objectives pursued by the eu Seal Regime, the distinctions enshrined in the ic exception were considered not to be even-handed under art. 2.1. The need to preserve the Inuit culture and tradition and to sustain their livelihood, broadly recognized in national and international instruments, could justify the distinction between commercial and non-commercial hunts. However, the ic exception was “not designed or applied in an even-handed manner so as to make the benefits of the exception available for all potential beneficiaries.”81 Likewise, in us-Tuna ii the ab concluded that the dolphin-safe label was inconsistent with art. 2.1 tbt, even though it pursued the legitimate 78 79 80 81

wto, ec-Seals, Panel report cit., para. 7.505. wto, us-Tuna ii, ab report cit., para. 330. wto, ec-Seals, Panel report cit., para. 7.279. Ibid., para. 7.317.

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objectives of ensuring that consumers were not misled or deceived and protecting dolphins: in fact the measure was considered to be not even-handed because it was not calibrated to the risks to dolphins arising from different fishing methods in different areas of the ocean.82 3.4 Interpreting tbt in Light of gatt: A Step Towards Flexibility or a Step Back? As interpreted by the wto dispute settlement bodies, arts. 2.1 and 2.2 tbt largely reproduce the legal framework established under gatt arts. i.1, iii.4 and xx. Indeed, art. 2.1 tbt provides for the same legal obligations as arts. i.1 and iii.4 gatt; in line with art. xx gatt, art. 2.2 tbt establishes that some essential interests can be protected through regulatory measures, if necessary, that can derogate from the aforementioned obligations; finally, in order to be considered legitimate under art. 2.1 tbt, such regulatory distinctions must be even-handed, as required under the chapeau of art. xx gatt. However, differently from the gatt, in the context of which art. xx encompasses all the conditions to be complied with by a domestic measure in order to be considered a legitimate exception, tbt divides such requirements into arts. 2.1 and 2.2. Moreover, while art. xx must be applied by way of a two-tier test, according to which, before assessing whether a measure complies with the chapeau, panels must identify the specific objective it pursues and the corresponding heading from xx(a) to (j) and, if it is so provided, must verify that the measure is necessary to fulfill the objective, under the tbt and the related case-law this sequence is overturned. In fact, panels have usually tested measures’ compliance with art. 2.1 as a first step and with art. 2.2 as a second, and applied the two provisions separately and individually.83 Several authors have criticized this approach, arguing that panels should start with art. 2.2 tbt, and only if the complained-of measures are considered necessary under this provision, they should assess whether they are evenhanded under art. 2.1.84 This critique is based on gatt jurisprudence and the sequence usually followed by panels when applying arts. i.1, iii.4 and xx gatt. 82 83 84

wto, us-Tuna ii, ab report cit., para. 297. Marceau, “The New tbt Jurisprudence in us-Clove Cigarettes,” op. cit. P.C. Mavroidis, “Driftin’ too Far From Shore – Why the Test Compliance with the tbt Agreement Developed by the wto Appellate Body Is Wrong, and What Should the ab Have Done Instead,” World Trade Review, 2013, 509, 610–611; E. Baroncini, “Il Sistema di etichettatura ‘dolphin-safe’ e l’Organo d’Appello dell’omc: la corretta informazione del consumatore e la salute e il benessere degli animali al vaglio del Sistema multilaterale degli scambi,” Diritto del commercio internazionale, 2014, 109, 134.

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This topic is strictly connected with the relationship existing between the agreements covered by the wto. This relationship affects their mutual interpretation and coordination. As regards the latter, the gatt and the tbt do not provide for coordination clauses with each other. The General interpretative note to Annex 1A of the wto Agreement establishes that, in the event of conflict between a provision of the gatt and a provision of another covered agreement, the provision of the latter shall prevail to the extent of the conflict.85 However, the relationship between the gatt and the tbt is not necessarily conflictual;86 rather, according to its Preamble, the tbt should further the objectives of the gatt.87 Pursuant to the ab in ec-Asbestos, it does so through a specialized legal regime that applies solely to a limited class of measures. For these measures, the tbt Agreement imposes obligations on Members that seem to be different from, and additional to, the obligations imposed on Members under the gatt 1994.88 Given these premises and considering that the “wto Agreement is a ‘Single Undertaking’ and the obligations of the members are cumulative,”89 the jurisprudence is coherent in recognizing that “unless there exists a mandatory sequence of analysis which, if not followed, would amount to an error of law and/or affect the substance of the analysis itself, panels have the discretion to structure the order of their analysis.”90 Pursuant to the Panel in ec-Seals, when the tbt and the gatt are at stake “no such mandatory sequence of analysis”91 occurs; nonetheless, “where claims […] [are] made under two wto agreements, panels usually address[…] first the claim under the more specific and detailed agreement.”92 85 86

87 88 89

90 91 92

Agreement Establishing the World Trade Organization, Annex 1a, Multilateral Agreements on Trade in Goods, General interpretative note to Annex 1A. wto, Indonesia – Certain Measures Affecting the Automobile Industry, WT/DS54/R, WT/DS55/R, WT/DS59/R, WT/DS64/R, Panel Report of 2 July 1998, para. 14.28. J. Pauwelyn, Conflict of Norms in Public International Law: How wto Law Relates to Other Rules of International Law (Cambridge University Press, 2003) 240–244. tbt, Preamble, recital no. 2. wto, ec-Asbestos, ab report cit., para. 80. ilc, Fragmentation of International Law: Difficulties Arising From the Diversification and Expansion of International Law. Report of the Study Group of the International Law Commission Finalized by Martti Koskenniemi, A/CN.4/L.682, 13 April 2006, (hereinafter ‘ilc, Fragmentation of International Law’), para. 75, quoting wto, Turkey – Restrictions on Imports of Textile and Clothing Products, WT/DS34/R, Panel report of 31 May 1999, para. 9.92. wto, ec-Seals, Panel report cit., para. 7.63. Ibid., para. 7.64. Ibid., para. 7.66.

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Such a conclusion should be read in light of the lex specialis principle, a rule of customary international law, existing independently alongside art. 30 of the Vienna Convention, which does not expressly provide for it.93 According to the International Law Commission (ilc), the lex specialis criterion has two applications: first, in case of legal conflicts the particular rule “may be considered as a modification, overruling or a setting aside of” the general one;94 second, the “particular rule may be considered an application of a general standard in a given circumstance.”95 The latter case arises when a legal conflict does not occur and leads to “the simultaneous application of the special and the general standard.”96 As regards wto law, the ilc expressly acknowledges: While there appears to be a strong emphasis on interpreting wto obligations so that there would be no conflict between them, the lex specialis principle is assumed to apply if ‘harmonious interpretation’ turns out to be impossible, that is, to overrule a general standard by a conflicting special one.97 Considering the tbt as lex specialis in relation to the gatt, because of its “specialized legal regime that applies solely to a limited class of measures,” and their non-conflictual relationship, panels follow a two-step legal analysis: they apply the gatt provisions in a residual way to the tbt, after having assessed the measures’ compliance with the latter.98 This leads the author to highlight that, even where measures are consistent with tbt, they are nevertheless tested against the gatt.99 As for their mutual interpretation, the Panel in ec-Seals considered that “Article iii:4 of the gatt 1994 provides relevant context for the interpretation of the national treatment obligation of Article 2.1 of the tbt Agreement.”100 However, it is worth noting that “the scope and content of [arts. 2.1 gatt and 93

M.E. Villiger, Commentary on the 1969 Vienna Convention on the Law of Treaties (Martinus Nijhoff Publishers, 2009) 409; J. Klabbers, “Beyond the Vienna Convention: Conflicting Treaty Provisions,” E. Cannizzaro (ed.), The Law of Treaties Beyond the Vienna Convention (Oxford University Press, 2011) 196 ff. 94 ilc, Fragmentation of International Law, para. 88. 95 Ibid. 96 Ibid. 97 Ibid. On this topic see also: A. Gourgourinis, “Lex Specialis in wto and Investment Protection Law,” German Yearbook of International Law, 2011, 579, p. 593 ff. 98 On this point see Marceau, “The New tbt Jurisprudence in us-Clove Cigarettes,” op. cit., 34. 99 Ibid. 100 wto, ec-Seals, Panel report cit., para. 7.584.

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i:1 and iii:4 tbt] is not the same”101 and under the gatt “the objective of trade liberalization – including the obligation to respect the non-­discrimination obligations under Articles i:1 and iii:4 – is balanced against the right of Members to regulate under Article xx of the gatt 1994.”102 Thus, “the additional element (i.e. legitimate regulatory distinction) […] reflects […] the absence in the tbt Agreement of a general exceptions clause equivalent to Article xx in the gatt 1994.”103 Thus, by adding an exception concerning limited legitimate regulations, panels have interpreted art. 2.1 tbt in conformity with the contextual interpretative approach established under art. 31.2 of the Vienna Convention on the Law of Treaties, i.e. in the context of the other provisions of the tbt and of the gatt.104 More specifically, they have used cross-referencing as a means for contextualizing tbt, in order to synchronize the meaning of its provisions with those of the gatt. This leads to a sort of “‘horizontal cross-fertilization [of jurisprudence],’ that is, a treaty provision is interpreted taking account of other provisions in […] other covered agreements, as previously interpreted by panels and the Appellate Body.”105 In light of these premises, the critique that the tbt ought to be applied following the same legal structure as the gatt is well-founded: considering that the tbt furthers the objectives of the gatt and that the interpretation of the gatt is to conform to the tbt’s, to the point of integrating the gatt’s general exceptions within the tbt’s framework, it would be logical that panels, when interpreting the tbt, followed the same legal sequence as when they apply the gatt and interpret the former’s legal provisions through an holistic interpretative approach, taking into account their context – including the gatt – albeit recognizing the differences between the two agreements’ object, scope and purpose. 4

Concluding Remarks

In light of the above, some conclusions can be drawn concerning domestic policy space under the tbt. Three main points will be stressed. 101 102 103 104 105

wto, us-Tuna ii, ab report cit., para. 405. wto, ec-Seals, ab report cit., para. 5.77. wto, ec-Seals, Panel report cit., para. 7.585. In conformity with tbt, preamble, recital no. 2. I. Van Damme, “Treaty Interpretation by the wto Appellate Body,” European Journal of International Law, 2010, 605, 628. See G. Marceau, “Balance and Coherence of the wto Appellate Body: Who Could Do Better?”, G. Sacerdoti, A. Yanovich, J. Bohanes (eds.), The wto at Ten. The Contribution of the Dispute Settlement System (Cambridge University Press, 2006) 326, 334.

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First, given the discretionary power left to wto Members under art. 2.2, animal welfare can certainly be considered an essential interest for the protection of which the adoption of regulatory measures is allowed. Second, wto Members’ domestic sovereign powers in protecting animal welfare are not unlimited: rather, they are strictly conditioned upon respect for several requirements, listed in arts. 2.1 and 2.2 tbt. Among them, regulatory measures must be calibrated, even-handed, necessary, contribute to the fulfillment of the objective pursued, and only provide for distinctions deemed legitimate. While necessity and the contribution to the objective are interpreted with flexibility by wto panels, the test for determining whether measures are even-handed under art. 2.1 tbt is still very restrictive. This is also due to the relationship between the gatt and the tbt and to their mutual interpretation and coordination. This last factor is at the core of the third point the author would like to stress. On the one hand, the wto panels, instead of considering tbt to supersede the gatt on the basis of the lex specialis criterion, apply the two agreements cumulatively: preliminarily assuming that gatt’s provisions are not equivalent to the tbt’s and that the scope and content of their provisions is not the same, panels apply the gatt after having assessed the measures’ compliance with the tbt. Therefore, even if the measures are consistent with the tbt, nonetheless they are tested against the gatt. On the other hand, when interpreting the two agreements, panels follow an holistic approach, meaning that they interpret the tbt in the context of the gatt. In so doing, they develop a coherent interpretation of the two agreements. Such an approach has led to the integration within the tbt of general exceptions that reproduce art. xx gatt. However, on the basis of the same interpretative approach, such exceptions and the consequent wto Members’ domestic policy space to protect animals is not unconditioned and their sovereign prerogatives to fight natural resources grabbing restricted.

chapter 16

Water Resources’ Exploitation and Trade Flows: The Impact of International Trade Law* Julinda Beqiraj 1 Introduction Freshwater resources constitute only 2,5% of the amount of water available for use; 31% of the available freshwater resources is stored in lakes and rivers (0,3%) and in the form of groundwater and other surface freshwater (30,8%) while the largest part (68,9%) is locked in glaciers and ice caps.1 Water use for different purposes – such as drinkable water, industry, irrigation in agriculture, energy, sanitation etc. – has substantially outpaced the rate of population increase in the last century.2 Consequently, freshwater scarcity3 already affects almost every continent and more than 40% of the people worldwide.4 It is estimated that by 2025, 1800 million people will be living in countries or regions with absolute water scarcity, and two-thirds of the population could be living under water stress conditions.5 Against this background, international law addresses the problem of water scarcity and thus the need to guarantee a ‘fair and sustainable use’ of freshwater resources basically under two main (at times conflicting) perspectives: water as a natural resource owned by sovereign States, and water as an individual or * This contribution was conceived in the framework of a research project on “virtual water” conducted at the University of Trento and financed by the Italian Ministry of Education in 2012. 1 Water Facts and Trends, at: www.unwater.org/downloads/Water_facts_and_trends.pdf; see also http://www.unwater.org/water-cooperation-2013/get-involved/campaign-materials/water -factsheets/en/. 2 un-Water Factsheet on Water Scarcity, http://www.unwater.org/water-cooperation-2013/ get-involved/campaign-materials/water-factsheets/en/. 3 Scarcity is defined as an excess of demand over available supply. See fao, Coping with Water Scarcity: An Action Framework for Agriculture and Food Security, fao Water Reports No. 38, Rome, 2012, 5–6. 4 Data available at http://www.un.org/waterforlifedecade/scarcity.shtml. 5 United Nations World Water Development Report 4 (wwdr 4), Managing Water under Uncertainty and Risk, Vol. 2, unesco, 2012, 541.

© koninklijke brill nv, leiden, ���6 | doi 10.1163/9789004305663_018

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collective human right.6 Under the first perspective, water resources belong to States who have, in principle, full property rights (permanent sovereign rights) over their exploitation and control. In particular, from an international trade law viewpoint, States enjoy broad autonomy and discretion in placing into the market their natural resources and thereby in subjecting them to trade rules. Under the second perspective, water scarcity concerns have shed light on the need to guarantee access to water for everyone. This approach hinges upon a different but related problem, namely, that of access to water supplies addressed from a humanitarian and human rights perspective.7 This chapter analyzes and discusses the possible impact of international trade rules on the exploitation, use and access to water resources. It acknowledges that the provisions of the different agreements operating under the Agreement establishing the World Trade Organization (wto Agreement) were developed with a particular focus on the promotion of market access, and explores the extent to which, under today’s circumstances, existing international trade rules leave room for States to address also issues of access to supplies. In other words, it aims to examine the wto discipline applicable to water trade in light of the increasing importance placed on the need to guarantee access to water supplies in a global context. Given that the international trade of water (in particular drinking water) is scarcely relevant from a quantitative point of view,8 the chapter will address the problem with regard to both ‘natural’ and ‘virtual water trade.’9 The latter concept refers to water embedded in the production of agricultural commodities and other water-intensive products,10 and suggests that the lion’s share of water transfers between water-abundant and water-scarce countries takes place in the form of trade in water-intensive goods. 6 7

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At the global level the collective dimension is also addressed under international environmental law. Access to safe drinking water has been also included among the targets of the Millennium Development Goals (mdgs), in particular Goal 7 ‘Ensure environmental sustainability.’ See also: Open Working Group on Sustainable Development Goals Outcome Document, at: http://sustainabledevelopment.un.org/focussdgs.html. A.Y. Hoekstra, The Relation Between International Trade and Freshwater Scarcity, wto Working Paper, January 2010, 6. The term ‘virtual water trade’ was coined by Tony Allan in 1993, as a synonym of ‘embedded water’ until then employed. Tony Allan, “Virtual Water – the Water, Food, and Trade Nexus Useful Concept or Misleading Metaphor?” International Water Resource Association, Water International, 2003, 4 at: https://www.soas.ac.uk/water/publications/papers/file38394.pdf. The concept was originally conceived in relation to agricultural products, although Allan did not exclude that it could be extended to non-agricultural commodities. Ibid., p. 5.

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An important related concept is that of ‘water footprint,’ which indicates, the volume of water used to produce goods (volumes that are consumed, evaporated, and polluted).11 Accordingly, the water footprint differs among products and sectors.12 Agriculture accounts for 70% of total water use, while the remaining amount is employed in industry, including for the production of energy (20%), and for drinking, sanitation and other municipality use (10%).13 As regards specific products, it is estimated that meat products register the highest water footprint, ranging from 4325 liters/kg for chicken meat to 15415 liters/kg for bovine meat.14 Cereals require on average 1644 liters of water/kg, oil crops 2364 liters/kg, pulses 4055 liters/kg, cotton 10000 liters/kg. Some of these products (in particular cereal grains, oils and cotton) are among the most traded products between 1986 and 2010 and more recently there has been an important increase in trade of bovine meat.15 It is reported that about one-fifth of the global water footprint involves production for export.16 Accordingly, given that water resources are distributed unevenly across the globe, the virtual water concept suggests that States indirectly trade water while importing and exporting water intensive products. Also, considering that agriculture is the most water-intensive sector, and that the most water-intensive products (cereals and meat) are also amid those highly traded internationally, this chapter analyzes whether and how wto law

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A.Y. Hoekstra, P.Q. Hung, Virtual Water Trade: A Quantification of Virtual Water Flows Between Nations in Relation to International Crop Trade, unesco-ihe, Value of Water Research Series No. 11, 2002. It also differs among countries for the same product. Hoekstra, Hung, Quantification of Virtual Water cit. See also wto, Trade in Natural Resources, World Trade Report, 2010, Box 4, 74. fao, Coping with Water Scarcity cit., 66. M.M. Mekonnen, A.Y. Hoekstra, The Green, Blue and Grey Water Footprint of Crops and Derived Crop Products, unesco-ihe, Value of Water Research Report Series No. 47, 2010; M.M. Mekonnen, A.Y. Hoekstra, The Green, Blue and Grey Water Footprint of Farm Animals and Animal Products, unesco-ihe, Value of Water Research Report Series No. 48, 2010; A.Y. Hoekstra, “The hidden water resource use behind meat and dairy,” Animal Frontiers, 2012, 3–8. The substantial difference can be explained by the fact that 98% of the total volume of water refers to the water footprint of animal feed, calculated during the animal’s average lifetime. J.A. Carr, P. D’Odorico, F. Laio, L. Ridolfi, “Recent History and Geography of Virtual Water Trade,” Public Library of Science one, 2013, 8(2): Table  2, at: doi doi: 10.1371/journal .pone.0055825. A.Y. Hoekstra, M.M. Mekonnen, The water footprint of humanity, Proceedings of the National Academy of Sciences, 2012, 109 (9).

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affects water transfers between States and what is the impact of such rules on access to water and food across the globe. The chapter is organized as follows. Section 2 briefly defines the scope of the relevant wto provisions that may have implications for water transfers between States. Sections  3 and 4 assess and discuss the wto legitimacy of trade restrictions based on water scarcity concerns – in particular under the gatt and the AoA. Section 5 reflects on the relationship between trade liberalization and food security, on the proposals for reform and on the concerns raised by different groups of States in the current Doha negotiations. 2

The Relevance of Water under International Trade Law: Goods, Products and Natural Resources

wto rules concern the trade of goods and services and related aspects thereof – investment, intellectual property, or technical, sanitary and health standards. Leaving aside issues related to the international provision of waterrelated services, which are not addressed in this chapter,17 the relevant legal framework mainly comprises the agreements listed in Annex ia to the wto Agreement. These include the gatt’47 with the amendments incorporated in 1994, the Agreement on Agriculture (AoA), the Agreement on Subsidies and Countervailing Measures (scm) as well as other multilateral agreements on trade in goods.18 These agreements employ different terms, such as ‘goods,’ ‘products’ and ‘resources,’ but they rarely provide a definition thereof; however belonging to one category rather than the other impacts upon the applicability of trade rules. Accordingly, a preliminary issue is whether any distinctions can be drawn between these terms. gatt fundamental principles refer to ‘goods’ or ‘products,’ meaning tradable and ‘tangible’ items (different from services) that are subject to import and export. Instead, art. xx of the gatt establishes that protection of ‘natural resources’ may justify, upon certain conditions, measures contrary to the general principles of the gatt. In principle, this also means that to the extent that 17

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Such rules mainly affect the regulatory power of states in relation to the management and operation of water services, However, distinguishing between production of goods and services related to production is not is not always easy. M. Cossy, “Water Services and the wto,” E. Brown Weiss, L. Boisson de Chazournes, N. Bernasconi-Osterwalder (eds), Fresh Water and International Economic Law (Oxford University Press, 2005), 117. The Technical Barriers to Trade (tbt) Agreement; the Agreement on the Application of Sanitary and Phytosanitary Measures (sps).

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natural resources are not tradable or traded they are not subject to trade rules. However, while it may be clear that water contained in bottles or tanks is a tradable product, the distinction between extracted resources that are tradable goods and resources in their natural status which, in principle, are not covered by trade rules is not always straightforward. 2.1 Water as a Tradable Good? The issue has been raised in relation to investments in the context of the North American Free Trade Agreement (nafta). A first case concerned the restrictive legislation on bulk water transfers through marine transport system passed by the province of British Columbia (Canada) as an environmental measure in response to the prospected transfer of huge amounts of water from Canada to the us.19 Sun Belt, a us corporation filed a nafta claim for damages resulting from lost profits and lost access to water resources. The claim has not yet proceeded to arbitration, but one of the preliminary issues was whether water in its natural state, contained in rivers, lakes or mountains, came under the scope of international trade rules. To clarify the issue, a joint statement was released by the governments of the three nafta signatories, shortly before its entry into force. It declares that “[t]he nafta creates no rights to the natural water resources of the parties to the Agreement” and that “[u]nless water, in any form, has entered into commerce and become a good or product, it is not covered by the provisions of any trade agreement including the nafta.”20 Despite this, water use restrictions on the part of nafta signatories continue to be problematic.21 Commentators have put into question both the legal status of the statement and its core postulation that natural water is not a good or product.22 However, the main 19

uncitral, Sun Belt Water Inc. v. Her Majesty the Queen, Notice of Intent to Submit a Claim to Arbitration Under Chapter 11 of the nafta, 27 November 1998. See P. Stanton Kiebel, “Grasp on Water: A Natural Resource that Eludes nafta’s Notion of Investment,” Ecology Law Quarterly, 2007, 655ff. 20 Government of Canada, Office of the Prime Minister, Prime Minister Announces nafta Improvements; Canada to Proceed with Agreement, Press Release, 2 December 1993. 21 Another case was filed by the AbitibiBowater Inc. concerning proprietary claims by foreign investors over water permits including over water in its natural state. Documents available at: http://www.international.gc.ca/trade-agreements-accords-commerciaux/ topics-domaines/disp-diff/gov.aspx?lang=eng. 22 S. Shrybman, “A Legal Opinion Concerning Water Export Controls and Canadian Obligations under nafta and the wto,” West Coast Environmental Law, 15 September 1999, 7, at: http://wcel.org/resources/publication/legal-opinion-concerning-water-export -controls-and-canadian-obligations-under-. The argument that water is a ‘good’ or ‘product’

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challenge is to define criteria for establishing whether water – although not yet physically extracted from its natural environment (e.g. a lake or a river) – can nevertheless be the object of economic rights and therefore fall within the scope of trade and investment rules. In a nafta case filed against Mexico a group of Texas farmers claimed ownership over water quantities for irrigation that were diverted by Mexico through dams and reservoirs.23 Through such measures, Mexico had allegedly violated the 1944 Waters Treaty, which allocated to the us one-third of the Rio Grande tributaries located in Mexico. In particular, the farmers maintained that since the diverted water is stored in reservoirs, sold on the water market and delivered through irrigation infrastructure it clearly constitutes a tradable good or product.24 wto case law too delivers a blurred picture on the issue of distinguishing between resources in their natural status and tradable extracted resources. In us-Softwood Lumber iv,25 both the Panel and the ab reached the conclusion that trees in their natural status come under the scope of application of the scm Agreement. The case originated from the long-lasting dispute between Canada and the us on the trade in softwood lumber and concerned the wto legitimacy of countervailing duties imposed by the us on allegedly subsidized lumber from Canada. The Panel had to determine whether, by imposing too low charges for harvesting standing timber on government land, Canada had subsidized the enterprises that benefited from licenses and tenure agreements (stumpage agreements).26 However, a preliminary issue was whether standing trees (that were the object of these agreements) could be considered a ‘good,’ and thereby be comprised in the definition of ‘subsidy’ under the scm Agreement. Canada argued that the object of stumpage agreements was the right “to exploit in situ a natural resource”27 and therefore the government did not provide any ‘good’ under the definition of subsidy; the Panel however concluded that, in substance, providing the “right to harvest timber” is not different from is based on Chapter 22.01 of the Harmonized Commodity Description and Systems Code (hs Code), which assigns water a specific tariff heading. 23 Bayview Irrigation Dist., et al v. United Mexican States, Notice of Intent to Submit a Claim to Arbitration Under Section B, Chapter 11 of nafta, 24 August 2004. 24 Kiebel, Grasp on Water op.cit., 669. 25 wto, United States – Final Countervailing Duty Determination with respect to certain Softwood Lumber from Canada (us-Softwood Lumber iv), WT/DS257. 26 wto, us – Softwood Lumber iv, Panel report of 29 August 2003, WT/DS257/R. On stumpage agreements see para. 4.7. 27 Ibid., para. 4.14.

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providing “standing timber.” Canada also argued that ‘standing trees’ (i.e. trees before they are harvested) are an “in situ natural resource that is not capable of being traded across borders”28 but the Panel rejected such restrictive interpretation of ‘goods.’29 The ab further clarified that Canada’s narrow interpretation of the term ‘goods’ as tradable items capable of tariff classification would “undermine the object and purpose of the scm Agreement” and “would permit the circumvention of subsidy disciplines.”30 It upheld the conclusion of the Panel “that standing timber – trees – are ‘goods’ within the meaning of Article 1.1(a)(1)(iii) of the scm Agreement.” The implications of this case for water trade are important, yet circumscribed. The important corollary is that resources in their natural state cannot be excluded ex ante from the scope of application of wto rules: specific provisions (in particular those concerning domestic policies) may become relevant as it is the case with the definition of subsidies. However, as the ab underlined, this conclusion cannot be extended to the whole scm Agreement; analysis must be carried out on specific provisions of the wto Agreement(s) in question as well as on the basis of the concrete way in which the restrictive measure is enforced.31 It should also be recalled that while the decisions taken by wto judicial organs have no strict precedential value, the ab often supposes that its reasoning should be followed by the panels.32 2.2 Some General Considerations on the Existing wto Rules In the post wwii context in which the multilateral international trade rules were first conceived and applied, the main objective of the Contracting Parties was to offset the protectionist trend that had characterized their trade policies after the 1929 economic crisis and the war “by entering into reciprocal and mutually advantageous arrangements directed to the substantial reduction of tariffs and other barriers to trade and (to) the elimination of discriminatory treatment in international commerce.”33 In the years that followed the adoption of gatt ’47, the main concern was to reduce and remove market entry barriers. This was addressed in the course of the eight Rounds of negotiations 28 Ibid. 29 Ibid., para. 7.20, 7.27, 7.28. 30 wto, us – Softwood Lumber iv, ab report of 19 January 2004, WT/DS257/AB/R, para. 64. 31 Ibid., para. 62, 63. 32 V. Hughes, G. Marceau, wto and Trade in Natural Resources, L. Boisson de Chazournes, C. Leb, M. Tignino (eds), International Law and Freshwater: The Multiple Challenges (Elgar, 2013), 277. 33 gatt 1947, Preamble.

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that took place from 1947 to 1994 through commitments concerning the progressive reduction of import tariffs, the regulation of subsidies and dumping, and the elimination of non-tariff barriers. Even if clearly covered by the wto agreements, exports have not been subject to detailed bindings in the Members’ Schedules of commitments as it is instead the case with imports. The focus on restrictive import policies emerges also from an overall assessment of the gatt/wto case law: the overwhelming majority of disputes address measures that restrict imports of foreign goods and very few cases deal with export restrictions. In the last decade, however, global demand for natural resources and resource-based products and the general acknowledgement of their exhaustibility (water provides a good example) has shifted partly the debate on the concerns raised by importing countries as a result of the restrictive policies adopted by a number of resource-rich exporting countries. These concerns were already put on the table throughout the Uruguay Round of negotiations but faced the strong opposition of developing countries who retained that access to natural resources should remain outside the scope of the gatt.34 Although the Marrakech Agreement did not add any specific obligations on natural resources, the Agreements currently in force have some (though limited) potential for addressing export restrictions. For the time being, wto Members have tried to address these issues by means of interpretation of existing obligations in the context of the Dispute Settlement mechanism, along with discussions in the ongoing Doha Round. wto Members have additionally dealt with such issues in the context of new accessions, whereby new Members agree to additional commitments (wto Plus) on export taxes.35 So what are the implications of the wto regime on water trade? As earlier discussed, to the extent that water is a tradable commodity – for instance, when contained in bottles, jugs, tanker trucks etc., including the scenarios prospected in the Softwood Lumber dispute (and by analogy in the nafta cases) – wto law will apply. A more complete picture of how international trade law affects water transfers between States can be obtained by ­taking into account both natural and virtual water trade. Water for drinking 34 35

Hughes, Marceau, Trade in Natural Resources op.cit., 269. Mongolia, Latvia, Croatia, China, Saudi Arabia, Vietnam, Ukraine, Montenegro and Russia: see J. Ya Qin, “Reforming wto Discipline on Export Duties: Sovereignty over Natural Resources, Economic Development and Environmental Protection,” Journal of World Trade, 2012, 1147–1190, 1154; B. Karapinar, “China’s Export Restriction Policies: Complying With ‘wto Plus’ or Undermining Multilateralism,” World Trade Review, 2011, 136.

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purposes as well as almost all the products with the highest water footprint mentioned in the first part of this chapter fall under the scope of the definition of ‘agricultural products’ provided in AoA art. 2 and Annex 1.36 The AoA thus provides the principal legal framework governing water transfers, including virtual water trade. However, the AoA is a rather concise Agreement and its rules were conceived as part of an ongoing process. Therefore, other agreements operating under the wto umbrella may assist in grasping a full picture of the legal regime that governs water trade. The gatt, for instance, provides the general legal framework concerning trade in goods and it applies also to ‘primary products,’ defined as: “any product of farm, forest or fishery or any mineral in its natural form or which has undergone such processing as is customarily required to prepare it for marketing in substantial volume in international trade” (Ad Note to Article xvi gatt). Further, the scm Agreement contains certain provisions on subsidies that refer to the AoA or to agricultural products. 3

Water Trade and the gatt

As just mentioned, the gatt provides the general normative framework in relation to ‘primary products.’ It forbids the introduction or conservation of “prohibitions or restrictions other than duties, taxes or other charges whether made effective through quotas, import or export licences or other measures” on the importation or exportation of any product (art. xi). Accordingly, import and export restrictions in the form of quotas or licenses are generally prohibited, while custom duties (i.e. tariffs at the border), the only tolerable form of protection, cannot be higher than the amount specified by each State in its tariff Schedule (bindings) and should be progressively reduced (art. ii).37 Two 36

37

Agricultural products are defined in Annex 1 of the AoA by reference to the Harmonized System (hs) of product classification and cover all products within Chapters 1 to 24 of the hs, with the exception of fish and fish products, as well as some additional specific products. hs Chapter 22 dedicated to beverages includes natural water. A similar provision operates with regard to market-access commitments in relation to agricultural products. Schedules of commitment of each wto Member referred to in gatt art. ii set out in detail mfn concessions and the tariff ceilings applicable on agricultural products, tariff quotas on agricultural products and tariffs applied to other products; preferential tariffs applied on the basis of previous trade arrangement; concessions on non-tariff measures; and specific commitments on domestic support and export subsidies on agricultural products.

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other core gatt principles ensure that all trade partners and products benefit from the same trade conditions. The Most Favoured Nation (mfn) clause guarantees non-discrimination between trading partners: “any advantage, favour, privilege or immunity” granted by a Member to a product originating in or destined for another country “shall be accorded immediately and unconditionally” to the like products of all other Members (art. i). The National Treatment (nt) clause guarantees non-discrimination between national and foreign products: products from other Members must not be treated, in respect of internal taxes and regulations, directly or indirectly, in a less favourable manner compared to domestically produced goods (art. iii). It should also be noted that the non-discrimination principle (mfn and nt) applies with regard to ‘like products,’ thus in the absence of such condition the products in question may legitimately be accorded different treatment. wto jurisprudence generally relies on external product characteristics to determine likeness, while methods of production are irrelevant.38 However, these general principles are often qualified by a series of derogations and exceptions that make the identification of the applicable discipline rather complex. 3.1 Export Restrictions Given the scarcity of water resources it is likely that water trade (both real and virtual) will increasingly face export restrictions. Indeed, as a response to the food crisis of 2007–2008 numerous States imposed quantitative export controls on agricultural products, mainly on crops and rice.39 To what extent are these restrictive measures compatible with wto obligations? 3.1.1 Quotas Between 2007 and 2012 prohibition of exports and quotas on targeted agricultural products were the preferred measures adopted by the main exporting countries.40 As earlier explained, art. xi excludes export ‘quotas and restrictions,’ therefore the prohibition covers not only quantitative limitations 38

39

40

wto, ec – Asbestos, ab report of 21 March 2001, WT/DS135/AB/R paras. 98–99; us – Poultry (China), Panel report of 29 September 2010, WT/DS392/R, paras. 7.424–427.427, 7.429. Argentina, India, Viet Nam, Cambodia, China, Liberia, Egypt, Pakistan, Bangladesh, Zambia among others. fao, Crop Prospects and Food Situation, April 2008, 16–17; World Trade Report cit., 147. P. Liapis, How Export Restrictive Measures Affect Trade of Agricultural Commodities, oecd Food, Agriculture and Fisheries Papers, No. 63, oecd Publishing 2013.

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detailed through numerical parameters but also other government measures that have actually or potentially a “limiting effect” on exports.41 Thus, the measure adopted by British Columbia (commented above) on the ban of water exportation through marine transport system – which allowed water export in bottles, tanker trucks and by pipeline – would be inconsistent with wto commitments. However, two qualifications should be made. The first is that literally interpreted the prohibition in art. xi does not seem to cover production limitations as such.42 Accordingly, fixing the maximum amount of water that can be withdrawn yearly from a lake or river would, in principle, be compatible with gatt rules – provided that the regulation is applied indiscriminately to domestic users and exporters. Production quotas and export quotas are equivalent from an economic point of view but only the second are relevant under wto law.43 The second specification is that art. xi(2)(a) provides an exception to the general prohibition of non-tariff measures and permits temporary export bans or restrictions “to prevent or relieve critical shortages of foodstuffs or other products essential to the exporting contracting party.” These measures include action undertaken before the ‘crisis’ actually occurs and may (also) be employed in the case of domestic price escalation associated with product shortages,44 but the burden of proof as to whether the conditions of art. xi:2(a) are met is on the respondent State.45 Water may well be considered as a product ‘essential’ to an exporting State or as a foodstuff and thus be covered by this exception.46

41

On import restrictions see wto, India – Quantitative Restrictions, Panel Report of 6 April 1999, WT/DS90/R, para. 5.129. Export licenses are not per se inconsistent with wto law but only if discretionary or non-automatic: see wto, Japan -Trade in Semiconductors, Panel report of 4 May 1988, 35S/116, para. 118. A minimum export price requirement also amounts to a quantitative restriction prohibited under art. xi: China – Raw Materials, Panel report of 5 July 2011, WT/DS394/R, paras. 7.1081–1087.1082. 42 World Trade Report op.cit., 166. 43 Ibid., p. 147. 44 Liapis, Trade of Agricultural Commodities op.cit., 42. 45 wto, China – Raw Materials, Panel report cit., para. 7213. 46 The Panel in China – Raw Materials established that “a product may be ‘essential’ within the meaning of Article xi:2(a) when it is ‘important’ or ‘necessary’ or ‘indispensable’ to a particular Member. Such determination must take into consideration the particular circumstances faced by that Member at the time the restriction was applied.” The AB further clarified that art. xi:2(a) does not limit the scope of essential products to only foodstuffs (para. 326).

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3.1.2 Export Taxes or Duties gatt art. xi implies that “duties, taxes or other charges” are the only legitimate trade restrictions a Member may employ; these must be applied in a non-­ discriminatory manner – i.e. compatibly with arts. i and iii. Export taxes or duties are used by exporters of natural resources to a greater extent, almost twice the amount of export taxes in world trade as a whole.47 Their effect is to reduce the domestic price of the resource and to transfer revenues to the government (tax revenues), to domestic users and to downstream producers (through lower prices).48 From an international trade perspective it also attracts rents that could otherwise be captured by the importing country, via import tariffs.49 It has been noted that from an economic viewpoint a resource export tax produces the same effects as a subsidy on domestic consumption or to downstream producers who benefit from the lower prices.50 However, from a legal point of view, export taxes are not prohibited under the wto regime, while subsidies are subject to the scm Agreement and other wto provisions. The issue was indirectly raised in the us – Export Restraints dispute in which Canada challenged the us approach of considering export restraints as subsidies for the purpose of applying countervailing duties. The Panel found the us approach of treating export restraints as financial contributions to be inconsistent with the scm Agreement: it however underlined that its findings related to the specific facts of the case.51 Likewise, in China – Raw Materials the Panel highlighted the comparable economic effects of export restrictions and subsidies to the downstream sector, but it also explained in a footnote that the applicability of the scm Agreement was not at issue.52 3.2 Import Country Measures Water transfers between States can also be affected by trade measures adopted by import countries. Importing Members may be interested not only in importing water as such, but, given the scarcity of the resource, in promoting its sustainable use beyond borders. Import tariffs can be employed to deal with such concerns. Principally, import tariffs create revenues for the government of the importing country, but they also reduce the amount available to domestic 47 48 49 50 51 52

M. Ruta, A.J. Venables, International Trade in Natural Resources: Practice and Policy, wto Staff Working Paper ersd-2012-07, 2012, 13. Ibid., 12, 15. World Trade Report op.cit., 147. P. Collier, A.J. Venables, International Rules for Trade in Natural Resources, wto Staff Working Paper ersd-2010-06, 2010, 3. wto, us – Export restraints, Panel report of 29 June 2001, WT/DS194/R, para. 8.19, 8.75, 8.76. wto, China – Raw Materials, Panel report cit., para. 7.430, fn. 674.

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users compared to a no-tariff scenario. Therefore, apart from ‘revenue shifting’ purposes, import tariffs may also be applied with the purpose of mitigating the over-exploitation of the resource, by reducing its demand.53 As earlier clarified, import tariffs are wto consistent but they should be applied without discrimination between trading partners (mfn principle). Equally, in light of wto jurisprudence, it is very difficult to defend differential treatment by arguing that the two products are not ‘like’ products: production methods considerations do not seem to be relevant for the purpose of determining ‘likeness.’54 Import tariffs would thus hardly be appropriate, as they have to be neutral measures that affect ‘efficient’ and ‘inefficient’ Members equally. Instead, adoption of eco-schemes that inform consumers about the environmental impact of a product or impose requirements that the product must fulfil constitute a more targeted solution and present lower risks of inconsistency with wto rules. The tbt Agreement is the relevant wto Agreement in this latter regard. It allows States to adopt mandatory technical regulations and voluntary product standards, including in the form of labeling requirements, in order “to fulfill a legitimate objective,” such as, “protection of human health or safety, animal or plant life or health, or the environment.”55 First, labels associated to product related processes and production methods (ppms) that are not manifest in the final product seem to be covered by the tbt Agreement.56 Secondly, wto jurisprudence has clarified that by reason of its specificity the tbt Agreement should take precedence over the gatt in the order of application, even though the applicability of one or the other cannot be excluded a priori.57 This is relevant because the approach of the two agreements is quite different. The gatt aims to guarantee free trade but exceptionally allows Members to act inconsistently in order to address some legitimate concerns. The tbt Agreement, instead, sets out the requirements that legitimate technical regulations and standards must fulfill; it thus assumes their legality in principle, provided that they are applied indiscriminately and do not create an unnecessary obstacle to international trade.58 53 54 55 56

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World Trade Report op.cit., 137. However, consumer tastes and habits are one of the elements for determining ‘likeness’: wto, ec – Asbestos, Appellate Body report of 12 March 2001, WT/DS135/AB/R, paras. 98–99. tbt Agreement, art. 2.2. The definition of both ‘technical regulation’ and ‘standard’ in Annex i to the tbt agreement includes documents laying down “processes and production methods,” although in the case of voluntary standards the use of this type of labels seems less risky. C. Conrad, Processes and Production Methods (ppms) in wto Law: Interfacing Trade and Social Goals (Cambridge: Cambridge University Press, 2011), 387. wto, ec – Asbestos, Panel report of 18 September 2000, WT/DS135/R, 400. tbt, art. 2.

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3.3 The General Exceptions in gatt Article xx Another option is to address water scarcity concerns in the context of the general exceptions provisions contained in gatt art. xx. These validate otherwise inconsistent conduct enacted by wto Members in order to pursue specific non-trade interests, provided that such conduct is non-discriminatory and non-protectionist (art. xx chapeau requirements). From the perspective of this chapter, one of the possible relevant exceptions concerns measures “relating to the conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption” (gatt art. xx(g)). wto Members (both importing and exporting countries) claiming this defense must show that the measure is among those covered by art. xx(g); that it is applied consistently with the chapeau requirements; and must provide additional evidence that the measure was “primarily aimed at” the conservation of the resource.59 Additionally, paragraph (g) requires that the measure be applied “in conjunction with restrictions on domestic production or consumption” to guarantee the evenhandedness and genuineness of the restrictive measure adopted in the name of conservation.60 In this latter regard it may be questioned whether and to what extent wto Members can earmark water resources (or most part) for domestic use. In China- Raw Materials, the Panel acknowledged that the response must take into account the principle of sovereignty over natural resources, the developmental needs of different groups of countries as well as the principle of sustainable development.61 The Panel Report seems to infer that some flexibility may be allowed on the basis of these three concerns, and this suggestion is also confirmed by the more specific exceptions in art. xx (i) and (j). Paragraph (i) allows: restrictions on exports of domestic materials necessary to ensure essential quantities of such materials to a domestic processing industry during periods when the domestic price of such materials is held below the world price as part of a governmental stabilization plan; Provided that such restrictions shall not operate to increase the exports of or the 59

60 61

wto, us – Gasoline, Panel report of 29 January 1996, WT/DS2/R para. 6.40; and ab report of_29 April 1996, WT/DS2/AB/R, 16. The same interpretation was made in wto, us – Shripms, AB report of 12 October 1998, WT/DS58/R, para. 142–144; wto, China – Raw materials, Panel report cit., para. 7.370. wto, us – Gasoline, ab report cit., 20–21. wto, China – Raw materials, Panel report cit., para. 7381.

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­ rotection afforded to such domestic industry, and shall not depart from p the provisions of this Agreement relating to nondiscrimination. The provision covers situations where domestic exports can be restricted to assist the affected domestic industry – within specific governmental stabilization plans; however, to reduce risks of abuse the gatt Preparatory Committee in 1947 also added the second provision in paragraph (i).62 Later, in 1950, the Report of the Working Party on “The Use of Quantitative Restrictions for Protective and Other Commercial Purposes” concluded that while the gatt does not permit export restrictions in order to protect or promote a domestic industry, the question of the objective of any export restriction would have to be determined on the basis of the concrete terms in which it is applied.63 Accordingly, as regards the relationship between paragraphs (g) and (i), the Panel in China-Raw Materials affirmed that conservation purposes are legitimately considered in art. xx(g) but these cannot be interpreted so as to: allow a Member, with respect to raw materials, to do indirectly what paragraph (i) prohibits directly. In other words, wto Members cannot rely on Article xx(g) to excuse export restrictions adopted in aid of economic development if they operate to increase protection of the domestic industry.64 Art. xx(j) may also be relevant – even though it has never been raised in wto dispute settlement proceedings. It covers measures “essential to the acquisition or distribution of products in general or local short supply.” However, such measures must cease to apply once short supply concerns have been absorbed. While such measures are being applied, Members must guarantee that “all contracting parties are entitled to an equitable share of the international supply of such products.” The exception was originally adopted to address temporary situations of supply shortages in the post war context but it was later accepted as a permanent exception.65 The travaux préparatoires for the adoption of the gatt record that the phrase “general or local short supply” was interpreted flexibly to include cases where a product was not in short supply in all world markets.66 62 gatt analytical index cit., 592. 63 Ibid. 64 wto, China – Raw materials, Panel report cit., para. 7.386. 65 gatt analytical index cit., 594. 66 Ibid., 593.

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It is also worth noting that the concept of ‘equitable share’ has been read as different from ‘non-discrimination’; moreover, the ‘equitable share’ of the international supply of a given product will depend on the given set of circumstances.67 In principle, this exception allows States to adopt trade restrictive measures when a particular resource becomes temporarily scarce (e.g. food), however it is not clear how the flexibility accorded to wto Members through the expression ‘equitable share’ operates in relation to the non-discrimination chapeau requirements. Another blurred issue regards the relationship between different gatt provisions relevant in these regards. As concerns .... gatt arts. xi:2(a) and xx(j), both measures must be temporarily applied, both are exceptions to gatt general rules, and both address product shortages.68 However, the latter seems to have a broader scope of application: first, it applies to products in general and not only to foodstuffs or other essential products; secondly, it can be employed in cases of general or local shortages, and not only in relation to ‘critical shortages.’69 Accordingly, as discussed above, measures under Art xi:2(a) are subject to more stringent conditions than those falling under art. xx(j). As regards instead the relationship between gatt arts. xi:2(a) and xx(g) and (i) the Panel and ab reports in China – Raw Materials explain that these provisions play different functions and contain different obligations. The former relates to temporary measures addressing critical shortages, while the latter addresses mid- and long-term measures relating to the conservation of exhaustible natural resources or measures that are part of a government stabilization plan.70 By reason of such different reach the two measures might also operate simultaneously. Therefore, a wto Member could legitimately introduce export quotas (upon the conditions specified above) and simultaneously firm up the quotas or adopt other restrictive measures on a temporary basis if a ‘critical shortage’ occurs (e.g. a natural disaster or domestic price escalation associated with product shortages).71 The list of exceptions in art. xx covers not only measures concerning resource conservation as expression of the rights and duties stemming from State sovereignty but also measures aimed at addressing trade’s negative 67 68

Ibid., 594. In this latter regard the Panel in China – Raw Materials defines the noun ‘shortage’ in art. xi as “deficiency in quantity”: para. 7.295. It is analogous to ‘short supply’ in art. xx(j). 69 In China – Raw Materials, “In the Panel’s view, the term ‘critical’ indicates that a shortage must be of ‘decisive importance’ or ‘grave,’ or even rising to the level of a ‘crisis’ or catastrophe,” para. 7.296. 70 wto, China – Raw Materials, Appellate Body report cit., paras. 333–334, 337; Panel report, fn. 466. 71 wto, China – Raw materials, ab report op.cit.

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externalities on health or the environment. In this regard, art. xx(b) establishes that trade restrictive measures “necessary to protect human, animal or plant life or health” are consistent with the gatt. A Member may wish to preserve its freshwater assets not only to secure a sustainable use of such resource to downstream industries (e.g. agriculture, industry, sanitation) but also to protect human life and health by ensuring that its population has access to sufficient supplies of drinking water and food (water employed for irrigation in agriculture). However, the burden of proof under art. xx(b) is more onerous than under art. xx(g): the ‘necessity’ of the measure must be proved, i.e. it must be shown that it provides a material contribution, present or future, to the realization of the policy goal.72 4

The AoA Implications for Water Trade

The AoA was negotiated during the 1986–1994 Uruguay Round establishing the wto. Its main achievement was to provide a multilateral legal framework for a broadly unregulated sector. Although the gatt system had been operating and progressively extended during almost 40 years, agriculture was mostly excluded from the coverage of the core prohibitions on quantitative restrictions (art. xi) and export subsidies (art. xvi).73 However, rather than equating agricultural products to other products, the AoA places them under a special and more flexible regime. Accordingly, the AoA Preamble clarifies that the Members decided “to establish a basis for initiating a process of reform of trade in agriculture” and that “establishing a fair and market-oriented agricultural trading system” is the long term objective of such process. Following the Uruguay Round of negotiations wto Members agreed to convert nearly all non-tariff barriers into tariff equivalents under a process known as ‘tariffication’ (AoA art. 4.2.). Additionally, as regards market access, Members agreed to a system of schedules of commitments quantifying the bound tariffs, and to their progressive reduction (art. 4.1).74 The average amount of reductions and the time limit for their implementation varies between developed 72

73 74

wto jurisprudence has broadly dealt with the interpretation of the concept of ‘necessity’: Marceau, Hughes, Trade in Natural Resources cit., 290. On the interpretation of ‘relating to’ as ‘primarily aimed at’ see: wto, us – Gasoline, Panel report cit., para. 6.40; AB report cit., 16; us – Shripms, AB report cit., para. 142–144; China – Raw materials, Panel report cit., para. 7.370. A.F. Lowenfeld, International Economic Law (Oxford University Press, 2nd ed., 2008) 318. Supra note 37.

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Members (36% over six years, until 2000), developing Members (24% over ten years, until 2004) and least developed Members (these were required to bind their tariffs but not to undertake any reduction commitments). Another flexibility element of the AoA is that Members may apply different tariffs for different specified quantities of products: the so-called system of ‘tariff-quotas’; i.e. lower tariff rates for specified quantities and higher rates for quantities that exceed the quota can be applied.75 Additionally, the AoA subjects agricultural products to a less stringent subsidies’ regime, compared to non-agricultural products.76 Support of rural economies by governments is allowed, but preferably through less trade-distortive policies (AoA art. 3).77 The AoA further distinguishes between general domestic support to agriculture (art. 6), which becomes relevant only when trade distortive effects actually or potentially occur, and export subsidies (art. 9) which are contingent upon export performance and should have been phased out initially by 2013, with a final phase out period of two years that shall end no later than 31 December 2015.78 Considering that the progressive elimination of subsidies and domestic support is expected to increase the price of agricultural products, a special Ministerial decision annexed to the AoA takes into consideration the situation of the least-developed countries and those depending on food imports, and addresses their concerns relating to food aid and aid for agricultural development.79 75

The new tariffs and tariff quotas concerning agricultural products took effect in 1995. However during the transformation process Members set very high their maximum bindings while applying lower tariff levels: this strongly reduced the concrete impact of the reform. J.A. McMahon, M. Geboye Desta, The Agreement on Agriculture: Setting the Scene, in J.A. McMahon, M. Geboye Desta (eds), Research Handbook on the wto Agriculture Agreement: New and Emerging Issues in International Agricultural Trade Law (Elgar, 2012), 8. 76 These are subject to the scm Agreement. 77 25 wto Members initially specified the maximum level of their export subsidies in the Schedules of commitments; some have progressively reduced their subsidies: http:// www.wto.org/english/tratop_e/agric_e/negs_bkgrnd08_export_e.htm. 78 See https://www.wto.org/english/news_e/news12_e/scm_23oct12_e.htm. It is also worth noting art. 13 of the AoA which establishes that during the implementation period of the Agreement (1995 – until 1 January 2004) wto Members should show ‘due restraint’ before initiating either domestic market trade defense instruments or wto dispute settlement proceedings against agricultural subsidies (the so called ‘peace clause’). 79 Decision on Measures Concerning the Possible Negative Effects of the Reform Programme on Least-Developed and Net Food-Importing Developing Countries (The ‘nfidc Decision’).

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4.1 Special Restrictive Measures Besides the general regime, governments are allowed to undertake special restrictive measures in relation to both imports and exports.80 In this latter regard, the AoA discipline is rather loose. While no specific provisions address the issue of export duties, AoA art. 12 requires wto Members that wish to introduce new export prohibitions or restrictions on foodstuffs to do so in accordance with gatt art. xi:2(a). The Member concerned should however “give due consideration to the effects of such restrictions on importing Members’ food security”; promptly inform the Committee on Agriculture on the measure’s nature and duration; and consult, upon request, with any other importing Member having a substantial interest on the measure.81 The AoA Relationship with gatt and Other Multilateral Trade Agreements While the AoA provides the specific legal context for water trade – both real and virtual – it only “(initiates) a process of reform of trade in agriculture”; it thus fails to introduce a comprehensive discipline of the different aspects related to the trade of agricultural products. The implementation period expired in 2004 and new rules are being negotiated in the Doha Round. Therefore, it is important to consider AoA specific provisions in the context of the general legal framework established by the gatt. As earlier underlined, agricultural products are ‘goods’ for the purposes of the gatt. As regards possible conflicts between the two agreements, art. 21 of the AoA clarifies that “the provisions of gatt 1994 and of other Multilateral Trade Agreements in Annex 1A to the wto Agreement shall apply subject to the provisions of this Agreement.” This means that the gatt applies to market access commitments on agricultural products, unless the AoA contains a different specific provision.82 4.2

80

81

82

Restrictive import measures include ‘safeguard measures’ defined in art. 5 AoA and measures justified by non-trade concerns as defined in Annex 5. The latter were employed by Japan, Republic of Korea, and the Philippines in relation to imports of particularly sensitive products (mainly rice) during the implementation period (i.e. 2000 for developed countries, 2004 for developing nations). Republic of Korea, the Philippines and later China entered into negotiations with the purpose of extending their special treatment for rice. China’s special treatment terminated in 2007, Philippine’s in 2012 and Korea will apply it throughout 2014. On the export restrictive measures undertaken between 2004–2012 see Liapis, Trade of Agricultural Commodities cit.; R. Howse, T. Josling, Agricultural Export Restrictions and International Trade Law: A Way Forward, IPCPosition Paper, September 2012. This reasoning was made re the interpretation and application of AoA art. 21 in wto, ec – Bananas iii, Appellate Body Report of 9 September 1997, WT/DS27/AB/R, para. 155, 157,

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Reasoning by analogy, it can be assumed that the applicability of the general exceptions under gatt art. xx cannot be excluded a priori. Moreover, in the case of export quotas, art. 12 of the AoA explicitly refers to gatt art. xi:2(a).83 5

Issues Discussed in the Doha Round and Concluding Remarks

The current round of negotiations, officially launched at the wto’s Fourth Ministerial Conference in Doha, Qatar, in November 2001, covers a number of trade areas and topics, including agriculture. The Round also known as the Doha Development Agenda sets as a fundamental objective the improvement of the trading prospects of developing countries. As regards agriculture, the mandate for further negotiations was already included in AoA art. 20 providing for the continuation of the reform process. Negotiations were however later incorporated within the framework of the Doha Round, which moves beyond AoA art. 20, especially as regards the focus on nontrade concerns and the emphasis on special and differential treatment aimed at meeting the development and food security needs of developing countries.84 The negotiation process has shed light on the different interests of a number of coalitions of countries85 and the ‘obvious tension’ between the development and trade dimensions of the Doha Agenda.86 Against the background of different positions87 – i.e. lobbying for agricultural trade liberalization, promoting the specificity of agriculture in so far as it addresses additional nontrade concerns, or pressing for flexibility for developing and least-developed countries – one of the most critical stages of the agriculture negotiations has been the setting up of ‘modalities’ (including numerical targets and some rule making) for achieving the objectives set out in the Doha Ministerial Declaration. 162, and raised as an argument by the ec in ec – Poultry, Panel report of 23 July 1998, WT/DS69/R, para. 235. 83 In the same vein, the Panel in Korea – Beef found that “a violation of Article xi of gatt (…) would necessarily constitute a violation of Article 4.2 of the Agreement on Agriculture,” Panel report of 31 July 2000, WT/DS161/R, para. 762. 84 Doha Ministerial Declaration, November 2001, para. 13. 85 However there are frequent intersections of the membership of such coalitions. See: http://www.wto.org/english/tratop_e/dda_e/groups_e.pdf. 86 F. Smith, “Food Security and International Agricultural Trade Regulation: Old Problems, New Perspectives” in J.A. McMahon, M.G. Desta (eds), Research Handbook on the wto Agriculture Agreement: New and Emerging Issues in International Agricultural Trade Law (Elgar, 2012) 45–69. 87 At: http://www.wto.org/english/tratop_e/agric_e/negoti_groups_e.htm.

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Several versions of the ‘Draft Modalities’ have been circulated among the Members, the most recent being revised in December 2008.88 The issue of export restrictions has achieved growing importance and thereby has given momentum to the idea of redressing the ‘regulatory deficiency’ characterizing this topic.89 The 2007–2008 food crisis shed light on the contrast between the need to preserve domestic food supplies through restrictive export policies and the substantial harm suffered by highly vulnerable net food-importing countries. Consequently, a number of proposals concerning a clearer and tighter discipline on export restrictions have been discussed at the wto. They range from the radical proposal to remove all export restrictions and bind at zero all export tariffs,90 to the more flexible alternative of ‘tariffying’ all export prohibitions and restrictions and binding them alongside the model of import tariffs. However, these proposals have met strong opposition from some developing countries, exporters of agricultural products. Hence, the latest version of the Draft Modalities (December 2008)91 does not include any substantial modifications to the existing regime, apart from tightening the possibility for introducing new export restrictions, increased transparency and monitoring by the Committee on Agriculture, and a new paragraph on preliminary consultation in relation to gatt art. xi.2(a).92 The “Bali Package” adopted at the Bali Ministerial Conference in December 2013, however, registered a step forward on one of the food security aspects of trade. It was acknowledged that despite their trade distortive effects, governmental food stockpiling policies (i.e. buying food from farmers at supported prices to build up stocks) may also have beneficial effects if the stocked produce is supplied for food security reasons to low-income consumers. A compromise text was agreed establishing that Members would temporarily refrain from lodging a legal complaint (“due restraint” or “peace clause”) if a developing country exceeded its (Amber Box) subsidies limits as a result of stockholding for food security.93 88

wto, Committee on Agriculture, Revised Draft Modalities for Agriculture, TN/AG/W/4/ Rev.4, 6 December 2008. 89 B. Karapinar, Export Restrictions and the wto Law: How to Reform the ‘Regulatory Deficiency,’ Journal of World Trade 2011, 1139–1155. 90 wto Secretariat, Export Restrictions and Taxes, Proposal by Switzerland and Jordan, at: . 91 wto Secretariat, Revised Draft Modalities for Agriculture, 6 December 2008; Unofficial Guide to the 6 December 2008 ‘Revised Draft Modalities,’ at: http://www.wto.org/english/ tratop_e/agric_e/ag_modals_dec08_e.htm11. 92 Ibid., paras. 171–180. 93 At: http://wto.org/english/thewto_e/minist_e/mc9_e/balipackage_e.htm#agriculture.

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Therefore, from a broader perspective, to what extent can issues related to market access, access to water resources (natural and virtual), and food security be reconciled in the current Doha negotiations and what should be the way forward? The existing wto legal framework strongly affects water trade from the perspective of access to markets of importing countries, while rules concerning export restrictions, i.e. having an impact on access to resources of exporting countries are of limited scope. Export quotas are generally prohibited but provisions concerning export duties are either absent or not translated into concrete commitments. The absence of a general and clear discipline in these regards creates instability and unpredictability in relation to access to critical resources such as water and food. It further creates tensions and may impair international relations by stirring retaliation. Proposals to reform the sector, however, have been constantly vetoed by part of the wto Members. In the absence of consensus over a comprehensive revision of the system, the approach adopted by the wto, has consisted in imposing additional o­ bligations on export duties (wto Plus) on new Members (as part of their ‘accession costs’). This creates additional pressure because it bullies the non-­ discrimination and reciprocity pillars on which the entire system is grounded. Proposals for reform should take into account both the trade and non-trade role of export restrictions, namely that they can be decisive in promoting the economic development of resource-rich countries and in managing environmental externalities. This is crucial in the case of export taxes on agricultural products, which often do not fully reflect the environmental costs of the depletion of water resources. These measures should however operate alongside regulation promoting the sustainability of the production process. Although it may be argued that such policy has a ‘beggar-thy-neighbour’ effect, because it raises prices for the importing country and shifts rents to the exporting government, to its consumers and to downstream industries, it could be justified by the principle of permanent sovereignty over natural resources applied for developmental purposes. The wto is first and foremost a trade liberalization rather than a developmental organization. For this reason, the Doha Development Round, because of its developmental dimension, provides a unique opportunity for addressing the issue of export restrictions in the name of and versus food security. In trying to reach an agreement on a transparent, predictable yet flexible discipline on export restrictions, bringing in the food security dimension may result being a stepping stone rather than a stumbling block. The system as a whole is ‘biased’ in favour of exporting countries: they enjoy important market access rights (in the markets of importing countries) without being subject to a clear

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and coherent export-duty discipline. Importing countries might be incentivized to undertake commitments in the agricultural sector aimed at further facilitating access to their markets (e.g. by reducing subsidies or lower tariffs) if they obtain guarantees that they can have access to such products on the global market in times of shortages.

chapter 17

Energy Export Restrictions in the wto between Resource Nationalism and Sustainable Development Ilaria Espa 1 Introduction Energy issues have recently gained prominence in the multilateral trading system due to the rise of energy security and climate change in the international agenda. As fossil fuels account for more than 80 per cent in the global energy mix,1 the question of access to geographically concentrated energy resources has taken center stage in the trade and energy discourse. At the same time, the detrimental effects associated with extraction and use of hydrocarbons have called on governments to commit to decarbonize the energy sector,2 with an increasing range of trade-related instruments purportedly being adopted to promote the production and consumption of renewable energy.3 The increasingly evident interfaces between trade, energy and climate change have triggered a vivid debate as to whether existing wto rules efficiently regulate trade in energy goods and services and sufficiently incorporate the goal of promoting sustainable energy trade. The question has not an obvious answer for two main reasons: first, wto disciplines were not drafted having energy in mind;4 second, the line between using energy policy as a tool of sustainable development aimed at facilitating the shift to renewables or rather as an instrument of ‘green protectionism’ can be a thin one, and the wto system may not be well-equipped to deal with these nuances failing an institutionalized 1 International Energy Agency, “World Energy Outlook 2013,” 2014, at http://www.iea.org/ bookshop/455-World_Energy_Outlook_2013. 2 The energy sector is currently responsible for two thirds of global greenhouse gas emissions. International Energy Agency, “World Energy Outlook Special Report 2013: Redrawing the Energy-Climate Map,” 2014, at http://www.worldenergyoutlook.org/media/weowebsite/2013/ energyclimatemap/RedrawingEnergyClimateMap.pdf. 3 J. Salzman, M. Wu, “The Next Generation of Trade and Environment Conflicts: The Rise of Green Energy Policy,” Northwestern University Law Review, 2014, 401. 4 G. Marceau, “The wto in the Emerging Energy Governance Debate,” Pauwelyn (ed.), Global Challenges at the Intersection of Trade, Energy and the Environment (Geneva: Centre for Trade and Economic Integration, 2009), 25.

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­coordination between the trade and the climate change regimes.5 It is therefore important to assess whether the wto rulebook has the potential to address emerging energy concerns at the crossroads of trade and climate change such as renewable energy promotion, energy security and the elimination of distortive fossil fuels subsidies.6 This chapter contributes to the trade and energy debate by focusing on the specific issue of export restrictions. This issue has raised much controversy in the last few years mainly with respect to the 2007–2008 and 2010–2011 global food crises7 and the proliferation of Chinese restrictions on the exportation of various minerals and metals.8 Yet, the use of export restrictions in the energy sector may prove just as problematic: when applied to primary energy supplies, such measures may in fact not only endanger energy security but, depending on their actual economic effects, incentivize or discourage the production and consumption of fossil fuels. Hence, the question of how best to regulate energy export restrictions directly touches upon the need to ensure a reasonable balance between ‘fair’ access to primary energy supplies in the midst of a new wave of ‘resource nationalism’9 and wto Members’ right to regulate in a manner consistent with the objective of sustainable development as enshrined in the Preamble of wto Agreement.10 5

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T. Cottier, “Key Issues on Interlinking wto, Energy and Climate Change”, Intervention Given at the IISD/NCCR Workshop on “Linking Energy, Climate Change and wto Law: The Role of the wto in the Energy and Climate Change Debate,” 12 June, 2009, at http:// www.iisd.org/trade/crosscutting/energy_climate_debate.asp. For a comprehensive overview of the energy-specific issues covered, to a greater or lesser extent, by wto rules see Pauwelyn (ed.), Global Challenges at the Intersection of Trade, Energy and the Environment, op. cit. See, e.g., B. Karapinar, C. Haberli (eds.), Food Crises and the wto (Cambridge University Press, 2008). wto, China – Measures Related to the Exportation of Various Raw Materials, WT/DS394/R, WT/DS395/R, WT/DS398/R, Panel Reports of 5 July 2011; wto China – Measures Related to the Exportation of Various Raw Materials, WT/DS394/AB/R, WT/DS395/AB/R, WT/DS398/ AB/R, Appellate Body Reports of 22 February 2012; wto, China — Measures Related to the Exportation of Rare Earths, Tungsten and Molybdenum, WT/DS431/R, WT/DS432/R, WT/DS433/R, Panel Reports of 26 March 2014; wto, China — Measures Related to the Exportation of Rare Earths, Tungsten and Molybdenum, WT/DS431/AB/R, WT/DS432/ AB/R, WT/DS433/AB/R, Appellate Body Reports of 29 August 2014. Closing Statement of the United States at the Second Substantive Meeting of the Panel with the Parties, China – Measures Related to the Exportation of Rare Earths, Tungsten and Molybdenum (DS431), 19 June 2013, at 1. These opposing interests reflect the divide between net-importing economies, on the one hand, and richly endowed countries, on the other hand. The latter category of countries,

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In light of the above, this chapter will first illustrate the basic functioning of export restrictions as inherently trade-restrictive measures whose economic effects may not only serve economic development needs but also environment-related purposes, and shed light on the peculiar effects potentially arising out of export restrictions when applied on energy commodities. Secondly, it will give an overview of the scope and coverage of existing wto rules on export restrictions as interpreted by recent wto jurisprudence and identify the major limits of the current regime from an energy-specific perspective. Finally, it will discuss the desirability of a reform of existing wto disciplines in the field of energy and indicate a direction to implement such reform in a way as to ensure the mutual supportiveness between trade, energy and sustainable development. 2

The ‘Ambiguity’ of Energy Export Restrictions: Green Measures or de facto Fossil Fuel Subsidies?

According to standard economic theory, when a product is subject to a restriction on the exportation the imposing country exports it less (so-called trade effect) and supply is redirected from the international market onto the domestic market (so-called supply-side effect), causing a reduction in the domestic price.11 Export restrictions therefore create a wedge between domestic prices and world prices and, depending on whether the imposing country is a large exporter of the restricted product, they may also raise world prices. In principle,

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in particular, have defended export restrictions as a feature of a ‘new’ resource nationalism inspired by sustainable development, and accordingly advocated an evolutionary interpretation of the conservation exception under art. xx(g) gatt in light of the principle of sovereignty over natural resources. J.Y. Qin, “Reforming wto Discipline on Export Duties: Sovereignty over Natural Resources, Economic Development and Environmental Protec­ tion,” Journal of World Trade, 2012, 1147. The same holds true for both export taxes and other types of export restrictions. The only difference is that, in the case of an export tax, the trade effect and the supply-side effect are triggered by the imposition of a price on exports (so-called price effect). As to quantitative restrictions, the contraction in the volume of exports may directly result out the introduction of a ceiling (in the case of export quotas) or, for instance, it may be induced by stringent export licensing schemes. R. Piermartini, The Role of Export Taxes in the Field of Primary Commodities, wto Staff Paper, 2004, 5. Export taxes are considered least damaging for they are more transparent and predictable in their effects. J. Bonarriva, Export Controls: An Overview of Their Use, Economic Effects, and Treatment in the Global Trading System, us International Trade Commission Working Papers, 2009, 16.

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because of the shrinkage of domestic prices induced by the diversion of exports onto the domestic market, domestic production is predicted to decline in the country imposing the restriction.12 This circumstance has been frequently relied upon by wto Members to invoke environmental objectives in justification of export restrictions, namely the conservation of scarce natural resources and the minimization of public health and environmental impacts linked to extractive activities.13 However, it is often the case that such goals are, if not merely declaratory (more or less openly) pursued in combination with industrial policy objectives such as the promotion of downstream production in the attempt to support export diversification and higher-value added activities.14 In such cases, however, the desired reduction of domestic processing industries, and thus the achievement of the environmental objective, would be frustrated by the expansion of downstream industrial sectors.15 In other words, export restrictions would serve to reduce the price of the restricted product domestically, and amount to an indirect subsidy to local consumers (i.e. downstream industries).16 In the particular field of energy, imposing export restrictions to provide downstream producers with cheap energy inputs may carry a positive or negative potential for climate change mitigation. Export restrictions applied on energy resources could in fact (be used to) specifically alter the terms of competition between fossil fuels and renewable energy. On the one hand, inasmuch as they de facto subsidize highly polluting forms of energy domestically, they may widen the competitiveness gap between renewables and fossil fuels at the 12 13 14 15

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R. Piermartini, The Role of Export Taxes, op. cit., 3–5. B. Fliess, T. Mard, Taking Stocks of Measures Restricting the Export of Raw Materials: Analysis of the oecd Inventory Data, oecd Trade Policy Papers No. 140, 2012, 15–16. J. Korinek, J. Kim, “Export Restriction on Strategic Raw Materials and Their Impact on Trade and Global Supply,” Journal of World Trade, 2011, 255. A substantial body of literature has shown mixed evidence as to adequacy of export taxes as tools to achieve environment-related goals in comparison with alternative options such as straight conservation policies (e.g. extraction and/or production caps). wto Trade Policy Review – Report by the Secretariat, China, WT/TPR/S/230/Rev.1, 5 July 2010, 44; M. Ruta, A.J. Venables, International Trade in Natural Resources: Practice and Policy, Oxcarre Research Paper No. 84, 2012, 16. The fundamental ambiguity of export restraints was acknowledged by the panel in China – Rare Earths which described the “perverse signal [sent by such instruments] to domestic consumers” in the following terms: “[w]hereas export quotas may reduce foreign demand for Chinese rare earths [because of the world price increase, which also has a signalling effect], it seems likely to the Panel that they will also stimulate domestic consumption by effectively reserving a supply of low-price raw materials for use of domestic downstream industries” (para. 7.444, original emphases).

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disadvantage of the former. On the other hand, if applied by sufficiently large countries, they might increase the world price of fossil fuels and therefore erode the gap between the two in favour of renewables. The potential for climate change mitigation would then depend on the extent to which such erosion is matched with a production reduction of fossil fuels-generated energy in the country applying the export restriction. 3 Existing wto Disciplines on Export Restrictions wto rules were not specifically drafted having energy in mind. The original ‘marginality’ of energy issues in the multilateral trading system reflects, on the one hand, the peculiar features of the energy sector, traditionally characterized by a ‘sovereignty-based’ approach due to the existence of natural monopolies and the predominant role of large state-owned enterprises17 and, on the other hand, the historically strong focus on market access for foreign exporters since its early decades.18 The gatt architecture is therefore ‘biased’ towards the regulation of trade barriers imposed on the importation. Trade in energy, however, is much more affected by barriers on the exportation as it is triggered by the opposite need of securing adequate access to energy supplies.19 The wto rulebook includes generally applicable disciplines on export restrictions under the General Agreement on Tariffs and Trade (gatt) that may be relevant for trade in energy resources, but they are overall weaker and less comprehensive than those applicable on import barriers. A reform of such 17

T. Cottier et al., “Energy in wto Law and Policy,” T. Cottier, P. Delimatsis (eds.), The Prospects of International Trade Regulation: From Fragmentation to Coherence (Cambridge University Press, 2011). 18 The gatt architecture was inspired by the assumption that the removal of import barriers, which had caused countries to close up against each other during the period between the two wars, would be pivotal to prevent disasters linked to trade warfare such as the Second World War. R.W. Staiger, Non-Tariff Measures and the wto, Working Paper ersd, 2012, 8–9. 19 As explained by Professor Joost Pauwelyn, “[w]hen it comes to energy, … import restrictions is not the issue (few countries impose import duties on oil). Rather, what matters is ‘production management’ and price stability … for energy exporters, and access to foreign supplies (or production, export and transit restrictions) for energy importers. Consequently, in a gatt club worried about ‘how can I export more,’ the central question of ‘how can I import more’ (or can I maximise the return on my energy resources) was not addressed.” J. Pauwelyn, “Global Challenges at the Intersection of Trade, Energy and the Environment: An Introduction,” Pauwelyn (ed.), Global Challenges at the Intersection of Trade, Energy and the Environment, op. cit., 3.

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disciplines has nevertheless being impaired by the strong divide between netimporting countries, interested in greater access to supplies, and net-exporting countries, determined to defend the principle of permanent sovereignty over natural resources in this area.20 The efforts to reinforce wto disciplines have thus taken the form of varying country-specific ‘wto-plus’ obligations undertaken by new wto Members in the context of their accession negotiations. Among them are also the major energy players that have recently acceded to the wto, namely Saudi Arabia,21 Ukraine,22 and the Russian Federation.23 In light of the prospective accession of many more big energy exporters such as Kazakhstan, Azerbaijan, Algeria, Lybia, Iran, Iraq, and Sudan, the question is therefore whether existing wto rules on export restrictions relevant for trade in energy goods are adequate to meet today’s challenges of energy security and climate change. 4

gatt Rules on Export Restrictions

4.1 The Prohibition of Quantitative Restrictions under Article xi:1 gatt Art. xi:1 gatt, labelled “General Elimination of Quantitative Restrictions,” outlaws import and export “prohibitions” and “restrictions…whether made effective through quotas, export … licenses or other measures.” wto dispute settlement bodies have consistently interpreted the expression “other measures” in connection to the term “restriction” as to significantly expand the scope of art. xi:1, including not solely a category of measures that may be considered formal quantitative restrictions, such as quotas, but also a whole variety of means as long as they have a limiting effect on the volume of exports. As to now, five cases have specifically dealt with export quantitative restrictions under art. xi:1 gatt.24 The disputes challenged the consistency of several 20

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The issue of reforming relevant gatt rules has indeed been consistently taken up in various fora dating back to the Tokyo Round. gatt Doc. MTN.GNG/NG2/W/40. Today as back then, the same issues keep impeding a far-reaching compromise on the advancement of wto disciplines on export restrictions. wto, Report of the Working Party on the Accession of Saudi Arabia, WT/ACC/SAU/61, 1 November 2005. wto, Report of the Working Party on the Accession of Ukraine, WT/ACC/UKR/152, 16 May 2008. wto, Report of the Working Party on the Accession of the Russian Federation, WT/ACC/ RUS/70, 17 November 2011. gatt, Canada – Measures Affecting Exports of Unprocessed Herring and Salmon, L/6268 – 35S/98, Dispute Settlement Report of 22 March 1988; gatt, Japan – Trade in

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measures under art. xi:1 gatt including formal export quotas, export licensing requirements and minimum export prices. In all cases, the wto Panels and Appellate Body considered the measures at issue to fall under the scope of art. xi:1, irrespective of their de iure or de facto nature, as long as they have the effect of reducing the volume of exports.25 In light of existing wto case law, it is clear that a wto Member applying any form of quantitative restriction on the exportation of primary energy inputs would thus be obliged to remove it as per art. xi:1 gatt unless it falls under the scope of any of the exceptions admitted under the Agreement. It is less clear, however, whether art. xi covers production quotas such as the ones operated by opec Members among its range of supply management policies, i.e. whether a production quota in the exporting countries could be considered a “restriction … on the exportation” within the meaning of art. xi:1 gatt. The wto dispute settlement bodies have never ruled on the specific question of what constitutes a measure posing a restriction ‘on the exportation.’ In one occasion, the Panel clarified the concept of a restriction “on importation” under art. xi:1. It concluded that it does not only encompass ‘border measures,’ or measures relating to the actual process of importation, but covers “any form of limitation imposed on, or in relation to importation.” In particular, it opined that it is the “nature of the measure as a restriction in relation to importation which is the key factor to consider in determining whether a measure may properly fall within the scope of Art. xi:1.”26 This conclusion applied to the export side could be interpreted as to suggest that opec measures may not be considered to fall under the scope of art. xi:1. However, the existing wto jurisprudence could also suggest that production quotas may be considered as ‘other measures’ having a limiting effect on the exportation of energy supplies within the meaning of the scope of art. xi:1 gatt.27 Semi-conductors, L/6309 – 35S/116, Dispute Settlement Report of 4 May 1988; wto, Argentina – Measures Affecting the Export of Bovine Hides and the Import of Finished Leather, WT/DS155/R, Panel Report of 16 February 2001; and, China – Raw Materials and China – Rare Earths cit. 25 In China – Raw Materials, in particular, the Panel considered that “the very potential to limit trade to constitute a ‘restriction’ within the meaning of art. xi:1 of the gatt 1994” (original emphasis), para. 7.1081. 26 wto, India — Measures Affecting the Automotive Sector, WT/DS146/R, WT/DS175/R, Panel Report of 21 December 2001, para. 7.261. 27 Cottier et al., “Energy in wto Law and Policy,” op. cit., 211. The decision on the applicability of art. xi:1 gatt to production controls would carry very sensitive implications with regard to the value of the principle of sovereignty over natural resources in the wto system and the question of the interaction between the wto system and the opec rules.

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4.2 The Treatment of Export Duties under the gatt Art. xi:1 gatt expressly allows export taxes and duties. The exclusion of “duties, taxes or other charges … on the exportation” from the scope of application of art. xi:1 reflects the traditional preference of the gatt for ‘tariffs’ over quantitative restrictions as the lawful means of restricting imports and exports. However, while art. ii:1(b) gatt provides the legal basis for wto Members to schedule and bind import duties in their Schedules of Concessions, no similar framework is specifically envisaged for export duty concessions. Art. ii:1(a) gatt simply leaves the possibility for Members to negotiate commitments other than import tariffs “in the appropriate Part of the appropriate Schedule annexed to this Agreement (emphasis added).” Moreover, art. xxviii(bis) encourages “negotiations on a reciprocal and mutually advantageous basis, directed to the substantial reduction of the general level of tariffs and other charges on imports and exports.” No wto Member has nevertheless engaged in such negotiations so far, except in two cases.28 Hence, Members exclusively bound by gatt obligations as to their use of export taxes remain free to introduce and/or maintain such measures on whatever product, including any energy commodity. Available General Exceptions for gatt-Inconsistent Export Restrictions gatt-inconsistent measures can seek justification under the general exceptions recognized under art. xx gatt.29 In particular, the so-called ‘environmental’ exceptions provided under art. xx(b) and (g) justify, respectively, measures “necessary to protect human, animal and plant life or health,” and “related to the conservation of exhaustible natural resources.” These exceptions

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M. Cossy, “Energy Trade and wto Rules: Reflections on Sovereignty over Natural Resources, Export Restrictions and Freedom of Transit,” C. Hermman, J.P. Terherchte (eds), European Yearbook of International Economic Law (Springer, 2012). 28 The first case concerned a concession done by the United Kingdom to the Malayan Union on tin ore and concentrates in the early years of the gatt, and the second was made by Australia in the Uruguay Round of 1994 on nine items (iron ore, titanium ore, zirconium ore, coal, peat, coke, refined copper, unwrought nickel, nickel oxide, and lead waste and scrap) in respect of the European Communities. In both cases, the concessions were extended to all Members under the mfn clause, and were set forth in the tariff schedules annexed to the gatt. See Qin, “Reforming wto Discipline on Export Duties,” op. cit., 1152. 29 Art. xx exceptions are ‘general’ exceptions because they can be invoked for violations of any gatt provision. J.H. Jackson, World Trade and the World of gatt (Bobbs-Merrill Company, 1969), 535.

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address the most common non-economic public policy goals associated with the use of export restrictions applied on extractive resources. wto Members have indeed invoked art. xx environmental exceptions in the attempt to defend their right to use export restrictions as sustainable development tools.30 When seeking a reasonable balance between fair access to primary resources and the right to regulate in accordance with the objective of sustainable development, the question of the ‘policy space’ left to wto Members to use export restrictions responding to legitimate environmental goals recognized under art. xx becomes central. The China – Raw Materials and China – Rare Earths disputes are highly informative in this respect, as the panels assessed in both cases the legitimacy of various export restrictions applied by China on mineral resources under art. xx(b) and (g) gatt. Although they concluded that none of the measures at issue could be successfully defended under art. xx gatt, they consolidated an interpretative approach based upon the clarification of the relationship between conservation, sustainable development31 and the principle of sovereignty over natural resources under art. xx(g) gatt,32 which appears particularly useful in providing guidance on the extent to which energy export restrictions could seek justification on environmental protection and resource conservation grounds. In particular, the panels recognized 30 31

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H. Ward, Resource Nationalism and Sustainable Development, iied Working Paper, 2009, at http://pubs.iied.org/G02507.html. The Panel considered the Preamble of the Marrakesh Agreement as relevant context to art. xx(g) in accordance with art. 31(2) of the Vienna Convention on the Law of Treaties, according to which the context of a treaty is composed of its “text, including its preamble and annexes.” The first recital of the Preamble recognizes that trade relations between wto Members should be conducted in a way that allows “for the optimal use of the world’s resources in accordance with the objective of sustainable development, seeking both to protect and preserve the environment and to enhance the means for doing so in a manner consistent with their respective needs and concerns at different levels of economic development.” “The principle of sovereignty over natural resources allow states to freely use and exploit their natural wealth and resources wherever deemed desirable by them for their own development.” unga Res.1803 (xvii), “Permanent Sovereignty Over Natural Resources” (14 December 1962). See N. Schrijver, Sovereignty Over Natural Resources: Balancing Rights and Duties (Cambridge University Press, 2nd ed., 2008). In the Panel’s view, the principle of sovereignty over natural resources is a “relevant rule of international law applicable in the relations between the parties” which should be taken into account by the interpreter together with the context in pursuance to art. 31(3) of the Vienna Convention on the Law of Treaties.

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that the term “conservation” under art. xx(g) shall be interpreted in light of the principle of sovereignty over natural resources under art. xx(g) gatt as to allow wto Members to resort to measures aimed at managing the supply and use of exhaustible resources “to promote their own development while regulating the use of these resources to ensure sustainable development.”33 The panels therefore recognized that the mere fact that export restraints form part of a comprehensive conservation policy “comprising a multiplicity of interacting measures” is not sufficient to exclude that they qualify as conservation measures within the meaning of art. xx(g),34 provided that there is a “close and genuine” link between such measures and the conservation objective as required by the first leg of art. xx(g)35 and that the even-handedness requirement under the second leg of art. xx(g) is met.36 Nevertheless, the panels also clarified that a Member’s sustainable economic development cannot be in itself a goal to be pursued under art. xx(g) gatt. Citing with approval the Panel Report in China – Raw Materials, in China – Rare Earths the panel reiterated that “resource-endowed Members may take their sustainable economic development needs into account in designing a conservation policy that ‘manages the supply and use’ of exhaustible resources in a way that ‘take[s] into account the challenge of using and managing resources in a sustainable manner that ensures the protection and conservation of the environment while promoting economic development.’”37 Accordingly, it stressed that “measures adopted for the purpose of economic development are not automatically measures ‘relating to the conservation of exhaustible natural resources’ […] but measures relating to industrial policy”38 that have to be consistent with Members’ wto obligations or justified by one of the relevant exceptions available under the wto Agreement. A different conclusion could not be reached based on wto Members’ sovereign right over natural resources since wto Members are entitled to exercise such right in conformity with the parameters of art. xx(g).39 33 34 35 36 37 38 39

wto, China Raw Materials, Panel Reports cit., para. 7.381. Ibid., para. 7.376. See also wto, China – Rare Earths, Panel Reports cit., paras. 7.252–7.277. wto, China Raw Materials, Panel Reports cit., paras. 7.370 and 7.418–7.426. See also wto, China – Rare Earths, Panel Reports cit., paras. 7.279–7.293. wto, China Raw Materials, Panel Reports cit., paras. 7.453–7.466. See also wto, China – Rare Earths, Panel Reports cit., paras. 7.295–7.337. wto, China – Rare Earths, Panel Reports cit., para. 7.451, citing wto China – Raw Materials, Panel Reports cit., para. 7.375. wto, China – Rare Earths, Panel Reports cit., para. 7.460. wto, China – Raw Materials, Panel Reports cit., para. 7.404.

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The Universe of wto-plus Obligations on Export Duties

Some Members acceding to the wto after its entry into force have been required to undertake so-called wto-plus obligations40 on the use of export duties within their accession protocols and the associated Working Party’s reports.41 The scope and coverage of the wto-plus obligations agreed upon by these countries, however, is quite uneven. The most severe regime has been agreed upon by China, which undertook a general obligation to eliminate all taxes and charges applied to exports by terms of Paragraph 11.3 of China’s Accession Protocol:42 China shall eliminate all taxes and charges applied to exports unless specifically provided for in Annex 6 of this Protocol or applied in conformity with the provisions of Article viii of the gatt 1994. Annex 6 to China’s Accession Protocol, entitled “Products Subject to Export Duty,” lists 84 different products for which maximum levels of export duty are provided, but among them there are no energy products. China is the only country having undertaken a general elimination obligation on the use of export duties without negotiating any wto or gatt flexibilities in its wtoplus commitments other than the specific reference to art. viii gatt. The other countries abiding by wto-plus commitments on the use of export duties have accepted less burdensome commitments consisting on the phasing down and binding or the elimination of the export duties applied on specific products, while reserving the right to apply such measures on other products (i.e. the products for which no commitments were taken) in accordance with the gatt provisions. Among them are all the major energy producing or transit countries having acceded to the wto so far, namely Saudi Arabia, Ukraine, 40

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wto-plus obligations are obligations that exceed the obligations arising out of multilateral wto Agreements as opposed to wto-extra obligations, which refer to commitments that lie outside the current wto mandate. The additional commitments negotiated by new wto members on the use of export duties are considered wto-plus obligations in light of the possibility left to wto members to negotiate export concessions in Part iii of their Schedules of Concessions. H. Horn et al., “Beyond the wto? An Anatomy of eu and us Preferential Trade Agreements,” The World Economy, 2010, 1567. More generally, out of the thirty-one countries that have acceded to the wto to date, nine have agreed to adopt wto-plus commitments on export duties (Mongolia, Latvia, Croatia, China, Saudi Arabia, Vietnam, Ukraine, Montenegro, and the Russian Federation). wto, Protocol on the Accession of the People’s Republic of China, WT/L/432, 23 November 2001.

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and the Russian Federation. In the case of Saudi Arabia and Ukraine, the additional obligations undertaken under paras. 184 and 240 of their respective Working Party reports provide for the elimination or the binding and phasing down of export duties on a very limited set of products not including any energy product.43 This means that both Saudi Arabia and Ukraine remain free to recur to export taxes on any energy products, without any upper bound limit. This circumstance most probably reflects the fact that these Members abided by specific obligations on the use of export duties in their accession protocols, and were thus concerned over the ‘rigidity’ of accession protocols’ provisions.44 At the other end of the spectrum, the Russian Federation agreed by terms of paragraph 638 of its Working Party Report to create a new ‘Part v’ on export duties within its gatt Schedule of Concessions, where it bound over 700 tariff lines including many energy primary products. Importantly, Part v of the Russian Federation’s Schedule starts with the statement: [t]he Russian Federation undertakes not to increase export duties, or to reduce or to eliminate them, in accordance with the following schedule, except in accordance with the provisions of the gatt 1994. The legal technique chosen by the Russian Federation seems directly related to the far greater level of commitment undertook by Russia compared to other leading energy-producing wto Members. By creating a new Part of its Schedule of Concessions as explicitly admitted by art. ii:1(a) gatt, the Russian Federation brought its wto-plus provisions on export taxes into the gatt framework, and thus reserved its right to invoke gatt-specific provisions applicable to schedules of concessions’ commitments. These include the rules

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The specific wto-plus commitments contracted by both Saudi Arabia and Ukraine under their Working Party reports were then incorporated into their respective accession protocols by virtue of, respectively, paragraph 315 and paragraph 512 of such protocols. Accession protocols do not contain any provision relating to amendment. Accordingly, two different visions have been developed on the extent to which accession requirements could be modified. As to the former, accession terms are permanent and Members cannot renegotiate conditions apart from the market accession commitments incorporated into the schedules of gatt and gats. In the latter view, accession protocols could be amended through the same procedures required for other wto Agreements (i.e. two thirds majority). For a more detailed overview of the two theories, see Qin, “Reforming wto Discipline on Export Duties,” op. cit., 1157–1158.

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on deconsolidation of scheduled concessions under art. xviii gatt45 and gatt exceptions relevant to energy-related export restrictions such as art. xx (b) and (g) gatt. 6

Limits of Existing wto Disciplines from an Energy-Specific Perspective

Current wto disciplines on export restrictions are highly fragmented and overall less developed compared to gatt rules on import barriers. Such ‘asymmetry’ is particularly evident if one considers the legal treatment of import and export tariffs.46 The former are bound in wto Members’ Schedules of Concessions, which are incorporated into the gatt framework by means of art. ii:1(b) and art. ii:7 gatt and subject to gatt-specific adjustment procedures such as the deconsolidation procedure laid down under art. xxviii. The latter are explicitly admitted by terms of art. xi:1 gatt although Members may schedule and bind export duty concessions as per art. ii:1(a) and art. xxviii (bis) gatt. This general framework has however not been systematically implemented by wto Members and chances that countries will voluntarily reverse this trend remain very low. The absence of any obligation as to the use of export duties on the part of original wto Members, on the one hand, and the parallel existence of varying accession requirements binding on selected newly acceded wto Members, on the other hand, inherently generates substantial differences in the rights and obligations 45

46

gatt-specific adjustment procedures for scheduled commitments are set forth at art. XXVIII. However, the exact wording of such article, which envisages the possibility for a wto Member to modify or withdraw a scheduled concession prior to “negotiation and agreement with any contracting party with which such concession was initially negotiated and with any other contracting party determined by the Contracting Parties to have a principal supplying interest,” reveals that the reference framework is that of import duty concessions, thus leaving it unclear whether it could be considered to apply to export duty concessions. Some authors argue, however, that the fact that the provision is labelled “Modification of Schedules” and explicitly applies to concessions “included in the appropriate Schedule annexed to this Agreement” indicates that it applies to both import and export duty concessions. M. Matsushita, “Export Control of Natural Resources: wto Panel Ruling on the Chinese Export Restrictions of Natural Resources,” Trade Law and Development, 2011, 274. For a comprehensive overview of the shortcomings of wto rules on the export side compared to disciplines applicable to import barriers see I. Espa, Export Restrictions on Critical Minerals and Metals (Cambridge University Press, 2015).

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of various categories of wto Members.47 The fragmentation of existing wto disciplines on export restrictions has also direct and specific implications for the energy sector. Potential Unavailability of gatt General Exceptions for Export Duties in Breach of wto-plus Obligations The recent wto disputes China – Raw Materials and China – Rare Earths have shed light on a particularly dangerous risk linked to the fragmentation of current wto rules on export duties resulting out of the current accession regime: the non-automatic applicability of gatt general exceptions to justify export taxes in breach of wto-plus obligations assumed under specific provisions of accession protocols. According to the Appellate Body, in fact, individual accession protocol provisions may be subject to art. xx gatt only to the extent that they have an “objective link” to the gatt and/or art. xx gatt itself.48 Whether such link exists has to be assessed through an analysis of the particular provision at issue, which should not be limited to its text but also take into account its context and the overall architecture of the wto system based on the customary rules of treaty interpretation.49 In the case of China, the Appellate Body concluded that “there is no basis in China’s Accession Protocol to allow the application of Article xx of the gatt 1994 to China’s obligations in Paragraph 11.3 of the Accession Protocol”50 because, “had there been a common intention to provide access to Article xx [for violations of Paragraph 11.3], language to that effect would have been inserted [therein] or elsewhere in China’s Accession Protocol.”51 As a result of the ‘objective link’ test established by the Appellate Body, newly acceded wto Members assuming wto-plus obligations on export duties in their accession protocols may, depending on the language of such specific obligations, be prevented from using export duties a priori, irrespective of whether such measures could be justified under art. xx gatt. This approach regretfully implies neglecting values such as those protected under

6.1

47

48 49 50 51

Qin, in particular, elaborated a theory according to which the panorama of wto-plus obligations undertaken by new Members has given rise to a “four-tiered” membership within the wto. See Qin, “Reforming wto Discipline on Export Duties,” op. cit., 1161–1162. wto, China – Rare Earths, Appellate Body Reports cit., paras. 5.62. Ibid., para. 5.74. wto, China – Raw Materials, Appellate Body Reports cit., para. 307. Ibid., para. 293. The panel in China – Rare Earths examined the issue again based on China’s new arguments but it concluded that there were no cogent reasons for departing from the Appellate Body’s finding in China – Raw Materials. wto, China – Rare Earths, Panel Reports cit., para. 7.115.

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art. xx(b) and (g) which inspire the overall architecture of the wto Agreement and are ultimately embraced, as recognized in China – Raw Materials and China – Rare Earths, in the principle of sustainable development as enshrined in the Preamble of the wto Agreement.52 Moreover, this interpretative outcome deprives wto Members bound by additional commitments that do not incorporate art. xx flexibilities, such as China, from the right to invoke the only article within the gatt addressing the non-economic public policy goals typically associated to export duties applied in the extractive sector. In the field of energy, this result is even more regretful as energy-specific export duties with a primary environmental rationale may entail positive climate change mitigation effects if applied by ‘large’ world exporters of fossil fuels. Finally, the non-automatic availability of art. xx defences for violations of wto-plus obligations assumed under post-1994 accession protocols risks incentivizing export quantitative restrictions instead of export duties: the former are in fact outlawed by art. xi:1 gatt so that art. xx automatically applies in case of breach. Indeed, China’s main argument of appeal in China – Rare Earths concerned the defence of its right to invoke art. xx(g) to justify its art. xi:1-inconsistent export quotas.53 The indirect ‘encouragement’ of export quantitative restrictions runs counter to the cornerstone principle upon which the gatt itself was edified, i.e. the choice of ‘tariffs’ over more trade-distortive measures such as quantitative restrictions as the lawful means of restricting exports, and adds to the fragmentation of existing wto disciplines on export restrictions. From an energy-specific perspective, it is therefore important that energy-producing countries acceding to the wto succeed in negotiating specific commitments on export duties whose language allows for recourse to art. xx gatt exceptions. 6.2 Paucity of Export Duty Commitments on Energy Commodities When looked from an energy-specific perspective, the fragmentation of existing wto disciplines on export duties and the imbalances produced by such fragmentation add to a more general paucity of commitments. In the specific field of energy, the vast majority of wto Members is under no obligation to refrain from using export duties on any energy input, either because they are exclusively bound by gatt obligations or because energy resources are excluded 52

53

For a critique of the Appellate Body’s approach in light of the centrality of the fundamental environmental concerns invoked by China, see I. Espa, “The Appellate Body Approach to the Applicability of Article xx gatt in the Light of China – Raw Materials: A Missed Opportunity,” Journal of World Trade, 2012, 1407. wto, China – Rare Earths, Panel Reports cit., para. 5.162.

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from the scope of the wto-plus obligations assumed under their specific accession protocols. Countries belonging to the former ‘category’ of wto Members include several top energy producers and exporters such as the United Arab Emirates, Kuwait, Nigeria, Qatar, Angola, Venezuela, Indonesia, Australia, Canada, United States, South Africa, and Colombia,54 most of which are also opec Members applying production quotas whose status under wto law is yet to be clarified. Among the latter category are other major energy players such as Saudi Arabia, Vietnam, Ukraine and Mongolia. These countries managed to reserve the right to introduce and/or maintain export duties on energy resources. The only exception among leading energy exporting wto Members is represented by the Russian Federation, which agreed to bound export duties on over 700 tariff lines, including many energy products, into a specific Part v of its gatt Schedule. This state of things is particularly problematic if one considers two main elements. First, high enough export tariffs ultimately have the same effect of export prohibitions, which are outlawed under art. xi:1 gatt.55 Second, the freedom to recur to export duties on traditional energy products potentially admits the use of export duties as an instrument to subsidize fossil fuels-­ generated energy, whose climate change-related impacts may ultimately run counter to the objective of sustainable development which informs the very object and purpose of the wto Agreement as a whole. The systemic lack of significant wto commitments on the part of key energy players on the side of energy-related export duties is thus detrimental to the strategic energy security interests of net-importing wto Members. These countries in fact depend on the importation of primary energy supplies from countries that, with the only exception of the Russian Federation, could potentially resort to export duties on energy commodities at any time without incurring in any wto violation, either because they are ‘original’ wto Members or because they accepted de minimis wto-plus obligations given the uncertainty surrounding the flexibility of accession protocols’ provisions, especially after the China precedent.56 Yet, the Russian example has shown that pervasive obligations on the use of export duties do not necessarily impair a wto Member’s right to regulate, as long as they are drafted in a way that ensures the greatest level of comparability in the legal treatment of export taxes and import tariffs. 54 International Energy Agency, “Key Energy Statistics 2013,” at http://www.iea.org/­ publications/freepublications/publication/KeyWorld2013.pdf. 55 Piermartini, The Role of Export Taxes, op. cit., 8. 56 For such countries, therefore, the rigidity of de minimis wto-plus obligations on export duties included into individual accession protocol provisions has the effect to ‘secure’ the right to introduce and/or maintain export duties on energy inputs.

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In light of the prospective accession of many other energy players to the wto, the ‘model’ used to negotiate export duty commitments on the part of wto accession candidates would thus be critical to determine the level of ambition of their specific obligations. 7

Prospects for a Sector-Specific Reform of wto Export Disciplines Informed by Sustainable Development

The overall fragmentation of wto disciplines on export restrictions and the systemic lack of significant commitments on the side of energy-related export duties concur to determine a situation for which, on the one hand, all major energy-exporting wto Members with the exception of the Russian Federation are free to resort to export taxes on energy commodities irrespective of their rationale and their environmental impacts. At the same time, depending on the specific language of their WTO-plus obligations, newly acceded wto Members aiming at discouraging fossil fuels extraction and consumption may have to recur to more trade-distortive types of export restrictions when seeking justification under art. xx gatt. Leaving aside the inconsistencies of such a framework, wto disciplines as they currently stand may not always ensure fair access to energy resources while de facto admitting the use of export taxes as a form of subsidization of highly polluting forms of energy. In light of the limits of existing wto rules and their potential implications from an energy-specific perspective, it is argued that a more effective regulation of export restraints in the energy sector lies in the advancement of wto disciplines on export duties. In this perspective, the Russian example should be taken as a model for the on-going accession negotiations of energy-producing countries as a way of reinsuring such countries of the flexibility of their commitments and thus raising their level of ambition. The consolidation of this model for a ‘critical mass’ of wto Members controlling a substantial amount of world energy trade could then serve as a basis for advocating a system-wide reform of existing wto disciplines based on the Russian model, with all wto Members negotiating export duty concessions and incorporating them into their gatt Schedules.57 57

It is noteworthy that such a scenario was envisaged under the latest proposal on export taxes inserted into the fourth revision of draft modalities for non-agricultural market access in the context of the Doha negotiations. wto Doc. TN/MA/W/103/Rev. 3 (2006). Under this proposal, it was suggested that wto Members “should undertake to schedule export taxes on non-agricultural products in their Schedules of Concessions and bind the export taxes at a level to be negotiated.”

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Such a scenario could be implemented gradually, privileging a sectorial approach. In light of the peculiar effects arising out of the fragmentation of wto export disciplines for energy regulation, and the relatively limited number of large energy suppliers, it is suggested that export duty concessions on energy commodities could be negotiated on a priority basis. The ‘systemic’ assimilation of energy-related export duty concessions to the Russian model could be implemented along the following guidelines: (i) wto Members exclusively bound by gatt obligations but maintaining export duties on any energy commodity could negotiate export duty concessions on such products and incorporate them into their gatt schedules in accordance with the Russian model; (ii) newly acceded wto Members already deprived from the possibility to apply export duties on energy products by terms of the wtoplus obligations contained in their accession protocols could insert into their gatt schedules a 0 per cent bound rate for such products;58; (iii) the Russian Federation would continue to be bound by the concessions included in Part v of its gatt Schedule, along with any other new wto Member which may have completed its wto accession in the meantime and incorporated export duty concessions in to its gatt schedule similar to the Russian Federa­tion; (iv) any other wto Member bound by product-specific wto-plus obligations on export duties in the field of energy would keep these commitments but always in the form of bound rates incorporated into its gatt schedule. At the same time, full applicability of art. xxviii gatt would have to be expressly formalized so as to ensure the maximum level of flexibility to wto Members in accordance with gatt rules on deconsolidation applicable to import duty concessions. Under this conditions, the incorporation of export duty concessions into wto Members’ gatt schedules would ensure the greatest level of comparability between gatt rules on import and export tariffs in accordance with the spirit of the gatt as expressed by terms of art. ii:1(a) and art. xxviii(bis) gatt, while at the same time inherently correcting the main inconsistencies arising out of the current wto accession regime on export duties. Such an approach would, moreover, prevent wto Members from resorting to beggar-thy-neighbour practices resulting into subsidy-equivalent measures, but leave them free to derogate from such commitments on equal terms 58

In other words, newly acceded wto Members whose wto-plus obligations include specific commitments on the elimination of export duties on certain or all energy products (e.g. China, which agreed to eliminate all export duties, thus committing to refrain from imposing such measures on any energy input) would be required to ‘transfer’ such commitments into a new Part v of their Schedules of Concessions in the form of a 0% binding commitment.

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when addressing legitimate public policy goals admitted by art. xx ‘environmental’ exceptions. By ensuring the availability of gatt general exceptions across-the-board, a system-wide framework for scheduling and binding export duties in gatt Schedules would finally reconcile the conflicting interests of import-dependent and net-exporting wto Members under the guiding principle of sustainable development as enshrined in the Preamble of the Marrakech Agreement. 8 Conclusions This chapter aimed at contributing to the trade and energy debate by focusing on the specific issue of export restrictions. It started from the premise that a balanced and efficient regulation of export barriers in the energy sector would contribute to tackle emerging energy concerns such as energy security and the elimination of fossil fuel subsidies in light of the challenge of climate change mitigation. It assessed the adequacy of existing wto rules on export restrictions and accordingly identified the main gaps and inconsistencies inherent to the current disciplines from an energy-specific perspective. Finally, it discussed the merits of an energy-specific approach to advance existing disciplines in the most deficient area of export duties based on the systematization of the Russian model. Such approach could raise the overall level of commitments in the energy sector while still allowing for the systemic applicability of gatt environmental exceptions in a manner consistent with the principle of sustainable development recognized in the Preamble of the wto Agreement.Vid

PART 6 Conflicts and Crimes

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chapter 18

On the Financing of Civil Wars through Natural Resources: Is There a Duty of Vigilance for Third States on the Activities of Trans-National Corporations? Marco Pertile 1 Introduction Among the many possible sources of financing for the warring parties in a civil war, this study will address the exploitation and the selling of natural resources that are located in the territory affected by the conflict.1 It is here submitted that this source of funding and its legal regulation reveal some specificity that is worth being investigated. More specifically, it seems worth underlining at the outset that the financing of civil wars through natural resources shows an interesting paradox. On the one hand, natural resources can be an effective method to ‘liberate’ the warring parties from the influence of third States. At least some natural resources (e.g. alluvial diamonds; gold) are easily tradable to private individuals and trans-national corporations that are not necessarily acting on behalf of a State.2 On the other hand, the presence of natural resources in the territory affected by the conflict is a powerful incentive for the intervention of external actors – and among them of course also States – in the war. Civil wars in territories that are rich in natural resources all too easily seem to become internationalized conflicts.3

1 On the sources of financing of civil wars, see: D. Byman et al., Trends in Outside Support for Insurgent Movements (rand, 2001). 2 Natural resources can be determinant factor of the duration of the conflict as both the Government and the insurgents can trade them for weapons, mercenaries, military equipment, and goods. Even in the absence of any external intervention in support of the parties to a civil war, if the ‘battleground’ is rich in natural resources the parties can finance their war effort indefinitely. P. Le Billon, “The Geopolitical Economy of Resource Wars,” P. Le Billon (ed.), The Geopolitics of Resource Wars (Cass, 2005) 8–13; M. Ross, “A Closer Look at Oil, Diamonds and Civil Wars,” Annual Review of Political Science, 2006, 265–300. 3 M. Humphreys, “Natural Resources, Conflict, and Conflict Resolution,” Journal of Conflict Resolution, 2005, 511.

© koninklijke brill nv, leiden, ���6 | doi 10.1163/9789004305663_020

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Against this background, our main objective lies in describing the legal regime applicable to the financing of civil wars through transactions on natural resources. The concept of civil war will be interpreted in a flexible way, so as to include also coups d’état and minor insurrections. Equally flexible and nonformalistic is our understanding of the word ‘transaction.’ It will be used to cover all of the cases in which natural resources are exchanged in the context of civil wars. These include: contracts (e.g. between private individuals and/or corporations, between governmental authorities and private individuals and/ or corporations); concessions (from governmental authorities to private individuals or corporations); and agreements (between governmental authorities at the inter-state level). The argument is developed as follows. Section 2 provides for an overview of the relevant legal framework. Section 3 describes four different typologies of transactions on natural resources and their legal regime. Section 4 investigates a specific legal issue of particular interest: the possible existence of a duty of vigilance on States for the activities of trans-national corporations and private individuals in financing civil wars. Section 5 presents some concluding remarks. 2

The Legal Framework: An Overview

The international legal regulation of civil wars does not take explicitly into consideration the financing of the conflict through natural resources. Nonetheless, some well-established principles and norms, such as the principle of non-intervention, the territorial dimension of State sovereignty, and the principle of self-determination are relevant for the legal qualification of this question. In essence the legal framework results from the combination of the international regulation of natural resources with the rules on third parties’ intervention in civil wars. Under the first perspective one should note that the primary function of international law with respect to natural resources consists in setting (indirectly) the criteria for their allocation between States. In inter-State relations, access to natural resources is primarily regulated by territorial sovereignty and by the existence of a title to territory or to the maritime zone in which the resources are located.4 Traditionally internal sovereignty can be described as a set of virtually unlimited rights and powers over the population and the territory (and the natural resources) over which the jurisdiction of the State extends 4 I. Brownlie, “Legal Status of Natural Resources in International Law (Some Aspects),” Recueil des cours – Académie de droit international de La Haye 162 (1979) 253.

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itself. When States enter into economic dealings or make war over natural resources, they do so on the assumption that the State having title to territory or to a maritime zone has title also to the resources therein.5 To the contrary, such function of international law does not exist with respect to the allocation of natural resources within the legal order of States. International law tends to be neutral in this respect. When governmental and administrative authorities allocate natural resources to legal persons, natural persons and, possibly, other States they do so on the basis of their domestic legal order.6 When it comes to the regulation of civil wars, with the obvious exception of the ius in bello, the legal framework is mainly related to the behaviour of third parties with respect to the conflict. Whereas international rules, ineffective as they may be, regulate the use of force in international relations in a rather detailed way, in the case of non-international conflicts there are no prohibitive rules against recourse to violence by the warring parties.7 In a nutshell, the legal regulation of civil wars revolves around the prohibition of the use of force, the principle of non-intervention and the principle of self-determination. It can be summarised as follows. Armed intervention by third States in support of the insurgents is prohibited as it amounts to a use of force in international relations and, possibly, to an armed attack.8 Other forms of support for the insurgents such as training and supply of weapons may be 5 M. Pertile, “The Changing Environment and Emerging Resource Conflicts,” M. Weller (ed.), Oxford Handbook on the Use of Force (Oxford University Press, 2015) 1081–1082. 6 Some of the rules of human rights protection (on indigenous peoples and natural resources, the human right to water, and the human right to food) might be seen as limited exceptions to this neutrality of international law as they tend to impose on State authorities obligations concerning the allocation of natural resources within their domestic legal orders. However, it is worth recalling that the right to exploit natural resources is primarily exercised by governmental authorities on behalf of the State. The internal dimension of the principle of permanent sovereignty over natural resources does not attribute to the peoples of independent States an autonomous right to dispose of natural resources opposable to the existing state structures. See: D. Dam de Jong, “Armed Opposition Groups and the Right to Exercise Control over Public Natural Resources: A Legal Analysis of the Cases of Libya and Syria,” Netherlands International Law Review, 2015, 15–19. 7 O. Corten, The Law against War (Hart Publishing, 2010) 127–134. In the sense of the mere existence of tendencies towards the extension of the scope of the prohibition of the use of force to cover also internal situations, see, A. Tancredi, “Secession and Use of Force,” C. Walter et al. (eds), Self-determination and Secession in International Law (Oxford University Press, 2014) 76. 8 icj, Case concerning Military and Paramilitary Activities in and against Nicaragua (Nicaragua v United States of America), Merits, Judgment of 27 June 1986, icj Reports, 1986, 103–104, para. 195.

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qualified either as violations of the prohibition of the use of force in international relations or, in any case, as violations of the principle of non-intervention.9 Although the conclusion of agreements and contracts on natural resources with third parties is a common pattern in the financing of internal conflicts, in State practice the issue is rarely discussed in the open as it is probably overshadowed by more blatant forms of intervention. In the Eighties of the last century the practice of the United States came close to openly invoking the right to provide financial assistance to insurgents that were qualified as ‘freedom fighters.’ Such assistance ‘was portrayed as “non lethal” or “humanitarian” aid.’10 More recently, in the case of the ongoing civil war in Syria, the European Union has explicitly lifted its sanctions on oil with respect to transactions operated in consultation with the insurgents. It is interesting to note that the relevant Council Decision is aimed inter alia at ‘(…) helping the Syrian civilian population, meeting humanitarian concerns (…).’11 However, in general terms, the Declaration on Principles of International Law concerning Friendly Relations and two other General Assembly’s resolutions classify the financing of a ‘civil strife’ as a form of intervention ‘in matters within the domestic jurisdiction’ of a State.12 Along similar lines, the taxonomy proposed by the icj in the Nicaragua case, and confirmed in drc v Uganda, classifies the financing of insurgents, with no exception, as a violation of the principle of non-intervention.13 One should moreover consider that the general legal framework described so far is frequently complemented by resolutions adopted by the Security 9

Ibid., 104, para. 195. On the scope and the content of the principle of non-intervention in areas other than the use of force, see: M. Jamnead and M. Wood, “The Principle of Nonintervention,” Leiden Journal of International Law, 2009, 345–381. 10 C. Gray, International Law and the Use of Force (Cambridge University Press, 2008) 106. 11 Art. 6, Council Decision 2013/255/CFSP of 31 May 2013. See: T. Ruys, “Of Arms, Funding and ‘Non-lethal Assistance’ – Issues Surrounding Third-State Intervention in the Syrian Civil War,” Chinese Journal of International Law (2014) 47–50. 12 See unga Res. 2625 (xxv) (24 October 1970) (hereafter: Declaration on Friendly Relations). For similar language, see also: Declaration on the Inadmissibility of Intervention and Interference in the Internal Affairs of States, unga Res. 36/103 (9 December 1981) para. ii, lett N (hereafter: Declaration on the Inadmissibility of Intervention); Declaration on the Inadmissibility of Intervention in the Domestic Affairs of States and the Protection of their Independence and Sovereignty: unga Res. 2131 (xx) (21 December 1965) para. 2. 13 Case concerning Military and Paramilitary Activities, 54, para. 115; icj, Case concerning Armed Activities in the Territory of the Congo (Democratic Republic of the Congo v Uganda), Judgment of 19 December 2005, icj Reports, 2005, 227, para. 164.

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Council.14 Transactions on natural resources taking place during civil wars might be prohibited by Chapter vii resolutions adopted by the Security Council.15 In the light of this legal framework, under certain circumstances, the conclusion of an agreement or a contract on natural resources with the insurgents by a third State may amount to an unlawful intervention in a civil war. With respect to transactions in support and upon request of governmental authorities, however, the law is less clear. Positions on the legal qualification of intervention in support of Governments are diversified and vary from the thesis according to which the established authorities may always exercise their sovereign right of requesting foreign help to the thesis that foreign intervention in civil wars is in any case precluded by the principle of non-intervention and, possibly, also by the principle of self-determination.16 Under the perspective of the principle of non-intervention, state practice and legal scholars tend to draw a distinction on the basis of the intensity of the conflict.17 Whereas 14

For a comprehensive overview of how the Security Council engaged with civil wars in the period between 1989 and 2006, see: J. Cockayne, C. Mikulaschek, C. Perry, The United Nations Security Council and Civil War: First Insights from a New Dataset (International Peace Institute, 2010). 15 In tackling civil wars the Security Council has frequently adopted sanctions aimed at stopping the export of specific resources from the concerned country. See: P. Le Billon, “Natural resources, armed conflicts, and the un Security Council,” 21 May 2007, Briefing Paper No. 07–001 – Liu Institute for Global Issues. 16 R. Kolb, Ius contra bellum (Bruylant, 2009) 324–329; P. Malanczuk, Akehurst’s Modern Introduction to International Law (Routledge, 1997) 322–324. Ruys, “Of Arms, Funding and ‘Non-lethal Assistance’,” op. cit., 40–50. 17 Gray, International Law op. cit., 82; A. Tanca, Foreign Armed Intervention in Internal Conflict (Martinus Nijhoff Publishers, 1993) 17–37; I. Brownlie, International Law and the Use of Force by States (Oxford University Press, 1963) 324–325; Ruys, “Of Arms, Funding and ‘Non-lethal Assistance’,” op. cit., 40. This is also the approach taken by the International Law Institute, which adopted two different resolutions dealing, respectively, with civil wars (Institut de droit international, Session of Wiesbaden – 1975, The Principle of NonIntervention in Civil Wars, 14 August 1975) and with military assistance upon request (Institut de droit international, Session de Rhodes – 2011, Present Problems of the Use of Force in International Law Sub-Group C – Military Assistance on Request, 8 September 2011). The latter only ‘applies to situations of internal disturbances and tensions, such as riots, isolated and sporadic acts of violence and other acts of a similar nature, including acts of terrorism, below the threshold of non-international armed conflict.’ Contra: Y. Dinstein, Non-International Armed Conflicts in International Law (Cambridge University Press, 2014) 78–79, who quotes the ‘widely acclaimed’ French interventions in Mali (2013) and Cote d’Ivoire (2010) in support to Governments ‘imperilled by insurgencies.’

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f­ oreign intervention in support of Governments in the case of domestic unrest and riots is always possible, when the conflict escalates to a civil war external interventions are precluded. Moreover, under the perspective of the principle of self-determination, it has been pointed out that the essence of civil wars often lies in the re-allocation of sovereign powers through the exercise by the people of the State of their right to (internal) self-determination.18 As a result of this, external interventions on any side would be prohibited.19 When Do Transactions on Natural Resources Amount to Financing a Civil War? Against this background, a crucial preliminary question regards the identification of the transactions on natural resources that may be regarded as financing the civil war. Is any transaction on natural resources, which is carried out in the context of a civil war, prohibited by the principle of non-intervention and the principle of self-determination? Or does one need to identify a specific intent of supporting one of the parties in the war and/or a relation of causality between the conflict and the transaction? On a point of fact, those are very difficult issues because of the unavoidable problems of evidence. Theoretically, it may be argued that only the economic dealings that have a significant impact on the war and that are concluded with a view to financing the war would amount to a breach of the principle of nonintervention in civil wars and to a breach of the principle of self-determination.20

2.1

18 Corten, The Law against War op. cit., 289–290; Brownlie, International Law op. cit., 327; J. Dugard, International Law – A South African Perspective (Juta & co, 1994) 325. For criticism of this position, see: G. Nolte, “Secession and External Intervention,” M. Kohen (ed.) Secession (Cambridge University Press, 2006) 84–86; L. Doswald-Beck, “The Legal Validity of Intervention by Invitation of the Government,” British Yearbook of International Law, 1985, 207. 19 One should however consider that there are elements in State practice according to which support for governmental authorities would be admissible in the case of subversion, which is when the insurgents are receiving foreign help. Such right of intervention would be based on the right to collective self-defence. See Brownlie, International Law op. cit., 325–326; Malanczuk, Akehurst’s Modern Introduction op. cit., 324–325. In the sense of the existence of a right to counter-intervention in support of the insurgents when foreign aid is given to governmental authorities, see: O. Schachter, “The Right of States to Use Armed Force,” Michigan Law Review (1984) 1642–1645. For criticism of this view: Tanca, Foreign Armed Intervention op. cit., 126–134. 20 According to the 1975 resolution of the International Law Institute (Session of Wiesbaden – 1975: The Principle of Non-Intervention in Civil Wars, Art. 2(2)(d)): ‘States shall refrain from … giving any party to a civil war any financial or economic aid likely to influence the outcome of that war, without prejudice to the exception provided for in Article 3(b);.’

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The contrary view would lead to the unreasonable result of considering third States automatically under an obligation to impose an embargo on the warring parties. Considering that the spectrum of the behaviours that breach the principle of non-intervention is constituted by intentional acts of third States, there should be no obligation to abstain from transactions on natural resources that do not have a specific relationship with the financing of the war.21 Respecting agreements stipulated with the established Government before the beginning of the war, for instance, would not amount to an unlawful intervention for lack of the necessary intent on the part of the acquiring State. One should however bear in mind that the scope of the principle of nonintervention is wider and does not prohibit only the conducts that amount to intervention in the war. Indeed, the principle precludes any coercive intervention by a State in the ‘internal affairs’ of another.22 Since the allocation of the natural resources of the territory is one of the most important prerogatives of State sovereignty, when a third State stipulates an agreement on such resources with the insurgents (that is with a non-sovereign entity) this conduct may be qualified as a form of interference in the internal affairs of the actual sovereign even irrespectively of the qualification of such agreements as acts of intervention in the war. In situations of uncertainty on the identity of the governmental authorities, the principle of non-intervention requires therefore that third States abstain from new transactions involving natural resources. By stipulating an agreement a non domino, third States would dispose of the resources without the consent of the sovereign, thereby unlawfully exercising their jurisdiction in the internal affairs of another State. 3

On the Financing of Civil Wars through Natural Resources: A Taxonomy of Cases

In light of the above, the most significant issue for our purposes is whether and under what conditions transactions involving natural resources can be regarded as unlawful interventions in civil wars. As the previous section should have made apparent, the legal framework is highly dependent on two different criteria: (a) the identity (and the legal

21 22

Art. 3(b) specifies that States may: ‘continue to give any technical or economic aid which is not likely to have any substantial impact on the outcome of the civil war.’ See, along these lines, the position of the delegation of Uganda in drc v Uganda: Public sitting held on Wednesday 27 April 2005, at 3 pm, cr 2005/15, 22–23. Jamnead and Wood, “The Principle of Non-intervention,” op. cit., 347–349.

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status) of the parties involved in the transaction; (b) the intensity and the characteristics of the conflict. According to the players involved, in civil wars one can thus distinguish four different types of transactions in natural resources (with the first party ceding the resources and the second one acquiring them): (a) (b) (c) (d)

State – State; State – corporations or private individuals; Insurgents – State; Insurgents – corporations or private individuals.

The legal qualification of each case will be described below, taking into account its interplay with the intensity and the characteristics of the conflict. When the Established Government Sells the Resources: Transactions at the Inter-State Level In principle, if the entity selling the resources were the established Government, transactions on natural resources to finance the war effort would be lawful. Under international law, the entity that effectively controls the territory represents the State, is endowed with sovereign rights, and is entitled to request foreign assistance disposing of the natural resources over which it has jurisdiction. However, if this is true for low-intensity conflicts, the realities of civil wars are much more complex. When the conflict reaches a certain level of intensity the very essence of sovereignty – territorial control – is put into question and with the passage of time there will probably arise a situation in which the identity of the ‘Government’ becomes uncertain.23 In such situation, international law tends to presume that the established Government still is the entity entitled to represent the State and dispose of natural resources.24 However, a sound legal argument can be made for the existence of an obligation to abstain from any kind of intervention in the civil war. The very fact that the Government is not capable of exercising its sovereign attributions over territory and population is evidence that sovereignty is being put into question. When territorial control is disputed, in the presence of competing claims to

3.1

23

24

R. Falk, S. Mendlovitz, S. Kim (eds), International Law: The Strategy of World Order (Transaction Publishers, 1966) 327–331; Malanczuk, Akehurst’s Modern Introduction op. cit., 323–324. Ruys, “Of Arms, Funding and ‘Non-lethal Assistance’,” op. cit., 37–39; Dam de Jong, “Armed Opposition Groups,” op. cit., 8–12.

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governmental status, the international community is generally divided into different factions. Some States recognise a party to the civil war as the legitimate Government, whereas some others take the opposite view. In such situation of uncertainty, it is here submitted that the legality of the cession of the resources should not depend on recognition on the part of third States. The better view is that third parties are under an obligation to abstain from financing the parties and this is so essentially for a logical argument: considering that the identity of the Government is not ascertainable, third States cannot identify the entity that has the power to request foreign assistance and to dispose of natural resources. Given this situation of doubt, respecting the principle of non-intervention would entail the abstention from financing the warring parties. In addition, as pointed out above, it may be argued that during civil wars the attribution of sovereign rights over the territory (and the resources) is being re-determined through an exercise of internal self-determination by the people of the State.25 As has been noted, paraphrasing Malcolm X, self-determination could be exercised not only by ballot but also by bullet.26 Respect for the right to internal self-determination of the people of the State affected by the conflict requires therefore that third States abstain from financing the warring parties through transactions on natural resources. The principle of non-intervention and the principle of self-determination thus point to the same direction and complement each other. There is however a fundamental difference: whereas the first norm, for interventions that do not involve the use of force, establishes a bilateral legal relationship, the second has arguably erga omnes effects.27 All of the States of the international community may claim the existence of a breach of self-determination. On the contrary, a possible breach of the principle of non-intervention may only be raised by the State concerned. When the Established Government Sells the Resources: Transactions between State and Corporations or Private Individuals The case of transactions between the State and corporations or private individuals is relatively straightforward. Even ignoring the fact that the decision on the selling of the resources is attributable to the sovereign power, there is considerable doubt on whether the principle of non-intervention and the

3.2

25 Tanca, Foreign Armed Intervention op. cit., 111. 26 Dugard, International Law op. cit., 325. 27 As held by the International Court of Justice in icj, East Timor (Portugal v Australia), Judgment of 30 June 1995, icj Reports, 1995, 102, para 29.

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principle of self-determination are binding on the acquiring party, in this case a non-state actor. International responsibility of trans-national corporations for gross violations of international law is probably desirable, but this is not the present state of international law. In a political perspective this could be lamentable. Even within the State natural resources are the object of campaigns of depredation and their exploitation can bring about grave breaches of human rights such as the destruction of the ancestral lands of indigenous peoples.28 Although such behaviours may be legally qualified as violations of human and indigenous rights, under the perspective of sovereignty, at the inter-state level, the granting of concessions by the concerned Governments is done ‘under the colour of law.’ To a certain extent, the concept of sovereignty is oblivious to social realities such as the fact that the historical and cultural ties between the peoples suffering from the negative externalities of the exploitation and the governmental elites authorizing it is often tenuous, to say the least. In several cases transnational corporations deeply influence the political life of States thus seriously undermining the right to internal self-determination of the peoples concerned. It has been reported, for instance, that a French publicly owned corporation financed for years both the Governments and the insurgents of a number of African States in the Gulf of Guinea in exchange of oil concessions.29 If the case could be made for the attribution of such conducts 28

29

Transnational corporations, which had been granted concessions by the Governments of Malaysia and Indonesia, for instance, penetrated in the forests of Borneo with the assistance of private security companies and the army. Indigenous tribes living in the forest since time immemorial attacked the workers because the exploitation activities were destroying their ancestral lands. See: M. Klare, Resource Wars – The New Landscape of Global Conflict (Henry Holt, 2002) 196–197. There is abundance of other examples. The insurrection of the inhabitants of Bougainville, who had seen the environment of their island severely damaged by the extraction of copper, was countered by the army of Papua New Guinea with the assistance of the corporation which had been exploiting the resource. See: Ibid., 202–209. The dynamic of the relationships between areva, a French state-owned company, the Tuareg tribes of Niger and the Government of Niger is similar. See, J.-M. Bezat, “Face aux Chinois, Areva obtient l’exploitation d’une mine d’uranium géante au Niger,” Le Monde (15 January 2008) 15. See: “Rapport d’information de Mme Marie-Hélène Aubert, MM. Pierre Brana et Roland Blum, déposé en application de l’article 145 du Règlement par la commission des affaires étrangères, sur le rôle des compagnies pétrolières dans la politique internationale et son impact social et environnemental” (13 octobre 1999), Tome 1, 110–125 at: http://www .assemblee-nationale.fr/legislatures/11/pdf/rap-info/i1859-01.pdf. In 1996, the ceo of Elf Aquitane declared: ‘Elf s’introduit en Angola, au Nigeria et plus récemment au Tchad à la demande du gouvernement français qui veut étendre sa zone d’influence et la sécuriser

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to a State, then a breach of the principle of non-intervention or the right to selfdetermination could be found. Otherwise, at the international level, these issues are addressed mainly by non-governmental self-regulatory initiatives, such as the oecd Guidelines for Multinational Enterprises30 and the Extractive Industry Transparency Initiative,31 and by international conventions such as the United Nations Convention against Corruption and the oecd Anti-Bribery Convention.32 Those instruments focus on increasing transparency for revenues and payments in the extractive industry and on obligations for States to adopt and enforce internal legislation criminalising corruption. In addition, as will be seen in Section 4, the view could be taken that, in extreme circumstances, States may also have a duty to prevent some of the most destabilizing conducts of transnational corporations. When the Insurgents Sell the Resources: Transactions between Insurgents and States As has been mentioned, natural resources are often an essential source of funding for insurgents. In some cases the appropriation of natural resources is also (or becomes) the primary purpose for their participation in the conflict. Curtailing the access of insurgents to natural resources may thus be one of the most important strategies to put the conflict to an end. The importance of natural resources is demonstrated by their re-allocation through peace agreements or amendments to the legal order of the State at the end of the hostilities. In the Sierra Leone civil war, for instance, the Lomé Accord granted the leader of the ruf not only an amnesty, but also the Vice-Presidency of the

3.3

grâce à des liens économiques solides,’ quoted in R. Buijtenhuijs, Transition et élections au Tchad, 1993–1997: Restauration et recomposition politique (Karthala, 1998) 85. 30 oecd Guidelines for Multinational Enterprises, oecd Publishing, 2011 at http://dx.doi .org/10.1787/9789264115415-en, Guideline ii.a.15 reads: ‘Enterprises should (…) Abstain from any improper involvement in local political activities’; guideline vii.7 reads: ‘Enterprises should not, directly or indirectly, offer, promise, give, or demand a bribe or other undue advantage to obtain or retain business or other improper advantage. Enterprises should also resist the solicitation of bribes and extortion. In particular, enterprises should: (…) Not make illegal contributions to candidates for public office or to political parties or to other political organisations. Political contributions should fully comply with public disclosure requirements and should be reported to senior management’. 31 The eiti Standard, eiti International Secretariat, 11 July 2013, at https://eiti.org/files/ English_EITI%20STANDARD_11July_0.pdf. 32 Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (adopted 21 November 1997, entered into force 15 February 1999) at http:// www.oecd.org/daf/anti-bribery/ConvCombatBribery_ENG.pdf.

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country and the Chairmanship of the Commission for the Management of Strategic Resources, National Reconstruction and Development.33 Similarly, the Lusaka Protocol, which attempted to put the civil war in Angola to an end, granted the insurgents of unita a number of posts in the central, the provincial, and the local administrations. Among them was the post of ‘Minister of Geology and Mines.’34 During the conflict, when the entity selling the resources is the insurrectional party, the legal qualification of transactions on natural resources is, again, asymmetric. From the perspective of the Government and under the internal legal order of the State, the behaviour of insurrectional groups selling the resources to third States is illegal. However, such behaviour is legally neutral under international law. Despite some contrary views in the literature, as has been indirectly confirmed by the International Court of Justice, the decision to initiate a civil war is not prohibited by international law35 and the principles of territorial integrity and permanent sovereignty over natural resources do not bind the insurgents.36 Conversely, the position of the acquiring State is highly problematic. The acquisition of natural resources from the insurgents by third States may be qualified by the established Government as a breach of its sovereign rights and as an unlawful intervention in its internal affairs. For this reason, transactions over natural resources between the insurgents and third States would probably be invalid for lack of title to the resources on the part of the ceding party. Moreover, for the reasons explained above, transactions on natural resources, which favour one of the warring parties in a civil war, might be considered as violations of the principle of self-determination. On a different note, the stipulation of an agreement a non domino not only raises issues of State responsibility, but may also affect the legal validity of the agreement itself. Agreements on natural resources stipulated with the 33

34

35 36

Letter dated 12 July 1999 from the chargé d’affaires ad interim of the Permanent Mission of Togo to the United Nations addressed to the President of the Security Council, un Doc S/1999/777, 12 July 1999, Annex, Peace Agreement between the Government of Sierra Leone and the Revolutionary United Front of Sierra Leone, Art. vii, par. 12. Letter dated 9 December 1994 from the Permanent Representative of Angola to the United Nations addressed to the President of the Security Council, Annex, Lusaka Protocol, Annex, Document relating to unita’s Participation in the Central, Provincial and Local Administration and in the Diplomatic Missions Abroad in accordance with Art. i of the Modalities of National Reconciliation, un Doc S/1994/1441, 22 December 1994. icj, Accordance with International Law of the Unilateral Declaration of Independence in Respect of Kosovo, Advisory Opinion, icj Reports, 2010, 403, 437–438, paras 80–81. G. Abi-Saab, “Conclusions,” Kohen (ed.) Secession op. cit., 474; Tancredi, “Secession and Use of Force,” op. cit., 76.

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insurgents would possibly be invalid under the general principle nemo dat quod non habet.37 According to the latter, a cession of rights over things may only be effectuated by the natural or juridical person who has an appropriate title to such things.38 The principle nemo dat quod non habet is probably based on ‘legal logic’ and is confirmed by the practice on treaties over natural resources. Considering that treaties on trans boundary resources and joint development agreements are always predicated upon the existence of a title to territory or to a maritime zone, there is no legal basis for an agreement on natural resources over which the stipulating parties do not have title. The obvious question in this respect is where and how a legal argument of this kind can be raised. Admittedly, the present author is not aware of any relevant precedent, but it can be presumed that the argument of the invalidity of the agreement for lack of title of the ceding party could be used, on a political level, in national parliaments, when scrutinizing the policies of the executive, or, under a legal perspective, before the national courts of the concerned States. An additional case of State responsibility could arise when private juridical persons or individuals act ‘under the instructions’ or ‘under the direction and control’ of the governmental authorities of a State in financing one of the parties to a civil war in exchange of the rights of exploitation of the resources of the territory.39 In such a situation, due to the existence of a qualified link between a corporation and the State, the conduct of the former is attributable to the latter and what seems to be a transaction between non-state entities is actually an economic dealing involving a State as the acquiring party. The private enterprise is generally State-owned, but that is not the crucial factor to attribute its conduct to a governmental authority.40 37

38

39

40

On the principle nemo dat quod non habet, see: icj, Case Concerning the Land and Maritime Boundary between Cameroon and Nigeria (Cameroon v Nigeria: Equatorial Guinea Intervening), Judgment of 10 October 2002, icj Reports, 2002, para. 204; Island of Palmas (Netherlands v usa), 4 Apr 1928, ii riaa 842–843 (hereafter: Island of Palmas Arbitration). See also: O. Elias and C. Lim, ““General Principles of Law,” “Soft” Law and the Identification of International Law,”” Netherlands Yearbook of International Law, 1997, 31–32; I. Brownlie, Principles of Public International Law (Oxford University Press, 2008) 121–122. R. Clark, “The Timor Gap: The Legality of the ‘Treaty on the Zone of Cooperation in an Area between the Indonesian Province of East Timor and Western Australia’” Pace Yearbook of International Law (1992) 92–94. See Art. 8, Responsibility of States for International Wrongful Acts, Yearbook of the International Law Commission, 2001, vol. ii (Part Two). In this sense: Jamnead and Wood, “The Principle of Non-intervention,” op. cit., 371. Draft Articles on Responsibility of States for Internationally Wrongful Acts, with commentaries, Yearbook of the International Law Commission, 2001, vol. ii (Part Two), 43.

396

Pertile

Two cases may exemplify how private enterprises and governmental authorities jointly intervene in financing civil wars through the exploitation of natural resources. In 2011, the Transitional National Council, representing the insurgents in the Libyan civil war, announced that Qatar Petroleum, a State owned enterprise, was ready to market the oil extracted from the fields that they controlled.41 On the ensuing day, the Government of Qatar announced that there were political and legal reasons to recognize the Transitional National Council as ‘the sole legitimate representative of the Libyan people.’ The authorities of Qatar felt the need to have recourse to this recognition as they probably regarded the financing of the insurgents as scarcely compatible with international law. In an official declaration they acknowledged that they directed the action of the corporation and mentioned that ‘The decision to sell Libyan oil is the exclusive prerogative of the Transitional National Council, as the legal authority with effective control over the territories under its jurisdiction.’42 The decision of Qatar was met favourably by the United States43 but merely acknowledged by the States participating in the London Conference of March 2011.44 The final communiqué noted ‘the offer of Qatar to facilitate the sale of Libyan oil where consistent with international law’ and stressed that the proceeds would have been used to meet the ‘humanitarian needs’ of the people of Libya.45 The participants in the Conference evidently took the 41 42

43 44

45

A. Dziadosz, “Rebels say Qatar Ready to Market East Libyan Oil,” Reuters (27 March 2011) at http://www.reuters.com/article/2011/03/27/us-libya-rebels-oil-idUSTRE72Q1ON20110327. Letter dated 31 May 2011 from the Chargée d’affaires a.i. of the Permanent Mission of Qatar to the United Nations addressed to the Secretary-General, un Doc S/2011/346, 7 June 2011. On the political nature of most of the acts of recognition of insurgents rendered during the Syrian and the Libyan civil wars, see: S. Talmon, “Recognition of Opposition Groups as the Legitimate Representative of a People,” Chinese Journal of International Law (2013) 219–253. The statement of the Government of Qatar is however problematic in legal terms as it acknowledges, before the end of the conflict, a possible right of the insurgents to exploit the natural resources of a portion of the State’s territory. “US Supports Qatar’s Marketing of Libyan Oil,” Reuters (12 April 2011) at http://www .reuters.com/article/2011/04/12/us-libya-usa-oil-idUSTRE73B6YN20110412. The States participating in the conference were: Albania, Belgium, Bulgaria, Canada, Croatia, Czech Republic, Denmark, Estonia, France, Germany, Greece, Hungary, Italy, Iraq, Jordan, Kuwait, Latvia, Lebanon, Lithuania, Luxembourg, Malta, Morocco, Netherlands, Norway, Poland, Portugal, Qatar, Romania, Slovakia, Slovenia, Spain, Sweden, Tunisia, Turkey, uae, uk, usa. Annex to the letter dated 29 March 2011 from the Permanent Representative of the United Kingdom of Great Britain and Northern Ireland to the United Nations addressed to the President of the Security Council – The London Conference on Libya, un Doc S/2011/204, 29 March 2011.

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view that the financing of a party to a civil war other than for humanitarian needs was unlawful. In a less recent case (2007) the Government of Niger accused a French public-owned enterprise of financing the Tuareg rebellion and expelled its general director.46 According to the President of Niger the financing of the Tuareg by the French enterprise aimed at coercing his country not to assign to a Chinese firm a concession for the exploitation of a new mine of uranium in Imouraren.47 The French Government intervened at the highest level and the issue was settled with the attribution of such concession to the French enterprise.48 Depending on the factual circumstances of the case, in such scenarios the enterprise is probably acting under the instructions or under the direction or control of the State, thus engaging the responsibility of the latter for breach of the prohibition of intervention in civil wars or in the internal affairs of the territorial State. For purposes of attribution under the law of State responsibility, the relevant element to be assessed is the factual relationship of control between the governmental authorities and the private enterprise. When the Insurgents Sell the Resources: Transactions between Insurgents and Corporations or Private Individuals In several cases, however, the financing of the parties to a civil war through natural resources is attributable to private enterprises or individuals and third States are not directly involved. In principle, the conduct of private parties in such transactions is not covered by norms that have been developed in classical inter-state relations such as the prohibition of intervention in civil wars or the principle of self-determination. As has been said in Section 3.2, the financing of civil wars by corporations and private individuals dealing with natural resources largely takes place in a legal vacuum. If this is true for general international law, there are, however, three additional issues that are worth being discussed in this connection: the determinations of the Security Council with respect to civil wars and to their linkage with natural resources; the functioning of a certification scheme such as the Kimberley Process; and the possible role of international criminal law.

3.4

46

47 48

“Le directeur général d’Areva au Niger expulsé par le gouvernement,” Le Monde avec afp (26 July 2007) at www.lemonde.fr/afrique/article/2007/07/26/le-directeur-general-d -areva-au-niger-expulse-par-le-gouvernement_939499_3212.html. “Le Niger accuse Areva de soutien aux rebelles,” L’Obs avec Rue89 (28 July 2007) at http:// rue89.nouvelobs.com/2007/07/28/le-niger-accuse-areva-de-soutien-aux-rebelles. Bezat, “Face aux Chinois,” op. cit.

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Pertile

With regard to the action of the Security Council, it is important to note that the Council has frequently intervened in (internationalized) civil wars taking the view that such conflicts constituted threats to the peace and openly acknowledging the role of natural resources in fuelling them and in favouring their continuation. For our purposes, the most significant measures adopted by the Council are commodity sanctions directly related to natural resources and/or sanctions targeting individuals and groups involved in the exploitation of natural resources in the context of armed conflicts. With regard to the situation in Angola,49 Liberia,50 Sierra Leone,51 Cote d’Ivoire,52 and Cambodia,53 the Council imposed bans on trade in specific resources such as oil, diamonds, and timber. In the cases of Angola, Sierra Leone, and Cote d’Ivoire the relevant sanctions were adopted with a view to favouring the implementation of peace plans by forcing the parties to respect them. In Sierra Leone and Angola resources under control of the Government were not covered by the embargo and governmental authorities were invited to establish a certification scheme to ensure that trade in the resources respected the laws in force in the country.54 With regard to the situation in the Democratic Republic of the Congo, the Council did not adopt bans, but imposed targeted measures on individuals and groups involved in illegal trafficking in natural resources.55 Recently, in the case of Libya, the Security Council condemned the attempts to ‘illicitly’ exploit crude oil by a group of insurgents that controlled the port of Es Sider and were able to fill a commercial tanker that subsequently left the port. The relevant resolution authorized member States to inspect designated vessels on the high seas and, in case, to ‘direct them to take appropriate actions to return the crude oil, with the consent of and in coordination with the Government of Libya, to 49 50 51 52 53

54

55

unsc Res. 864 (1993), para. 19 (sanctions on oil); unsc Res. 1173 (1998), para. 12, lett b (sanctions on diamonds). unsc Res. 1343 (2001), para. 2(c) (sanctions on diamonds); unsc Res. 1521 (2003), paras 6–13 (sanctions on timber). unsc Res. 1132 (1997), para. 6 (sanctions on oil); unsc Res. 1306 (2000), para 1 (sanctions on diamonds). unsc Res. 1643 (2005), para. 6 (sanctions on diamonds). unsc Res. 792(1992), paras 13–14. The Council merely supported the decision of the Cambodian authorities to set a moratorium on the export of logs and requested that a similar moratorium be established ‘on the export of minerals and gems.’ unsc Res. 1173 (1998), para. 12(b) (sanctions on diamonds, Angola); unsc Res. 1306 (2000), paras 1, 5 (sanctions on diamonds, Sierra Leone). Such certification schemes are the model upon which the Kimberley process is based and were developed in this context by the Security Council. unsc Res. 1857 (2008), para. 4(g).

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Libya.’56 With regard to the situation in Syria, where the Islamic State of Iraq and Syria and other armed groups were able to finance themselves through the exploitation of a number of oilfields, the Council made reference to the concept of terrorism and to its previous resolutions adopted against Al-Qaida and the entities associated with it. The relevant resolution condemned ‘any engagement in direct or indirect trade involving isil, anf and all other individuals, groups, undertakings and entities associated with Al-Qaida’ and reiterated that ‘such engagement could constitute financial support’ for terrorist entities.57 In the light of the cases described above, one of the most relevant aspects of the practice of the Council lies in the fact that sanctions over natural resources often target only one of the parties in the civil war, which is identified as the main obstacle to the peace.58 In complex situations in which the international community is divided, the intervention of the Security Council tends to aggregate the reaction of member States against one of the warring parties. Sanctions are employed to deprive one of the parties of the means to sustain the war effort, but not necessarily as tools to bring the conflict quickly to an end. As a result of this, the application of the legal framework described so far can be fundamentally altered by the intervention of the Security Council, which may ban transactions on natural resources between the insurgents and private enterprises or individuals. Among the informal instruments that are aimed at countering the inflammatory role of natural resources, the Kimberley Process is undoubtedly the most famous and the most relevant for the typology of transaction that is examined in this section. It is an international certification scheme established as a result of a joint initiative of civil society, governments and industry. Participating countries must adopt appropriate legislation and institutions to certify that their international shipments of rough diamonds are ‘conflict free.’ Among participating States, only rough diamonds that are accompanied by a Kimberley Process certificate can be traded. In other words, participants are not allowed to trade rough diamonds with non-participants. Interestingly enough, the definition of conflict diamonds is limited to ‘rough diamonds used by rebel movements or their allies to finance conflict aimed at undermining 56

57 58

unsc Res. (2014), para. 5. The resolution was adopted two days after the boarding and the seizing by the us Navy upon request of the Libyan Government of the stateless commercial tanker ‘Morning Glory’ on the high seas. See: Department of Defence Statement on Boarding of Commercial Tanker Morning Glory, Release No: NR-126-14, March 17, 2014, at http://archive.defense.gov/news/newsarticle.aspx?id=121847. unsc Res. (2014), paras 13–14. unsc Res. (1998), paras 11–12, 16.

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Pertile

legitimate governments.’59 Therefore, the scheme does not tackle the linkage between natural resources and conflicts in general terms, but merely aims at ensuring the stability of established Governments. Diamonds that are being used to finance oppressive and dictatorial Governments are not covered by the definition of ‘conflict diamonds’ enshrined in the Kimberley Process.60 Finally, an additional legal tool to tackle the behaviour of private individuals and individuals acting on behalf of transnational corporations is offered by international criminal law and, more precisely, by the possibility of ‘revitalizing’ the war crime of pillage.61 The use of the crime of pillage to qualify situations in which economic dealings on natural resources finance the insurgents requires however a flexible interpretation of the constitutive elements of the crime.62 Transactions in natural resources through which private individuals and corporations finance the war are indeed quite different from the traditional understanding of pillage as ‘theft in war’ committed by soldiers on the battlefield. In particular, in most cases on natural resources individuals and transnational corporations do not appropriate the resources directly from the owner (generally the State, represented by the Government), but from the ones who dispossessed it (the insurgents). Whereas the jurisprudence of the Nuremberg tribunals and of post-World War Two military courts shows that these forms of indirect appropriation can be covered by the crime of pillage, there seems to be no recent cases adopting this approach.63 4

Is There a Duty of Vigilance on Third States for the Activities of Private Persons?

In conclusion, it remains to be seen whether States can be called to respond indirectly for transactions between non-State entities. In other words, are 59

Kimberley Process Certification Scheme, 5 November 2002, Section i, Definitions, at www.kimberleyprocess.com/documents/10540/11192/KPCS%20Core%20Document?vers ion=1.0&t=1331826363000. 60 This aspect became apparent when the Government of Zimbabwe was able to trade as ‘conflict free’ diamonds that had been mined in the region of Marange notwithstanding the fact that in such region the army had committed grave breaches of human rights to expropriate the artisanal miners. See: Global Witness, “Diamonds: A Good Deal For Zimbabwe?” February 2012, at http://www.globalwitness.org/sites/default/files/library /A%20GOOD%20DEAL%20FOR%20ZIMBABWE_1.pdf. 61 L. van den Herik, D. Dam-De Jong, “Revitalizing the Antique War Crime of Pillage: The Potential and Pitfalls of Using International Criminal Law to Address Illegal Resource Exploitation during Armed Conflict,” Criminal Law Forum (2011) 237–273. 62 J.G. Stewart, Corporate War Crimes (Open Society Institute, 2011) 33–37. 63 Ibid., 96–124.

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there cases in which States are responsible for negligence, for not having prevented the financing of civil wars by non-State entities? Is there a duty of vigilance for States and, specifically, a duty to prevent the financing of civil wars by private parties entertaining economic dealings on natural resources? It is here submitted that State practice shows at least some indications in this sense. In extreme cases, when a party to the civil war comes close to acting on behalf of a private juridical person to appropriate the resources, it may be argued that the States that have a qualified link with such private juridical person have a duty of vigilance on its conduct. Such obligation would stem both from the general principles applicable to this situation and from a limited number of specific cases of practice. One should perhaps start by noting that the language used by the un General Assembly in the Declaration on Friendly Relations and in the Declaration on the Inadmissibility of Intervention is based on a precise conception of sovereignty – as entailing not only rights but also duties – that emerges also in the jurisprudence of the International Court of Justice. As will be seen, this conception seems to be confirmed by three cases of practice dealing with the financing of civil wars through natural resources. The Declaration on Friendly Relations, which is regarded as a document mirroring customary law, clarifies that: Every State has the duty to refrain from organizing, instigating, assisting or participating in acts of civil strife or terrorist acts in another State or acquiescing in organized activities within its territory directed towards the commission of such acts, when the acts referred to in the present paragraph involve a threat or use of force (…)64 and that: (…) no State shall organize, assist, foment, finance, incite or tolerate subversive, terrorist or armed activities directed towards the violent overthrow of the regime of another State, or interfere in civil strife in another State.65 The Declaration on the Inadmissibility of Intervention uses the same language. Such declarations can be read as a specification, in the context of noninternational conflicts, of a principle famously described by Max Huber in the Island of Palmas Arbitration: sovereignty entails not only powers and rights, 64 65

Declaration on Friendly Relations (italics added). Ibid. (italics added).

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Pertile

but also responsibilities towards the international community. According to the famous obiter dictum by Max Huber: Territorial sovereignty (…) has as corollary a duty: the obligation to protect within the territory the rights of other States, in particular their right to integrity and inviolability in peace and in war, together with the rights which each State may claim for its nationals in foreign territory. (…) Territorial sovereignty cannot limit itself to its negative side, i.e. to excluding the activities of other States; for it serves to divide between nations the space upon which human activities are employed, in order to assure them at all points the minimum of protection of which international law is the guardian.66 Subsequently, the icj used very general words to express a similar concept. Faced with the failure of Albania to notify British ships of the presence of seamines in the waters of the Strait of Corfu, the Court held that each State is under an obligation ‘not to allow knowingly its territory to be used for acts contrary to the rights of other States.’67 Clearly, both statements postulate the existence of a duty of vigilance on the part of States with respect of specific activities carried out on the territory by individuals and private juridical persons. Considering that under the law of State responsibility the rule is the separateness between the conduct of State organs and the conduct of private juridical persons and individuals, a legitimate question is how wide can be this form of indirect responsibility (in vigilando) of the territorial State for the activities of non-State entities. What behaviour may be reasonably required from the territorial State in terms of prevention and repression? In this respect, it is interesting to note that the statement by Max Huber seems to limit the scope of the duty to a closed group of rights (integrity and inviolability in peace and war, rights of aliens). Conversely, the icj seems to take a slightly different approach, which focuses on a psychological element and, as a consequence, on the degree of diligence that can be required. States shall not allow ‘knowingly’ their territory to be used against the rights of other States. In State practice, the possible existence of a duty of vigilance on the most extreme forms of economic intervention of private juridical persons in civil 66 67

Island of Palmas Arbitration, 839. icj, The Corfu Channel case (United Kingdom v Albania), Merits, Judgment of 9 April 1949, icj Reports, 1949, 22.

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wars first came to the surface in the case of Katanga; it was later referred to in the proceedings of the drc v Uganda case before the icj and in the case of the coup d’état attempt in Equatorial Guinea. In 1961, when Moishe Tschombé declared the independence of the province of Katanga, the Belgian Union Minière du Haut Katanga (umhk) decided to pay in advance to the secessionist Government the revenues for the exploitation of natural resources that were due to the central Government of the Congo. The un Secretary General U-Thant described the financing of the secession by umhk as ‘the crux of the problem’ in the crisis. He wrote letters to Belgium and to the States concerned, and used language that could imply the existence of a duty of vigilance on the part of un member States.68 In a first letter he asked the authorities of Belgium to: take all possible steps to induce the Union Minière to turn over to the Belgian Government, to be frozen only for the time being pending an ultimate settlement and accounting, all revenues now being paid to the provincial authorities of Katanga. The letter was formulated in the form of an appeal and did not state clearly that Belgium was under a legal obligation to cooperate. However, a sense of legal obligation might perhaps be conveyed by the following words of the Secretary General: ‘it would seem to me that this sort of action might be expected of one State from another friendly State.’69 The Report of the Officerin-Charge of the United Nations Operation in the Congo further explained that, as umhk was ‘a Belgian corporation with its headquarters in Brussels, the Secretary General requested that the Belgian Government exert every possible influence on the umhk to cause it to desist forthwith from paying revenues to Katanga province.’70 Similar letters were sent by the Secretary General to the Governments of the United Kingdom, Portugal, and South Africa requesting them to stop the transit of ‘Katangese’ copper from territories under their control.71 The Government of Congo addressed letters to the same effect to several other Governments.72 68 69 70 71 72

S/5053/Add.14, Annex xiii. S/5053/Add.14, Annex xiii. S/5053/Add.14, 6–7. S/5053/Add.14, Annexes xiv and xv. Belgium, Italy, France, West Germany, the United Kingdom, the United States of America, South Africa, the Netherlands, Sweden, Portugal, India, Austria, Southern Rhodesia, Denmark, Switzerland, Japan, and Brazil. See: S/5053/Add.14, Annex xvi.

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The duty of vigilance for the activities of private enterprises and individuals in economic dealings on natural resources resurfaced more clearly in Democratic Republic of Congo v Uganda before the icj. During the proceedings, the drc took a wide approach and – with reference to the exploitation of natural resources – maintained that Uganda was under an obligation ‘to use due diligence to ensure that activities that violate the rights of the drc do not occur in areas which are under its control.’73 Interestingly, Uganda did not challenge the existence of a duty of vigilance, which it conceded in the abstract with a more limited scope, and based her counterargument mainly on issues of fact.74 The Court affirmed the existence of the duty of vigilance but limited its scope to the territories of the drc occupied by Uganda founding its legal basis on a provision of the law of occupation: article 43 of the Hague Regulations.75 According to article 43 the occupying power ‘shall take all the measures in his power to restore, and ensure, as far as possible, public order and safety’ in the occupied territory. As the law of occupation is not applicable in non-international conflicts, the approach of the Court limits the scope of the duty of vigilance to international conflicts and to internationalized civil wars. Another case regards the coup d’état attempt in Equatorial Guinea in 2004. The operation consisted in the hiring of a small number of mercenaries to depose the President of the tiny African State, substituting him with the main opposition leader exiled in Spain. It was probably organised in London by a group of financiers. The aim was exploiting the future preferential oil concessions that the new President would have granted to corporations affiliated to those involved in the coup. According to South-African prosecutors, who indicted some of the individuals involved in the coup attempt, the opposition leader also offered to the organizers of the plot 1.8 million dollars.76 Investigations by the press demonstrated that the British Government, the us Government and possibly the Government of Spain had prior knowledge of 73

74 75

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Public sitting held on Wednesday 13 April 2005, at 3 p.m., cr 2005/5, 21, para. 16. See also: Réplique de la République démocratique du Congo, Vol. 1, Mai 2002, 306–311, paras 4.71–4.81. Public sitting held on Wednesday 20 April 2005, at 10 am, cr 2005/9, 34–38, paras 63–74. Convention (iv) respecting the Laws and Customs of War on Land and its annex: Regulations concerning the Laws and Customs of War on Land (Hague Regulations) (adopted 18 October 1907 entered into force 26 January 1910). “Report of the Working Group on the use of mercenaries as a means of violating human rights and impeding the exercise of the right of peoples to self-determination,” un Doc A/ HRC/18/32/Add.2, 4 July 2011, 7–10; D. Leigh, J. Wilson, D. Pallister, “‘Wonga List’ Reveals Alleged Backers of Coup,” The Guardian (10 September 2004) at http://www.theguardian .com/uk/2004/sep/10/equatorialguinea.zimbabwe.

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the coup attempt. After initially denying any prior knowledge, the British Minister for Foreign Affairs revealed that the Foreign Office had received reports on the coup attempt at least five weeks before the event. However, he defended in Parliament the decision not to inform the Equatorial Guinean Government. He stated that, although the British Government did not ‘condone or support unconstitutional action including coup d’état of any kind in other countries,’ his understanding was that ‘governments are under no legal obligation to pass on information which they may receive about such possible action.’77 The Government of Equatorial Guinea replied defining this statement as ‘surprising’ especially in light of the fact that ‘a number of British citizens and residents of the uk appear to be central to the conspiracy to overthrow the government of Equatorial Guinea.’78 The President of Zimbabwe accused the United Kingdom, the United States and Spain of having plotted the coup in Equatorial Guinea.79 South-African judicial authorities indicted a number of participants in the attempted coup for breaching that country’s anti-mercenary legislation.80 On the whole, in the context of civil wars, there seems to be a tendency towards the emergence of a customary obligation for third States not to acquiesce to the conduct of private enterprises and individuals financing a warring party in exchange of rights of exploitation over natural resources. However, given the paucity and the contradictory nature of the practice, significant theoretical problems remain. It is not clear whether the duty of vigilance can be conceived of as a corollary of the principle of non-intervention, an obligation ensuing from territorial sovereignty, an obligation exclusively founded on the law of occupation or an independent rule under customary law. Doubts remain also as to the addressees of the obligation. Which States are expected to exercise their vigilance on the activities of private corporations? Given the immateriality of the activities of private enterprises, reference to ‘territory’ in the Declaration on Friendly Relations should probably be read as imposing a duty of vigilance on each State that has a link with the corporation enabling it to 77

Written Ministerial Statement (1 December 2004), at http://www.publications.parliament .uk/pa/cm200405/cmselect/cmfaff/489/489we12.htm. 78 A. Barnett, M. Wight, “Straw: We Did Know of Africa Coup,” The Observer (14 November 2004), at http://www.theguardian.com/politics/2004/nov/14/uk.equatorialguinea. 79 Ibid. 80 Republic of South Africa, Government’s Gazette, Vol. 395, No. 18912, 20 May 1998, Art. 4 and Art. 5. The trials led to a number of plea bargains and to some acquittals, see: “Report of the Working Group on the use of mercenaries as a means of violating human rights and impeding the exercise of the right of peoples to self-determination,” un Doc A/HRC/18/32/ Add.3, 4 July 2011, 11–12.

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influence the conduct of the latter, be it the State of incorporation, the State of the principal seat or the State of nationality of the main shareholders. 5

Concluding Remarks

Natural resources are often a determinant factor of the duration of conflicts as they can be traded to satisfy the economic needs of the warring parties. However, despite their significance in the financing of civil wars, the international legal framework reveals loopholes and double standards. If the acquisition of natural resources is attributable to a State, some well-established principles of international law, such as the principle of non-intervention and the principle of self-determination may be applicable. On the contrary, the financing of civil wars by private juridical persons and individuals is in principle legally neutral. Under certain circumstances only civil society and selfregulatory initiatives and measures adopted by the Security Council can legally qualify this type of transactions. The effectiveness of such initiatives is however open to debate, while the intervention of the Security Council is based on political reasons and to a certain extent unpredictable. State practice and some general declarations of the un General Assembly show some indications that, in extreme cases, States that have a qualified link with private parties might be bound by a duty of vigilance on their behaviour in the financing of civil wars. However, the relevant practice is too limited and this development remains open to debate.

chapter 19

Breaking the ‘Resource Curse’: Prosecuting Pillage of Natural Resources Garima Tiwari* 1 Introduction The environmental, human, and economic impacts of natural resource plunder during a war are catastrophic and well described in the books of international criminal law. Trade in diamonds, timber, oil, coltan, cassiterite and other ‘conflict resources’ have helped both state and non-state actors to fuel and financially sustain armed conflicts. Pillage as a war crime under arts. 8(2) (b) (xvi) and 8(2) (e) (v) of the Rome Statue1 is the criminal charge used most frequently to prosecute the perpetrators of natural resource exploitation. Various theories of prosecution of the crime of pillage have emerged.2 Prosecutors have largely applied pillage on a situational or small-scale incident level, which has proven to be inadequate, as it fails to secure the objectives of the Rome Statute to create stability and reduces crime at a massive, systematic level to the level of a particular act. Some theorists have added another leg to this episodic theory by propagating the corporate theory of pillage prosecution, which argues that the corporations, businesses, and industries that extract, export, and sell the pillaged resources should be held criminally liable along with the direct perpetrators. The Democratic Republic of the Congo (drc) provides a classic example of how the greed for natural resources can lead to the bloodiest and the deadliest * The author wishes to thank Prof. Paolo Bianchi, Scuola di Giurisprudenza, University of Camerino, Italy for his kind supervision and guidance. Special thanks to the editors Dr. Francesca Romanin Jacur, Dr. Angelica Bonfanti and Prof. Francesco Seatzu for their fruitful suggestions. Also comments from Ms. Mariangela Sullivan have helped the paper immensely. 1 Rome Statute of the International Criminal Court (Rome Statute) (Adopted 17 July 1998, entered into force 1 July 2002). 2 See the criticisms of that approach by L. Van Den Herik, D. Dam De Jong, “Revitalizing the Antique War Crime of Pillage: The Potential and Pitfalls of Using International Criminal Law to Address Illegal Resource Exploitation During Armed Conflict,” Criminal Law Forum, 2011, 237.

© koninklijke brill nv, leiden, ���6 | doi 10.1163/9789004305663_021

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of conflicts.3 Foreign armies, rebel forces, and the drc government have all plundered the drc’s natural resources to further their control over the country’s wealth and people.4 The drc situation represents the phenomenon known as a ‘resource curse,’ meaning that a country is unable to use its rich natural resource wealth to boost its economy and ultimately has lower economic growth than countries without an abundance of natural resources. Resource curse may be both a cause and effect of pillage. The paper postulates that the incident based theory and the corporate theory of pillage prosecution may help prosecute some perpetrators for pillage, but ultimately fail to cure a system of its resource curse. In light of this, the paper suggests that a systematic theory of pillage prosecution5 would offer not only a solution to hold direct perpetrators responsible, but would also have a disruptive effect on others involved in the mineral wars.6 Thus, an attempt is made to deal with the problem of resource curse in its relationship with the war crime of pillage, with the aim of culling out a theory that is best suited to curing the curse. While acknowledging that the International Criminal Court (icc) should pursue resource pillaging as a war crime, this paper argues that the systematic theory offered by Keenan should be applied to effectively combat the paradox of plenty. The paper proceeds in five parts. After a brief introduction, the second part deals with a general overview of the problem of resource curse and its ­relationship with natural resources and armed conflict. The third part critically assesses the practice of international courts in relation to pillage charges and explores their role in prosecuting the same. The fourth part will elaborate the various theories of pillage prosecution, and, finally, the paper concludes with a ­possible solution to the problem of pillage and resource curse, highlighting the systematic approach in particular as the most plausible. 2

Links between Resource Curse, Resource Wars, and Pillage

With the expansion of the global economy, the extraction and depletion of finite natural resources has led to conflicts on both the global and the local 3 The Secretary-General, “Final Report of the Panel of Experts on the Illegal Exploitation of Natural Resources and Other Forms of Wealth of the Democratic Republic of the Congo,” October 16, 2002, un Doc. S/2002/1146; C.W. Mullins and Dawn L. Rothe, Blood, Power, and Bedlam: Violations of International Criminal Law in Post-Colonial Africa, New Perspectives in Criminology and Criminal Justice (Peter Lang Publishing Inc., 1st ed., 2008) 158–164. 4 L. Watt, “Mining For Minerals Fuels Congo Conflict,” usa Today (1 November 2008). 5 P.J. Keenan, “Conflict Minerals and the Law of Pillage,” Chicago Journal of International Law, 2013–2014, 524. 6 Ibid., 530.

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scale. These conflicts have become known as ‘resource wars.’ Studies have shown that a country with no natural resource exports only has a 0.5 percent probability of war breaking out.7 The demand for oil and certain strategic minerals is such that, “they are worth controlling and fighting over precisely because they are valued in the global economy.”8 The idea that natural resources might be more of an economic curse than a blessing began to emerge in the 1980s. In 1993 the term ‘resource curse thesis,’ also known as the Paradox of the Plenty, was first used by Richard Auty9 to describe how countries rich in natural resources were unable to use that wealth to boost their economies, and how, counter-intuitively, these countries had lower economic growth than countries without an abundance of natural resources. According to Auty, resource wealth leads to economic stagnation and political instability and either triggers or fuels internal armed conflict. These internal armed conflicts are often internationalized through regional spill-over like in the drc and Sierra Leone. In the dynamics of these so-called resource conflicts, horrendous crimes against the population at resource sites are often committed in order to either drive the population away or win a place at the negotiating table where control over natural resources is distributed.10 Paul Collier discussed the relationship between natural resources and resource curse with the armed conflict dimension.11 He postulated the thesis that economic resources may constitute a more important incentive for conflict than ethnic heterogeneity or oppressive governance. He argued that, in most modern conflicts, the key driving force is greed in an environment of dependence on natural resources and poor governance.12 Natural resources can, and often do, provoke conflicts within societies as different groups and factions fight for their share. There may be different types of relationships between natural resources and armed conflicts. First, the resource curse argument highlights that the resource curse effects can undermine the 7 8 9 10 11 12

P. Collier and A. Hoeffler, “Greed and Grievance in Civil War,” Oxford Economic Papers, 2004, 563–595. K. Colin, “Demographic Change, Natural Resources and Violence: The Current Debate,” Journal of International Affairs, 2002, 257–282. R.M. Auty, Sustaining Development in Mineral Economies: The Resource Curse Thesis (Routledge, 1993). M. Renner, “The Anatomy of Resource Wars,” WorldWatch Paper, 2002, 13–14, at http:// www.worldwatch.org/system/files/EWP162.pdf. P. Le Billon, Fuelling War: Natural Resources and Armed Conflict (Adelphi Series, Routledge, 1 ed., 2006), 373. I. Bannon and P- Collier, “Natural Resources and Conflict: What we can do” I. Bannon et al (eds.), Natural Resources and Violent Conflict: Options and Actions (World Bank, 2003) 1, 5–6.

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quality of governance and economic performances13 thereby, increasing the vulnerability of countries to conflict. Second, the resource war argument retains that conflicts can occur over the control and exploitation of resources and the allocation of their revenues; and third, the conflict resource argument holds that the access to resource revenues by belligerents can prolong conflicts. Conflicts that start out as political or ethnic grievances may turn into resource conflicts. In the context of the Democratic Republic of Congo (drc), the 2010 drc Mapping Human Rights Violations 1993–2003 Report14 discusses in paragraph 733 that the conflict began in 1996, driven by political, ethnic, and security considerations and changed over time into a resource conflict, in which natural resources were used to fund the conflict as well as the personal gain of the players. Likewise, Michael L. Ross has contended that the relationship between natural resources and conflict may consist of a complex of many causal linkages.15 Some natural resources may be linked to the onset of a conflict, whereas other types of resources may only prolong a conflict while having no bearing on its initiation. Moreover, some resources may be associated with particular types of conflict, such as separatist conflicts, and the geography of the resources in such cases has an obvious role.16 Professor Mark Swilling17 puts forth that resource wars are the outcome of two related processes. Firstly, as the competition for increasingly scarce resources escalates between major global powers, these powers are prepared to intervene in various ways to protect their interests, including militarily. Secondly, a context is created for intensified conflicts between local elites within resource-rich countries as they struggle to secure access to resources and position themselves as the key interlocutors in these globalised value 13 14

15 16 17

C.S. Norman, “Rule of Law and the Resource Curse: Abundance versus Intensity,” Environmental and Resource Economics, 2009, 183–207. Office of the un High Commissioner for Human Rights, “Report of the Mapping Exercise documenting the most serious violations of human rights and international humanitarian law committed within the territory of the Democratic Republic of the Congo between March 1993 and June 2003,” August 2010, 352. M.L. Ross, “How Do Natural Resources Influence Civil War? Evidence From Thirteen Cases,” International Organization, 2004, 35, 62–63. P. Le Billon, “The Political Ecology of War: Natural Resources and Armed Conflicts,” Political Geography, 2001, 561–584. M. Swilling, Beyond the Resource Curse: From Resource Wars to Sustainable Resource Management in Africa, at http://www.sustainabilityinstitute.net/newsdocs/­document -downloads/cat_view/23-research-project-outputs?limit=10&order=date&dir=ASC&st art=60.

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chains. In order to extract these resources cheaply, costs are often carried by exploited populations and degraded environments. The players are prepared to use any means necessary, including the organised deployment of conventional military forces and, when necessary, less formal militia when it comes to killing and/or dispossessing large numbers of people (as in Darfur and the drc). Sudan, which tops both the ‘resource war’ and ‘failed states’ lists, demonstrates in horrifying ways how a resource-rich environment and society can be ransacked, subjugated, and destroyed so that large quantities of valuable primary resources can be sold at discounted prices in global markets. It is worth noting that the self-financing nature of post-Cold War conflicts and natural resource exploitation replacing superpower patronage as the main source of income for parties to conflicts post-1990 are responsible for prompting the resource curse time and again.18 Two major incidents can be revealing in understanding this phenomenon. First, on 6 April 1994, the President of Rwanda was killed in a plane crash, triggering the horrors of the 100-day genocide that left 800,000 Rwandans (mainly Tutsis) dead. This was, however, merely the spark that ignited a violent reaction after decades of simmering local conflicts over access to a key natural resource -firewood. As trees disappeared so did soil nutrients, which exacerbated intense land shortages created by population increases in Africa’s most densely populated country. By the 1990s hundreds of localised land conflicts were at the breaking point as many people started to run out of food in a country in which ethnic identities had been actively politicised by colonial and post-colonial elites. Second, in October 1999, authority over United States military forces in Central Asia was transferred from Pacific Command to Central Command. Per M.T. Klare,19 the only reason for this shift in command was to put in place the strategic and military capabilities required to manage a highly unstable region in which vast oil and gas reserves had recently been discovered. The Cold War was over; the global war over diminishing resources had moved into a new phase.20 The United Nations Security Council has also discussed the linkages between the exploitation of natural resources and the continuation of armed conflict. For instance, in Resolution 1306 (2000), the Security Council expressed 18

19 20

C. Cater, “The Political Economy of Conflict and un Intervention, Rethinking the Critical Cases of Africa,” in K. Ballentine and J. Sherman (eds.), The Political Economy of Armed Conflict: Beyond Greed and Grievance (Lynne Rienner Publishers, 2003) 19, 23–24. M. T Klare, “The New Geography of Conflict,” Foreign Affairs, 2001, at http://www .foreignaffairs.com/articles/57030/michael-t-klare/the-new-geography-of-conflict. M. Mamdani, When Victims Become Killers: Colonialism, Nativism, and the Genocide in Rwanda (Princeton University Press, 2002).

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its concern at the role played by illicit trade in diamonds in fuelling the conflict in Sierra Leone.21 In Resolution 1457 (2003) 3,22 resolution 1856 (2008),23 and, most recently, resolution 1952 (2010)24 on the situation concerning the drc, the Security Council stated that the plundering of natural resources in the drc is one of the main elements fuelling conflict there. In addition, in Resolution 1625 (2005),25 the Security Council reaffirmed, in a more general fashion, the interrelationship between natural resources and armed conflict, when it expressed its determination to take action against the illegal exploitation and trafficking of natural resources and high-value commodities in areas where it contributes to the outbreak, escalation, or continuation of armed conflict. Companies trafficking in conflict resources such as gold, diamonds, timber, and precious minerals have seldom been held accountable for natural resource exploitation fuelling war and violence. Illicit trade often provides the funds for arms purchases, military troop support, and child soldiers. In countries including Angola, the drc, Liberia, Sierra Leone, Iraq, East Timor, and Myanmar, illicit trade in natural resources has furnished warring parties with the funds necessary to purchase arms and maintain fighters, while the struggle to control areas of natural wealth drives further violence. The natural resource curse is vividly illustrated in Angola, where a fiscal audit by the International Monetary Fund, has been unable to account for a huge amount of oil revenue. In Nigeria and Cameroon, oil wealth has failed to generate development, and has instead generated deep-seated corruption that retards growth. Sudan is marked by strife over oil, and in Aceh, Indonesia, regional separatism has been fanned by secrecy about oil payments and public misunderstanding about their scale.26 War crime convictions for pillaging natural resources are few, in part because this area of law has not been adequately developed and discussed. Viewed in this light, pillage becomes a glaring crime. Pillage is defined in Black’s Law Dictionary as “the forcible taking of private property by an invading

21 22 23 24 25 26

unsc, “The Situation in Sierra Leone,” Res. 1306 (2000), un Doc. S/RES/1306 (5 July 2000). unsc, “The Situation Concerning the Democratic Republic of Congo,” unsc Res 1457 (24 January 2003) para. 3. unsc, “The Situation Concerning the Democratic Republic of Congo,” unsc Res. 1856 ( 22 December 2008) Preamble para. 10. unsc, “The Situation Concerning the Democratic Republic of Congo,” Res. 1952 (2010), (29 November 2010) Preamble para. 8. unsc, “Threats to International Peace and Security,” unsc Res. 1625 ( 14 September 2005) para. 6. T.I. Palley, “Lifting the Natural Resource Curse,” The Foreign Service Journal, 2003, at http:// www.globalpolicy.org/component/content/article/198/40112.html.

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or conquering army from the enemy’s subjects.”27 The offense of pillage is a conflict-related theft and is synonymous with other equally evocative terms such as looting, spoliation, and plunder. Pillage is generally punishable under military law or general penal law in domestic jurisdictions. The modern law of pillage makes it a crime to, under certain conditions, appropriate property during conflict with the intent to deprive the owner of the property, and with the intent to put the property to personal or private use. This paper argues that the war crime of pillage is a more effective tool for sanctioning illicit exploitation of conflict resources, since it focuses on the illegality of the resource transactions themselves, unlike corporate complicity. Although it is not the only tool available to prosecutors to address the exploitation of resources or civilians during conflict, it may be the most appropriate tool. Resource cursed countries, during armed conflicts, tend to pillage natural resources opportunistically for immediate gains rather than strategically for achieving long-term economic growth. The interrelatedness of resource curse, resource wars, and the war crime of pillage is a testament to the depth and severity of the challenges involved, and calls for a careful prosecution strategy that would result in systemic overhaul. 3

Nuremberg to icc-Theoretical and Interpretative Oscillations

3.1 Background on the Law of Pillage The prohibition of pillage is a long-standing rule of customary international law recognized in art. 44 of the Lieber Code, art. 18 and art. 39 of the Brussels Declaration, and art. 32 of the Oxford Manual. The Hague Convention of 1907 (‘Hague iv’) and the Geneva Conventions of 1949 both prohibit the crime of pillage. Art. 28 of Hague iv reads: “The pillage of a town or place, even when taken by assault, is prohibited.” Further, art. 47 of Hague iv says: “Pillage is formally forbidden.” Art. 33 (2) of the 1949 Geneva Convention iv specifically states: “Pillage is forbidden.” The Hague regulations aimed to address individual acts of looting by soldiers for personal gain, whether these concerned isolated instances of pillage by soldiers acting on their own initiative or more organized forms of the taking of property, where military authorities allowed soldiers to take war booty as part of their pay. They did allow for certain property to be lawfully appropriated 27

Black’s Law Dictionary, (5th ed., 979) 1033.

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by an occupying state,28 provided that the occupying army operated under the rules of usufruct, meaning that they could use the State’s resources only to pay for the occupation and not to wage war. Under Hague iv, requisition of private movable property is permitted so long as it is for the support of the occupying army and does not exceed the level of what a country can reasonably be expected to produce.29 On the other hand, there are no exceptions under Hague iv that allow for the requisition or appropriation of private immovable property as such. Thus selling, appropriating, and taking of private immovable property was prohibited.30 The applicability of the term ‘property’ to natural resources may be inferred from, inter alia, Art. 55 of the 1907 Hague Conventions, which explicitly refers to natural wealth such as forests as an example of properties that must be safeguarded by an occupant. Because the protection offered to public property under Hague iv also differs according to whether the resource concerned is immovable or movable, the majority of scholars argue that, unless already harnessed and stored, natural resources are immovable property. But exploiting and selling off extracted diamonds, a non-renewable resource, and using the proceeds to continue or further expand military operations would be considered pillage, because the rules of usufruct do not allow the occupying force to dispose off or sell public immovable property, and such sale violates art. 55. There has been some argument that exploitation of these immovable natural resources by an occupier is legal when it would go to the benefit of the occupied territory but that argument has been discredited.31 Hague iv applied only to conflicts of an international nature, but the 1949 Geneva Conventions32 and their 1977 Protocols33 extended the prohibition of pillage to all kinds of conflict situations and applied to both public and private

28

29 30 31

32 33

Convention (iv) respecting the Laws and Customs of War on Land and its annex: Regulations concerning the Laws and Customs of War on Land. The Hague, 18 October 1907 (The Hague iv) art. 28, 47 and 53. Ibid., art. 46. Ibid., art. 52, art. 53. See Ministry of Foreign Affairs of Israel, “Israel: Ministry of Foreign Affaires Memorandum of Law, on the right to Develop New Oil Fields in Sinai and the Gulf of Suez,” International Legal Materials, 1978, 432, 433. Geneva Convention iv Relative to the Protection of Civilian Persons in Time of War (adopted 12 August 1949, entered into force 21 October 1950) art 33(2). Protocol Additional to the Geneva Conventions of 12 August 1949, and relating to the Protection of Victims of Non-International Armed Conflicts (Additional Protocol ii) (adopted 8 June 1977, entered into force on 7 December 1978) art. 4(2) (g).

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property. Sierra Leone ratified the Geneva Convention in October of 196534 and Protocol ii in October of 1986.35 3.2 The International Military Tribunal Art. 6(b) of the Charter of the International Military Tribunal (nmt) in Nuremberg held accountable those perpetrators that committed “plunder of public or private property.”36 Although the defendants at Nuremberg were prosecuted based on the 1907 Hague Regulations that dealt with pillaging of private property, it is still helpful to analyse the cases that dealt with exploitation of property as a point of comparison with current situations. The Nuremberg tribunals prosecuted several businessmen and government leaders for the pillage, spoliation, and exploitation of occupied territory. The Nazi Hans Kehrl was convicted of pillage for having exploited large quantities of iron, crude steel, and coal from the Vitkovice Works in then-Czechoslovakia. In finding Kehrl guilty of pillage, the tribunal concluded that, “through his active participation in the acquisition and control of the industries and enterprises hereinbefore specifically referred to, Kehrl violated the Hague Convention with respect to belligerent occupancy.”37 In the I.G. Farben Case,38 several leading businessmen of the I.G. Farben Industry were convicted of plundering both private and public property. Following the invasion of Poland, the Farben Directorate sent the Reich Ministries of Economics a letter detailing the need to use the stocks of Polish companies in the interest of the German economy.39 Farben was then named trustee over the companies listed in the letter, and “Farben-recommended employees were named provisional managers.”40 Farben then acquired each of the companies instead of using lease agreements as originally proposed.41 Equipment from several of the plants was then 34

Signatories to Geneva Convention, at http://www.icrc.org/ihl.nsf/WebSign?ReadForm &id=375&ps=P. 35 Signatories to Additional Protocol ii, at http://www.icrc.org/ihl.nsf/WebSign?ReadForm& id=475&ps=P. 36 Charter of the International Military Tribunal (Nuremberg Military Tribunals), 8 August 1945. 37 Trials of War Criminals Before the Nuremberg Military Tribunals Under Control Council Law No. 10, The Ministries Case, Nuremberg Military Tribunals, vol. xiv (October 1946–April 1949). 38 United Nations War Crimes Commission, Trial of Carl Krauch and Twenty-Two Others, Law Reports on Trials of War Crimes, 1949, x, 1 [hereinafter I.G. Farben Trial]. 39 Ibid., 19. 40 Ibid. 41 Ibid., 20.

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dismantled and sent to Germany.42 Using the Declaration by United Nations on Forced Dispossession of Property in Enemy-Controlled Territory (London Declaration)43 as evidence, the United States nmt sustained the argument that Farben’s actions violated existing international law.44 The nmt went on to state: “It was in violation of rights of private property, protected by the Laws and Customs of War, and in the instance involving public property, the permanent acquisition was in violation of that provision of the Hague Regulations which limits the occupying power to a mere usufruct of real estate.”45 It is imperative to note that the London Declaration did not distinguish between private and public property, nor did it state that the bullion, banknotes, and stocks, all seizable under the Hague Regulations,46 were any different from other property. The nmt conceded that the declaration had no legal consequences but found it persuasive in determining where the international prohibition stood. In the later case of A. Krupp, the nmt found six of twelve industrialists guilty of exploiting, as principals or accessories, by “a deliberate design and policy, territories occupied by German armed forces in a ruthless way, far beyond the needs of the army of occupation and in disregard of the needs of the local economy.”47 Applying the 1907 Hague Regulations, the nmt further reasoned: Just as the inhabitants of the occupied territory must not be forced to help the enemy in waging the war against their own country or their own country’s allies, so must the economic assets of the occupied territory not be used in such a manner.48 These cases point to an economic dimension of pillage that highlights systematic plunder of economic assets in occupied territories, implicating the resource curse. As noted above, Nuremberg jurisprudence significantly developed the crime of pillage beyond its original, traditional scope of theft of personal property by soldiers and civilians to include systematic exploitation, a 42 Ibid. 43 Declaration by United States and Certain others of the United Nations, Forced Transfer of Property in Enemy-Controlled Territory (5 January 1943). 44 I.G. Farben Trial, 45. 45 Ibid., 50. 46 Hague iv, art. 53. 47 United Nations War Crimes Commission, Trial of Alfried Felix Alwyn Krupp Von Bohlen Und Halbach and Eleven Others (A. Krupp), 1949, Law Reports on Trials of War Crimes Vol. x, p. 69, 73. 48 Ibid., p. 134.

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broad and more flexible association.49 Extending it further to cover natural resources, which may be publically or privately owned, would not be overstretching. 3.3 The International Criminal Tribunal for the Former Yugoslavia Cases on pillage before the International Criminal Tribunal for the former Yugoslavia (icty) have largely focused on situations involving pillaging property from towns and prison camps. In its Statute, the icty claims power to prosecute individuals for the “plunder of public and private property.”50 In Blaskic, the court carefully defined plunder as “the unlawful, extensive and wanton appropriation of property belonging to a particular population, whether it is the property of private individuals or of state or ‘quasi-state’ public collectives.”51 In the Mucic trials, the icty stated:52 The Trial Chamber must take as its point of departure the basic fact that international humanitarian law not only proscribes certain conduct harmful to the human person, but also contains rules aimed at protecting property rights in times of armed conflict. Thus, whereas historically enemy property was subject to arbitrary appropriation during war, international law today imposes strict limitations on the measures, which a party to an armed conflict may lawfully take in relation to the private and public property of an opposing party. The court also noted that, in order for a charge to be ‘serious’ under the icty statute, the charge must meet two elements. “First, the alleged offence must be one which constitutes a breach of a rule protecting important values. Second, it must also be one which involves grave consequences for the victim.”53 The Mucic Trial Chamber eventually ruled that, while the prohibition of plunder is an important value, the monetary value of the property taken did not cause 49

50 51 52 53

United Nations War Crimes Commission, Trial of Alois and Anna Bommer and their daughters before the Permanent Military Tribunal at Metz, 19 February 1947, Law Reports on Trials of War Crimes, v.10, 162. unsc, “Statute of the International Criminal Tribunal for the Former Yugoslavia,” unsc Res. 827 (25 May 1993) art. 3(e). icty, Prosecutor v. Blaskic, Case No. IT-95-14-T, Judgment of 3 March 2000, para. 234; See icty, Prosecutor v. Jelsic, Case No. IT-95-10, Judgment of 14 December 1999, para. 48. icty, The Prosecutor v. Zdravko Mucic, Hazim Delic and Esad Landzo, Case No. IT-96-21Tbis-R117, Judgment of 20 February 2001, para. 587. Ibid., para. 1154.

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grave consequences for the victim.54 The systematic looting of enemy property in several villages, as a more organised form of pillage is also treated in the cases against Kordic and Čerkez55 and Hadžihasanović.56 In the case against Delalić and others,57 which dealt with episodic and isolated cases of looting watches and money in concentration camps, the icty acknowledged by way of obiter dictum that systematic economic exploitation could also be a form of pillage. With this statement, the icty generally confirmed the Nuremberg legacy, but a factual scenario to which this dictum could be applied was never part of direct charges before the icty. In describing the scope of the prohibition of pillage, the Trial Chambers for the icty in the Delalic case stated: It is to be observed that the prohibition against the unjustified appropriation of public and private enemy property is general in scope, and extends both to acts of looting committed by individual soldiers for their private gain, and to the organized seizure of property undertaken within the framework of a systematic economic exploitation of occupied territory.58 3.4 The Special Court for Sierra Leone The Statute of the Special Court for Sierra Leone is based on the Geneva Conventions which prohibit pillaging of both public and private property.59 The charges before the Special Court for Sierra Leone (scsl), included in the Civil Defence Forces (cdf), Armed Forces Revolutionary Council (afrc) and Revolutionary United Front (ruf) indictments did not regard illegal resource extraction, but merely the charges related merely to burning of houses and property. The issue of illegal resource exploitation was only raised indirectly before the scsl as part of the joint criminal enterprise for which afrc and ruf rebel leaders were charged. In the ruf case, the Trial Chamber held that, since the indictment did not allege that the pillage of civilian property included the 54 Ibid. 55 icty, Prosecutor v. Kordić & Čerkez, Case No. IT-95-14/2-T, Judgment of the Trial Chamber, 26 February 2001, para. 803–809. 56 icty, Prosecutor v. Hadžihasanović & Kubura, Case No. IT-01-47-T, Judgment of the Trial Chamber, 15 March 2006, para. 1854–1993. 57 icty, Prosecutor v. Zejnil Delalic and others, Case No. IT-96-21-T, Judgment of 16 November 1998, para. 18 and 28. 58 Ibid., para. 590. 59 D. Keen, Conflict and Collusion in Sierra Leone ( James Currey Publication 1st edn, 2005) 48.

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diamond resources of Sierra Leone, it could not consider the criminality of such acts in Kono District.60 As a consequence, the famous Taylor indictment did not even refer to the diamonds!61 This was tantamount to backing away from the broadening scope of pillage prosecution from the Nuremberg Trials, and represents a low point. 3.5 The International Court of Justice The 2005 International Court of Justice (icj) decision between the Democratic Republic of the Congo and Uganda also solidified the prohibition of pillage.62 This civil case, although only about the natural resource exploitation committed by Uganda and its troops, provides the most current view of both the international prohibition of pillage and the obligations of an occupying force. In drc v. Uganda,63 the icj held Uganda liable for the exploitation of natural resources by members of its military while occupying parts of the drc. Speaking of acts that would draw this liability, the icj stated:64 Whenever members of the updf [the Ugandan military] were involved in the looting, plundering and exploitation of natural resources in the territory of the drc, they acted in violation of the jus in bello, which prohibits the commission of such acts by a foreign army in the territory where it is present. The Court notes in this regard that both Article 47 of Hague iv and Article 33 of Geneva iv prohibit pillage. The case went beyond Nuremberg to include looting, plundering, and exploitation of the natural resources of the Democratic Republic of the Congo “in all circumstances, whether it was an occupying Power in particular regions or not.”65 This being said, the case leaves some uncertainty about exploitation of natural resources. In its findings, the court references Uganda’s liability for “looting, plundering, and resource exploitation.”66 One may argue that, in 60

scsl, Prosecutor vs. Sesay, Kallon and Gbao, Judgment of the Trial Chamber, Case No. SCSL-04-15-T, Judgment of 25 February 2009, para. 1339 (hereinafter ruf Case). 61 C. Rose, “Troubled indictments at the Special Court for Sierra Leone: the pleading of joint criminal enterprise and sex-based crimes,” Journal of International Criminal Justice, 2009, 353–372. 62 icj, Armed Activities on the Territory of the Congo, Democratic Republic of the Congo v. Uganda, Judgment of 19 December 2005, icj Reports, para. 116 (hereinafter drc Case). 63 Ibid., para. 180. 64 Ibid., para. 245. 65 Ibid. 66 Ibid., para. 250.

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citing all three areas of misappropriation, the Court is saying that looting, plundering, and exploitation are separate activities and, therefore, exploitation does not mean pillaging. But that argument fails to consider the Court’s analysis when combining the three categories as violations of jus in bello under both The Hague iv and Geneva iv and its Additional Protocol. Robert Dufresne, a research analyst with the Canadian Library of Parliament, notes that the case “does not tackle similar resource exploitation by non-state actors and nonoccupying states, leaving this issue in need of clarification.”67 3.6 The International Criminal Court The modern law of pillage as included in the Rome Statute is general in scope, covering all kinds of property without any necessary affiliation between the owner of the property and a party to an armed conflict. But the catch here is that the property be taken for ‘personal’ or ‘private’ use, leaving an open space for justifying pillage that funds a conflict. The provision addresses both combatants and civilians. It is also worth noting that the war crime of pillage covers both individual acts committed without the consent of the military authorities and organized forms of pillage.68 The prosecution of pillage before the International Criminal Court (icc), is extensively called for by the academia. The war crime of pillage is included in art. 8(2) (b) (xvi) of the Rome Statute for international armed conflict and in art. 8(2) (e) (v) for non-international armed conflict. In addition, arts. 8(2) (b) (xiii) and (e) (xii) of the icc Statute deal with destroying or seizing the enemy’s property, and art. 8(2) (a) (iv) of the icc Statute with the extensive destruction and appropriation of property. There is no substantive difference between the two provisions, except that “there are no specific rules of international humanitarian law allowing requisitions, contributions, seizure or taking of war booty in a non-international armed conflict.”69 The icc provisions are premised on art. 28 of the 1907 Hague Regulations and read: “pillaging a town or place, even when taken by assault.” In comparison, the Statutes of the Rwanda Tribunal and the scsl list ‘pillage’ as a war crime without further qualifications in art. 4(f) of the International 67

68

69

R. Dufresne, “Reflections and Extrapolations on the icj’s Approach to Illegal Resource Exploitation in the Armed Activities Case,” New York University Journal of International Law and Politics, 2008, 171. O. Uhler and H. Coursier, The Geneva Conventions of 12 August 1949: Commentary, Part 4 on Geneva Convention relative to the Protection of Civilian Persons in Time of War, (International Committee of Red Cross, 1958). K. Dormann, Elements of War Crimes under the Rome Statute of the International Criminal Court: Sources and Commentary, (Cambridge University Press, 2003) 464–465.

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Criminal Tribunal for Rwanda Statute of 1994 and art. 3(f) of the scsl Statute. It has been argued that the reference to “a town or place, even when taken by assault,” as included in the icc definition, is legally redundant in modern international criminal law.70 To use language adopted in the art. 8(2) (b) (xvi) icc Elements of Crimes,71 the relevant conduct must have taken place in the context of, and been associated with an international or non-international armed conflict. War crimes can only be perpetrated during armed conflict. As a consequence, evidence that the illegal exploitation of natural resources took place during an armed conflict is essential to sustaining a charge of pillage. Unlawful appropriation is one of the elements of the crime of pillage. “[T]he property protected is not limited to civilian property as suggested by several delegations [to the Rome Treaty].”72 Although the term appropriation is not defined under the Statute or in the Elements of War Crimes, it is generally seen as the “exercise of control over property; a taking of possession.”73 In the decisions that have been issued so far, the Pre-Trial Chambers have confirmed the requirement that the appropriation must be done for private or personal use, without providing further details.74 But this has so far not been extended to include receipt of illicitly derived property with unknown origins. Also, by restricting pillage to appropriation “for personal or private purposes,” the icc Elements of Crimes depart from the vast majority of relevant World War ii cases that condemned acts of pillage perpetrated in furtherance of the Axis war effort. Moreover, the reference to military necessity in a footnote to the phrase “personal or private purposes” is inconsistent with the laws of war. Pre-Trial Chamber ii has further indicated that pillage must concern “a somewhat large-scale appropriation of all types of property, such as public or private, movable or immovable property, which goes beyond mere sporadic acts of violation of property rights.”75 In some of its jurisprudence, the icc has 70

J. G Stewart, Corporate War Crimes: Prosecuting The Pillage of Natural Resources (Open Society Foundations, 2011) 13. 71 International Criminal Court, Elements of Crimes, U.N. Doc. PCNICC/2000/1/Add.2 (2000), at http://www.icc-cpi.int/nr/rdonlyres/336923d8-a6ad-40ec-ad7b-5bf9de73d56/0/ elementsofcrimeseng.pdf (Hereinafter ‘icc Elements of Crime’). 72 Ibid. 73 Black’s Law Dictionary (8th ed. 2004) 110. 74 icc, The Prosecutor v. Germain Katanga and Mathieu Ngudjolo Chui, Decision on the confirmation of charges, Pre-Trial Chamber i, Case No. ICC-01/04-01/07, 30 September 2008, para. 332; See icc, The Prosecutor v. Jean-Pierre Bemba Gombo (Situation of the Central African Republic), Case No. ICC-01/05-01/08, 15 June 2009, para. 320. 75 Ibid, Prosecutor v. Jean-Pierre Bemba Gombo, para. 317.

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added a legal ingredient to the crime of pillage, namely that the property belong to an enemy or hostile party. Based on doctrinal views, the icc Pre-Trial Chamber required in Katanga and Ngudjolo Chui that the pillaged property, “belong to individuals or entities who are aligned with or whose allegiance is to a party to the conflict who is adverse or hostile to the perpetrator.”76 This requirement was not consistently confirmed in subsequent cases and is still open for discussion.77 Consent is another term not specifically defined under the icc Statute for pillage, but other sections of the Statute are informative: under art. 7(1) (g)(5), Enforced Sterilization, the icc Elements of Crime notes “it is understood that ‘genuine consent’ does not include consent obtained through deception.”78 And under 8(2) (b) (xxii) (1), Rape, “[i]t is understood that a person may be incapable of giving genuine consent if affected by natural, induced or agerelated incapacity.”79 Pillage is essentially appropriation of property without consent. This consent must come from the rightful owner. Companies operating in conflict zones often ignore the need for state consent entirely by relying on authorizations granted by rebel groups or foreign military forces. These and several other cases under the ad hoc criminal tribunals and the icc illustrate what kind of actions are prohibited relating to pillage. From exploitation of business factories to exploitation of natural resources, the international tribunals have firmly placed the activity of exploitation of resources under the prohibition of pillaging, while the icc has yet to decipher its position. 4

Prosecution of Pillage – The Systematic Approach to Cure the Resource Curse

Modern international courts and tribunals have relied largely on an incidentbased approach, where pillage is committed by an identifiable, but small group of individuals or by a political leader, and the property involved is usually small and movable. The icty targeted individual soldiers who stole jewellery from detainees or civilians, and the only scsl pillage convictions have been for stealing livestock, money, or other personal goods from individuals or 76 77 78 79

icc, Prosecutor v. Germain Katanga and Mathieu Ngudjolo Chui, para. 329. icc Pre-Trial Chamber ii was silent on this issue in The Prosecutor v. Jean-Pierre Bemba Gombo op. cit. paras. 314–320. icc Elements of Crime op. cit., fn 20. Ibid., fn 51.

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b­ usinesses run by civilians. The stark impact of pillage as a precursor to resource curse and cause of severe economic degradation of conflict zones has not been used as a strategic argument anywhere. There is a narrow approach adopted by the icc in dealing with prosecution of pillage, which has not rendered any positive impact either in terms of deterrence or stability in the conflict zone concerned. The icc did include pillage in indictments against Katanga en Mathieu Ngudjolo Chui (drc), Jean-Pierre Bemba (car), Joseph Kony (Uganda) and those pertaining to the situation in Darfur,80 but most of the charges dealt with looting villages and camps rather than with crimes directly related to the exploitation activities.81 In the indictments in the Congolese cases, despite the fact that exploitation of natural resources was recognized as a central factual element of the conflict, it was decided that prosecution would not be sought for the war crime of looting of natural resources. Therefore it may reasonably be said that the concept of criminal responsibility for pillage has yet to find an actual judicial endorsement.82 Critics of the modern law of pillage propose that prosecutors should combine the law of pillage with legal theories allowing for the extension of criminal liability to individuals and entities beyond the direct perpetrator in order to hold corporations responsible.83 These critics argue that the law as it has been used is inadequate and propose what they call a corporate theory of pillage.84 They argue that the corporate purchasers of illicit resources are among those most responsible for the duration and deadliness of conflicts and that they, like others thought to be most responsible, should face criminal prosecution.85 In many cases, there was clear evidence that resource war led to the conflict situations and that resource revenue was the principal reason. The corporate theory calls for the prosecution of individuals or entities who purchase or use resources derived from conflict areas or that are extracted under 80

icc, Prosecutor v. Ahmad Muhammad Harun and Ali Muhammad Ali Abd-Al- Rahman, Case No. ICC-02/05-01/07, 15 March 2012 (Ongoing trial). 81 icc, Prosecutor v. Germain Katanga and Mathieu Ngudjolo Chui, para. 1–3. 82 J.D’Aspremont, “Towards an International Law of Brigandage: Interpretative Engineering for the Regulation of Natural Resources Exploitation,” Asian Journal of International Law, 2013, 1–24. 83 J. Gettleman, “The World’s Worst War,” New York Times, (15 December 2012) at http://www .nytimes.com/2012/12/16/sunday-review/congos-never-ending-war.html?pagewanted=all &_r=0. 84 Stewart, Corporate War Crimes, op. cit., 13–15. 85 Michael A. McGregor, “Ending Corporate Impunity: How to Really Curb the Pillaging of Natural Resources,” Case Western Reserve Journal of International Law, 2009, 469, 471.

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the direction of those involved in the war. This theory needs much development, since the icc’s narrow stance would not be able to accommodate it. One version of the corporate theory would use aiding and abetting liability to target corporations, which would require a showing that corporate purchasers of conflict minerals -even six or seven transactions removed from the initial theft86 intended that the original theft occur and materially contributed to it. It has been argued that aiding and abetting liability, or some other form of complicity liability, would be sufficient to tie corporate purchasers to an initial theft.87 The Swiss Federal Criminal Court charged the Swiss gold refining company Argor-Heraeus sa with complicity in the war crime of pillage for laundering millions of dollars of looted gold from the Democratic Republic of Congo.88 There would be substantial evidentiary difficulties if a prosecutor attempted to demonstrate beyond a reasonable doubt that any particular manufacturer of electronic goods used minerals that were derived from a conflict area, and that, at the time the corporation purchased them, it knew that they were stolen. While the incident-based approach and the corporate theory of pillage prosecution both have their limited advantages, they fail to offer a solution for the paradox of plenty. A very interesting solution to the problem is offered by the systematic theory developed by Patrick J. Keenan, in his paper Conflict Minerals and the Law of Pillage,89 which advances beyond traditional approaches and suggests a wider use of the war crime of pillage. He notes that in cases from Rwanda, pillage targeted thefts of personal property from individual members of the Tutsi population. In Sierra Leone, the only pillage convictions were for stealing livestock, money, or other personal goods from individuals or businesses run by civilians. Absent from these cases is any attempt to address more broad-based or systematic theft, even when there are facts to support such charges.90 In modern international tribunals there have been several prosecutions for pillage or similar crimes, but all of them have used the episodic theory and have focused on discrete events rather than systems of exploitation or theft.91 All involve property taken from individuals or 86

J. Prendergast and S. Lezhnev, “From Mine to Mobile Phone,” The Enough Project, (10 November 2009) at http://www.enoughproject.org/publications/mine-mobile-phone. 87 Stewart, Corporate War Crimes, op. cit., para. 484–488. 88 Open Society Justice Initiative, Conflict Awareness Program and trial, “uk Authorities Called to Act on “Blood Gold” Case following Swiss Ruling on Argor-Heraeus Appeal,” (4 February 2014) at http://www.stop-pillage.org/wp-content/uploads/2013/11/StopPillage _NewsUpdate_February2014_EN.pdf. 89 Keenan, Conflict Minerals and Law of Pillage, op. cit. 90 Ibid., 534, 535. 91 Stewart, Corporate War Crimes, op. cit., 264–269.

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businesses whose utility for those taking it is immediately apparent. The property in question was taken by simple processes requiring no substantial infrastructure or expertise like simple robbery: thieves used force to take property and then carried it away themselves. Prosecutors proceeded on the theory that the thefts helped the fighters, but did not supply the primary reason for the conflict or the principal sources of livelihood of the fighters. Delalic and other cases from the icty demonstrate the simplest connection: in those cases the property taken amounted to supplemental income for individual fighters, not part of a larger strategy to fund the war effort, and it was certainly not the motivation for the fighting itself.92 Failing to address the broader picture is not helping pillage prosecution serve as a solution for resource curse. Under the systematic theory presented by Keenan, prosecutors could target those in control of a system of exploitation whose features met the standard elements of the crime of pillage.93 Prosecutors would be required to show that the defendant controlled the system or instrumentality by which he appropriated the property, for example by proving that he or his troops controlled the mine from which the resources were extracted. Importantly, the act of appropriation might take place over time and be done by underlings or employees, such as labourers working in a mine controlled by the defendant. Prosecutors could show that the defendant intended to deprive the owner of property by showing that he sold or otherwise made use of the property and kept the proceeds for himself.94 Finally, prosecutors could show that the defendant intended to put the property to personal or private use by showing that he exported and sold minerals, for example, and used the revenue to purchase weapons, pay his troops, or enrich himself.95 Applying his theory to Taylor’s case, Keenan notes that Taylor was not convicted of or charged with any crimes regarding his role in systematically pillaging Sierra Leone’s timber and other natural resources.96 As he notes, There is substantial evidence that Taylor orchestrated and was deeply involved in the unlawful appropriation of timber, diamonds, and other resources, and that the revenue derived from the sales of these illegallyappropriated resources funded the war for many years. If one of the 92 icty, Prosecutor v. Zejnil Delalic and others op. cit., 8–9, paras. 18–21. 93 Keenan, Conflict Minerals and Law of Pillage, op. cit., 541. 94 Ibid., 554. 95 Ibid., 541. 96 scsl, The Prosecutor vs. Taylor, Case No. SCSL-03-1-T, 18 May 2012, 2475–2478.Also see indictments (Case No. SCSL-03-01-I-001) (Case No. SCSL-03-01-PT).

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modern policy objectives of criminal law proceedings is to provide an accurate historical record of the harms of war, to ignore years of illegal appropriations of millions of dollars of state resources and their role in fuelling conflict is to fail at this objective.97 5 Conclusion The systematic theory offered by Keenan appears to be a plausible solution for tackling the problem of resource curse stemming from resource wars. This approach needs careful discussion and cautious implementation. The incident-based approach has already proven to have weak impact in creating any improvement in preventing exploitation of natural resources. It is no doubt true that the liability of foreign businesses for trading in illicit confl ict commodities is also vital, and that corporate liability should definitely be applied whenever appropriate and possible, but the problem has to be dealt with from a larger view of the correlation of pillage with economic growth. It should be remembered that pillage is not the only crime with which corporations that trade in pillaged resources might be charged. Corporations may be charged with fraud and money laundering, and principal offenders might also be treated as accessories to pillage or any other relevant offence. Thus, while the solution offered by Keenan requires the adoption of a new strategy by prosecutors, it will be an added advantage to the other initiatives targeted at curbing the resource curse, like fighting corruption, policing the resource sector domestically, building judicial capacity in countries recovering from war, and normative documents such as the Natural Resource Charter. 97 Keenan, Conflict Minerals and Law of Pillage, op. cit., 547.

chapter 20

Concluding Observations F. Romanin Jacur, A. Bonfanti and F. Seatzu This study looks at natural resources grabbing (hereinafter nrg) from an international law perspective. It examines the impact of several international legal tools with regard to this phenomenon to better understand the dynamics characterizing the difficult search for a balance between the economic development brought by the exploitation of natural resources and the respect of fundamental human rights and of environmental protection. In this regard, a somewhat contradictory picture may be drawn: on the one hand, International Law provides for legal instruments that challenge nrg and contribute to avoiding or mitigating its negative effects. On the other hand, nrg is exacerbated by the limitations on sovereign powers imposed by International Law. The first hypothesis is well reflected by the legal protection of peoples’ rights to property, to food, and to freely dispose of their natural resources provided by the international human rights systems.1 Conversely, nrg practices intensify when host States’ sovereign powers are excessively limited by trade agreements, investment treaties and contracts, under the pressure of the ‘land rush’ appetite of Western countries, eager to ensure an adequate access to natural resources and their own food and energy security. In the same vein, many civil society organizations claim that international financial institutions (ifis), such as the International Monetary Fund (imf) and the World Bank, are responsible for opening the agricultural market to global players, thereby negatively affecting the national economies of many developing countries. In this final part of the book, we develop some concluding reflections on the research questions posed in the Introduction, building upon the findings of the various chapters. First of all, a tentative definition of nrg could read as follows: the taking of natural resources that is decided and implemented in disregard of applicable procedural guarantees and that results in short or

1 On the international protection of property rights under human rights and investment law, see L. Cotula, Human Rights, Natural Resources and Investment Law in a Globalised World (Routledge, 2012) 38; Id., Law at two speeds: Legal frameworks regulating foreign investment in the global South, at: http://ccsi.columbia.edu/files/2014/01/FDI_73.pdf.

© koninklijke brill nv, leiden, ���6 | doi 10.1163/9789004305663_022

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long-term adverse effects on human rights of local people and/or on the environment in the recipient country. The generic word ‘taking’ is sufficiently broad to accommodate all the various forms that activities leading to grabbing may take, and indicates the main effect that they entail, the dispossession or loss of control over the resources by their owners. Relevant activities are private or public, foreign or national investments. They often are of a large-scale dimension, but they might as well be smaller deals. The same can be said with regard to the legal structure of the deals, because a great variety of options can be envisaged: acquisitions, concession agreements, project-financing, long-term leases, are the first that come to mind. Relevant operations are not only the ones directly targeting land or other natural resources, because also other activities may result in the dispossession of natural resources, even the ones pursuing legitimate public interests objectives. One may think, for example, of the construction of roads to improve the communications within a certain area, which causes illegitimate expropriations of lands inhabited by local communities or of the utilization of water from a river to provide electricity which reduces significantly access to water for agricultural purposes. Hence, the qualifying character rests in the effects linked to the activity carried out and in the modalities according to which it takes place. The following part of the definition relates to the decision-making process according to which the ‘taking’ occurs. In this regard, there are procedural steps and guarantees that need to be respected to make sure that all the stakeholders are adequately informed and able to participate in the process. Finally, the last part of the definition refers to the negative local impacts deriving from these practices on the human rights of people and on the environment and provides for the time and geographical frame. The first question these concluding observations intend to focus on is whether State sovereignty is eroded by nrg practices. Several chapters show that the grabbing phenomenon indeed erodes the effective exercise of state authority over lands and related natural resources. This occurs, for example, when the exploitation or alienation of natural resources leads to the transfer not only of possession – but also of control – over them from the host State to foreign private or public investors. This is typically the case of long-term land deals that lease large portions of a State’s territory for periods of up to 99 years. Situations such as these suggest that erosion of State sovereignty is, indeed, taking place from within the State: by leasing or selling these large portions of their lands, the governments of the affected countries “hereby erode the very basis of their decision-making authority, the fundamental nexus between

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government, territory and inhabitants.”2 This results “in a disarticulation of the territory from the power of regulation and control of the host country.”3 This phenomenon occurs notably with regard to land grabbing and creates “a structural hole in the tissue of national sovereign territory,” because while formally retaining ultimate jurisdictional control over these parts of the territory, foreign state entities or private investors gain the right to exploit the land and to dispose of its agricultural products, hereby effectively diminishing domestic control over vital land resources.4 Further limiting phenomena of State sovereignty are connected with the relationship existing between State sovereignty and peoples’ self-determination. Does sovereignty on natural resources in its internal dimension attribute to the people autonomous rights to natural resources? In this regard, consideration should be given to the peoples’ right to self-determination and to the concept of ‘parallel sovereignty’5 of peoples within the State. For example, it seems safe to argue that when indigenous rights on ancestral lands are recognized as being of a customary nature, they derive their legal basis from a source of law that is pre-existent and enjoys a certain degree of autonomy from the State. Thus, from this point of view, “the affirmation of a people’s right over natural resources is a form of restriction of State sovereignty.”6 This is even more evident when domestic armed conflicts reach a level of intensity that substantively weakens the State’s territorial control. In this regard, since “the attribution of sovereign rights over the territory and its natural resources are being re-determined through an exercise of internal selfdetermination by the people of the State,”7 it could be argued that respect for the right to self-determination requires third States to abstain from concluding transactions involving natural resources with the governmental entities. The double-headed inherent nature of sovereignty – the State’s and the peoples’ one – and the problems arising when its exercise by the governmental authorities is not aligned with and encroaches upon the peoples’ rights are central questions linked to nrg: to what extent do States legitimately dispose of their natural resources? States are often unwilling or unable to adequately 2 3 4 5 6 7

Bernstoff, 73. Violi, 36. Von Bernstoff, 63, quoting S. Sassen. Bordignon, Greco, Lepore, 104. Gilbert and Bernaz, 43. Pertile, 391.

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manage grabbing challenges within their territory, particularly when the economic national interests are not aligned with the interests and rights of their local communities and indigenous peoples. In these cases, States’ governmental and administrative authorities, although acting in compliance with applicable domestic law, often exercise their powers in ways which encroach upon self-determination and other fundamental human rights. Furthermore, it should be noticed that many domestic legal orders do not provide for an effective protection of peoples’ rights on natural resources. In this context, international law may provide for a complementary protection through a bottom-up approach, by upholding the substantive rights of peoples to their natural resources vis-à-vis their home States. This occurs, for instance, when international norms recognize to individuals and other non-state actors the right to access human rights bodies, compliance committees of Multilateral Environmental Agreements, and other quasi-judicial bodies, like the Compliance Advisor Ombudsman (cao), and to obtain remedies in case of violation of their rights. In this regard, a key role is played by international human rights bodies, as reflected in the human rights jurisprudence of the Inter-American Court of Human Rights8 and the African Commission on Human and Peoples’ Rights9 recognizing and strengthening peoples’ rights vis-à-vis their home States. Through their jurisprudence they influence other international jurisdictions, as well as the decisions of national courts. Thus, they may inform the development of lawmaking at the national and international levels. Their impact on domestic legal orders is further enhanced when domestic courts endorse their judgments and thereby transpose international human rights protection into the domestic legal order. Beside the judicial implementation of international human rights into the domestic legal orders, procedural rights and participatory processes for potentially affected individuals and indigenous peoples with regard to access to natural resources and sharing of benefits are increasingly recognized by international legally and non-legally binding instruments. Examples are found transversally across various fields of International Law:  the World Bank and other ifis’ policies, the Principles on Responsible Agricultural Investment recently adopted by the un Committee on World Food Security, the Nagoya Protocol on the access and benefit sharing of genetic resources and 8 9

For example, the Mayagna (Sumo) Awas Tingni Community v. Nicaragua, the Sawhoyamaxa Indigenous Community v. Paraguay and the Saramaka people v. Suriname cases. For example, the Centre for Minority Rights Development (Kenya) and Minority Rights Group International on behalf of Endorois Welfare Council v. Kenya.

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traditional knowledge. These different instruments may positively shape domestic regulatory measures and policies towards the recognition of the legitimate rights of individuals and communities on natural resources. By exercising this influence, they could frame State regulatory powers according to internationally recognized human rights and environmental standard. Other ways in which State sovereignty might be limited by international law with regard to nrg follow a top-down path and show negative side-effects. This occurs when States are unable to effectively address grabbing challenges because international obligations arising from investment and trade agreements have a shrinking effect on their domestic policy space. Thus, for example, the ability of wto member States to implement regulatory measures aimed at protecting animals or managing their essential water and energy resources is heavily conditioned, if these measures encroach upon the wto trade liberalization commitments. Analogous considerations apply in the investment context: bits, ftas and the financial assistance agreements of ifis and the European Union impose conditions upon recipient States that limit their sovereign prerogatives. These are different phenomena that occur whenever States willingly consent to be bound by international treaties that limit their sovereign prerogatives. In these situations, manifestations of State consent should not be narrowly understood to apply to a specific – and already existing – rule or obligation, but rather they “can be conceptualized as states consenting to a process of normative development, the outcome of which is unknown when consent is given.”10 Though we maintain that these cases are, indeed, formal exercises and manifestations of State sovereignty, nonetheless these situations may – and often do – result in de facto limitations of the State regulatory powers. As for the legal sources providing for rules and principles applicable in the field of nrg, the legal framework is multilevel. Different sources of law (e.g., hard law, soft law, domestic law, contracts, codes of conduct, standards and certification schemes) establish rules and principles on nrg creating a complex regulatory framework, where hard law (treaty and customary law) is complemented and clarified through the soft law recommendations addressed to States, the private investors and other stakeholders involved. Several legal instruments, especially guidelines, codes of conduct, and certification schemes established at the international level, complement and 10

E. Hey, “International Institutions,” in D. Bodansky, J. Brunné, E. Hey (eds), The Oxford Handbook of International Environmental Law (oup, 2007) 758; R. Higgins, Problems and Process. International Law and How We Use It (Clarendon Press, 1994) 10.

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integrate the international principles and rules regulating nrg with technical and detailed prescriptions and make them applicable to private operators. In so doing, the different legal sources interact with each other: while hard law is interpreted through the soft legal tools, and especially detailed through the standards of conduct and the certification schemes (e.g. those aimed at preventing the illegitimate/unsustainable exploitation of diamonds, timber, genetic resources), investment contracts often embody or make reference to the standards established at the international level, such as the un Guiding Principles. This complex legal framework is completed by the case-law concerning nrg developed in recent years by different international courts and tribunals, such as investment arbitral tribunals, the Inter-American Court of Human Rights, and the wto Dispute Settlement Body. Even without expressly referring to the phenomenon of ‘natural resources grabbing,’ these decisions contribute to the development of its international legal framework, providing clarifications and specific interpretations of the international rules applicable to its different aspects, and thereby increasing legal certainty in this area. This prolific normative development of standards and mechanisms for judicial review at the international level is a welcome contribution for tackling the negative effects of nrg. This leads to the following issue: natural resources provide for the basic livelihood and sustenance of local people, but at the same time they are tradable goods and commodities with an economic value. How can International Law combine the diverging interests of fostering economic development, on the one hand, and protecting human rights and the environment, on the other? As several contributing authors highlight, it should be recalled that the exercise of State sovereignty is not left to the full discretion of States, but entails rights as well as obligations. Sovereign prerogatives on natural resources should be exercised in a functional way to ensure their sustainable access and management. In other words, they entail responsibilities to ensure the protection of human rights and the well-being of people, and the proper use of agricultural lands and the environment. To achieve these purposes, States should not only refrain from interfering with the enjoyment of these rights, but are increasingly required, inter alia pursuant to their international obligations under human rights treaties and the Nagoya Protocol, to adopt measures that enhance the protection and legal certainty of such rights. As a concluding consideration, it may be asked whether a comprehensive legal regime, even in its ‘infant phase,’ can be envisaged that embraces basic common principles applicable to nrg. As explained in the Introduction, we maintain that the essential elements relate to the ways in which natural resources are accessed and managed. With regard to access to natural resources,

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procedural guarantees are increasingly recognized to the legitimate owners of such resources. The prior informed consent (pic) requirements set by human rights instruments, such as the undrip, by multilateral environmental treaties, such as the cbd and the Nagoya Protocol, and by the operational policies of ifis can be considered a fundamental tenet of the nrg legal regime. These international instruments require States to adopt adequate domestic measures that improve the legal protection of property rights vis-à-vis the host State itself and third parties, such as foreign investors. These mechanisms include collective rights of registration, participation and consultation of affected individuals and communities, and access to justice and remedies for violation of their rights. The recognition of procedural rights has greatly advanced but may further develop. For example, while the principles of prior consultation and participation of those directly affected by decisions regarding an investment are generally recognized, a veto power of local populations over the approval of projects that endanger food security, the environment, and/or their traditional livelihoods is not yet endorsed under the international instruments considered. Moreover, several international legal instruments examined throughout the book provide for the sharing of the economic and non-economic benefits deriving from the exploitation of natural resources. This is an essential element based on the principle of equity that is meant to reward the individuals and communities who own and sustainably manage the resources, independently from the occurrence of violations of their rights on such resources. This should also be considered a general principle of the nrg legal regime, linked to the recognition of the right to property as an individual and collective right of indigenous people. In this regard, noteworthy advancements are found in the human rights jurisprudence, which clarifies the normative content of such right and expressly recognizes the importance of its cultural dimension. The recognition of the value of the special relationship between ancestral lands and their inhabitants and of traditional knowledge transmitted within indigenous communities concerning their natural resources represents another emerging trend. Manifestations of this trend may be found in the “conceptualization of ‘spiritual damage’ as an aggravated form of moral damage, giving rise to non-pecuniary forms of reparation,”11 and in the procedural guarantees endorsed by the Nagoya Protocol with regard to the protection of traditional knowledge associated to genetic resources.

11

Ruozzi, 87, referring to the Separate Opinion of Judge Cancado Trinidade in the Moiwana case.

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In conclusion, nrg has recently gained the stage as a worrisome phenomenon that attracts attention and concerns and that requires appropriate regulatory tools to contain its negative effects. The double-headed inherent nature of sovereignty over natural resources and the problems arising when its exercise by the governmental authorities is not aligned with, and encroaches upon, the peoples’ rights are crucial aspects linked to nrg that raise questions for which international law has yet to provide for satisfying answers. The recognition of substantial and procedural rights and guarantees seems a well-established trend to address many of the hurdles posed by nrg, composing an infant legal regime for nrg. Nonetheless, in view of the highly complex legal framework characterized by a multiplicity of actors and of legal orders involved, many challenges still remain, gaps need to be addressed and coherence needs to be strengthened.

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Index Access to food 20 Access to land 20, 34, 82, 306, 308, 311 Accountability 39, 47, 195–198, 216, 275, 290,    292, 296, 298, 304, 306 Adequate standard of living 57, 71, 72, 101,    119, 168, 227, 237–239 Afghanistan 227, 231, 232, 236, 240, 243, 244 Agreement on Agriculture (AoA) 341, 346,    354–357 Aiding and Abetting 424 Animal protection 12, 318–321, 326–328 Awas Tingni 81, 83, 89, 90, 104, 168, 238, 430 Bilateral Investment Treaties (bits) 60, 63,    64, 109, 431 Bulk water 98, 99, 342 Businesses 225, 227, 233, 235, 242, 407,    423–426 Certification schemes 321–323, 398, 431, 432 Climate change 11, 116, 126, 133, 140, 161, 164,    165, 171, 172, 179, 184, 199, 200, 202–211, 213, 214, 220, 361, 362, 364–366, 375, 376, 379 Commodification of natural resources 24 Compensation 10, 12, 24, 28, 80, 83, 91, 109,    173, 230, 235, 239, 241–243, 245–274, 309 Partial Compensation 12, 245–274 Complaint 101, 235, 283, 284, 286, 288–291,    293, 358 Complementary activities 279 Compliance Advisor Ombudsman (cao) cao Compliance 284, 289, 291 cao Ombudsman 286, 290–292 Complicity 59–64, 68, 235, 413, 424 Consultation 35, 46, 51, 55, 70, 83, 84, 92,    99, 170, 176, 177, 191, 193–195, 220, 239–242, 244, 279, 283, 289, 302, 358, 386, 433 Community consultation 239–241, 244, 283, 289, 433 Control grabbing 24–32, 76 Corporations 2, 8, 13, 18, 23, 38–51, 93, 96,    108, 113, 115, 233, 235, 236, 342, 383–407, 423, 424, 426

Cultural rights 49, 65, 112, 128, 168, 175,    237, 239 Customary land rights 34, 35 Decolonization 17–21, 28, 65, 66, 69 Domestic policy space 64, 317, 326, 336, 337, 431 Due diligence 149, 150, 157, 189, 191, 227, 235, 277, 285, 286, 404 ec/Seals 317, 318 Eco-labels 318, 321–323 Economic Community of West African States 196 Court of Justice of the Economic Community of West African States 196 Elements of Crime 421, 422 Energy 1, 3, 13, 19, 20, 38, 116, 120, 122, 124,    133, 140, 199–221, 245, 249, 263, 268, 284, 287, 338, 340, 361–379, 427, 431 Environment 2, 3, 17, 21, 36, 56, 58, 59, 69,    85, 105, 108, 131, 133, 134, 143, 155, 172, 181–199, 204, 206, 207, 240, 245–247, 257–260, 263, 264, 268–271, 274, 280, 281, 284, 300, 308, 317, 326, 343, 350, 354, 363, 369, 370, 392, 409, 411, 428, 432, 433 Environmental impact assessment 83,    188–192, 198, 243 European Development Fund (edf) 125,    129–130 European Development Policy 116–135 Evidence 38, 133, 149, 150, 161, 176, 188, 221,    226, 232, 255, 258, 270, 271, 291, 305, 308, 326, 351, 364, 388, 390, 416, 421, 423, 425 Exploitation 3, 5, 7–10, 13, 20–24, 27, 29–32,    34, 36, 38–40, 45–51, 65, 69, 71, 80, 105, 108, 116, 143, 170, 174, 227, 230, 237, 240, 243, 299–301, 305, 338–360, 383, 385, 392, 395–399, 403–405, 407, 410–416, 418–428, 432, 433 Export restrictions 13, 345–349, 352, 358,    359, 361–379 Extractive industries 12, 69, 171, 225–244,    281, 289, 393

460

index

Financial instruments 129–131 Food security 10, 20, 21, 37, 38, 55, 58, 59,    69, 70, 122, 124, 140, 195, 217, 302, 341, 356–359, 433 Foreign direct investments (fdi) 12, 18–22,    25, 47, 158, 226, 298, 300, 302–311 Forest 3, 7, 9–11, 17, 38, 39, 56, 59, 62, 70, 72,    76, 159–180, 185, 211, 283, 301, 307, 308, 346, 392, 414 Fossil fuels 199, 210, 361–365, 375–379 Free, Prior and Informed Consent (fpic) 45,    46, 50, 51, 70, 82, 94, 103, 169–171, 174, 176, 177, 179, 239 Freshwater scarcity 338, 339

International Criminal Tribunal for the Former Yugoslavia (icty) 417–418, 422, 425 Investment 1–5, 9–12, 17–26, 29, 31–35, 37,    38, 47, 55–74, 93, 95, 97, 98, 107–115, 124, 125, 129, 133, 141, 142, 156, 158, 164, 170, 181–198, 210, 211, 217–221, 225–306, 308–310, 312, 335, 341–343, 427, 428, 430–433 International land investments 181–198 Investment arbitration 245, 247–257, 261, 265, 266 Investment contracts 3, 12, 20–24, 34, 63, 64, 225–244, 312, 432 Investment law 63, 71, 113, 115, 225

General Agreement on Tariff and Trade (gatt) 13, 99, 317–319, 324, 326–328, 333–337, 341, 344–354, 356–357, 365–379 Art. xi 318 Art. xx 317, 318, 327, 330, 333, 337, 368, 369, 374, 375, 377 globalization 17–21, 24, 26, 38, 45, 55, 60, 68,    69, 96, 114, 216, 294, 296, 298, 311

Land deals 10, 18, 56, 58, 62, 63, 67, 96, 97,    309, 428 Land deprivation 79, 83, 87, 88, 294 Land grabbing 2, 10, 12, 17–38, 55–57, 62, 63, 68, 69, 71, 73, 75–92, 94, 126, 220, 294–312, 429 Land use 57, 124, 159, 161, 185, 214, 238–239, 311 Land use change 211, 215, 219, 220 Large-scale land investments 11, 186, 187 Local communities 3, 7, 11, 22, 35, 39, 40, 51,    59, 65, 69, 70, 93, 99, 109, 115, 120, 132, 133, 139, 140, 143, 144, 146–149, 152–155, 157, 158, 168, 172, 175, 184, 190, 193, 195, 227, 231, 232, 237, 240, 243, 283, 285, 289, 299, 300, 308, 428, 430 consultation of, see ‘Consultation’ Looting 413, 418–420, 423

Human right(s) 1–5, 8–12, 17, 21, 31, 33, 34,    38–51, 55, 56, 59, 63, 64, 67, 71–95, 98, 100, 101, 104–119, 121, 127–131, 133, 139, 143, 152, 157, 161, 162, 167–181, 205, 207, 225–244, 250, 254, 275, 280, 287, 339, 385, 392, 400, 404, 405, 410, 427, 428, 430–433 to Land 294–313 ilo Convention n. 169, 76, 83, 102, 103, 168,    173, 175, 239 Immunity 20, 25, 26, 347 Index 33, 34, 48, 108 Indigenous people 3, 7–11, 22, 38–51, 62, 67,    70, 75–92, 94, 97, 99, 101–109, 114, 115, 127, 139, 148, 151, 152, 162, 168–178, 239, 240, 263, 281, 288–289, 291, 296, 308, 321, 385, 392, 430, 433 Insurance 275, 277–281, 287, 292, 310 International Armed Conflict 119, 420 International Court of Justice (icj) 103, 189,    191, 262, 263, 385, 386, 391, 394, 395, 401–404, 419–420 International Criminal Court (icc) 13, 407,    408, 413–424

miga (Multilateral Investment Guarantee Agency) 12, 225, 275–293, 310, 312 Moiwana 78, 79, 86, 87, 90, 433 Monitoring system 281, 293 Natural Resource(s), see Resource(s) New colonialism 25, 306 Niger Basin 11, 181–198 Non-international armed conflict 119, 387,    414, 420, 421 Nuremberg Trials 419 Paradox of plenty 408, 424 Performance Standards 50, 239, 240, 243,    277–292, 311

461

Index Permanent sovereignty over natural resources (psnr) 4–6, 27–31, 35, 39, 41–44, 65–67, 93, 94, 114, 225, 227–231, 359, 366, 369, 385, 394 Pillage 13, 400, 407–426 Plunder 109, 407, 413, 415–417 Political risks 275, 292, 310 Polluter pays principle 12, 184, 245–274 Poverty 1, 57, 118–120, 122, 124, 130, 132, 133,    175, 179, 205–207, 294–298, 303, 306–309, 311 Poverty Reduction Strategy Papers (prsps) 296, 298, 306, 307 Processes and Production Methods (ppms)     318, 320, 321, 323–326, 350 Precautionary principle 12, 184, 190, 245–274 Principles for Responsible Agricultural Investment (rai) 12, 17, 55, 58, 69–72, 196, 218, 295, 297, 301–302, 307, 309–311 Privatization 11, 95, 109, 110, 115, 131–133,    278, 309 Public morals 317, 318, 320, 321, 326–328, 331 Public participation 26, 113, 169, 173, 184,    191–195, 198 Qara Zaghan 227, 231, 232, 236, 238, 240,    242, 244 redd+ (Reducing Emissions from Deforestation and Forest Degradation in Developing Countries) 11, 159–180 Remedies 10, 12, 40, 48, 110, 157, 167, 195, 196,    226, 227, 233, 234, 237, 241–244, 246, 247, 255, 257–268, 281, 290, 430, 433 Resettlement 109, 175, 177, 179, 238, 239,    241–244, 280, 287, 288, 291 Resource(s) 2, 13, 39, 407–426 Conservation of natural resources 317, 351, 364, 368, 370 Resource conflict(s) 407, 410, 412–413 Resource management 132, 229, 320 Resource nationalism 361–379 Resource wars 409–411, 413, 423, 426 Restitution 83, 85, 86, 91, 241, 242, 252 Right to property 75, 79–80, 84–91,    94, 103, 108, 110, 114, 170, 173, 176,    237–239, 433 Right to sanitation 117–120, 127, 128, 134 Right to water 11, 88, 96, 100–108, 110–112,    115–135, 385

Rural development 21, 58, 60, 122 Saramaka 44, 76–79, 81, 82, 84–86, 88, 90,    91, 170, 174, 430 Sarayaku 77–79, 83–87, 91, 107 Sawhoyamaxa 45, 77, 79, 81–86, 88, 90,    107, 430 Self-determination 4, 6–8, 28, 31, 32, 42,    44, 45, 65–67, 69, 73, 94, 103–106, 114, 248, 384, 385, 387, 388, 391, 392, 394, 397, 404–406, 429, 430 Social/environmental impact assessment 82, 83, 144, 188–198, 240 Social protection 23, 232, 280–290 Sovereign investors 25, 26 Wealth Funds 20, 25, 26, 36 Sovereignty 4–6, 8, 10, 11, 17–37, 40–42, 47,    60–62, 64–71, 73, 93–115, 142, 163, 226–229, 231, 233, 236, 248, 299, 345, 351, 365, 390, 392, 401, 429, 434 inalienability of 30, 36 State sovereignty 4–6, 8, 10, 28, 29, 32, 37, 39, 43, 62, 68, 73, 93–115, 141–145, 229, 230, 353, 384, 389, 428–432 Special Court for Sierra Leone (scsl)     418–422, 425 Stabilization clauses 24, 231, 232, 236 State duty to protect 48, 51, 227 State-owned enterprises 25, 26, 365, 396 Sustainable development 2, 13, 117, 121, 122,    126, 134, 184, 186, 192, 195, 199, 201, 204, 205, 207, 208, 213, 216, 218, 236, 308, 351, 361–379 Technical Barriers to Trade (tbt) Agreement 12, 317, 328, 333–336, 341, 350 Art. 2.1 319, 320, 326, 328–333, 336, 337 Art. 2.2 319, 320, 326–328, 331–333, 337 Territorial Sovereignty 5, 17–37, 60, 63, 64, 93, 384, 402, 405 Territory alienation of 30 disarticulation of 10, 35–37, 429 un Guiding Principles 40, 48–50, 72, 77,    226, 227, 233–236, 243, 432 United Nations Security Council 387, 411 us/Tuna ii 317–326, 330–333, 336

462 Vienna Convention on the Law of Treaties (vclt) 173, 263, 329, 335, 336, 369 Virtual water 97, 124, 338–340, 345, 346 War crimes 13, 400, 407, 408, 412, 413,    415–417, 420, 421, 423, 424 Water footprint 340, 346 grabbing 10, 11, 57, 93–115, 183, 300 resources 11, 13, 22, 57, 93, 95–98, 100, 108, 116–135, 181, 183–185, 189, 192, 237, 283, 338–360 security 124, 294

index Water Charter 184–186, 189, 191–194, 196 Water-intensive products 339, 340 World Bank (wb) 2, 12, 17–19, 21, 33, 50, 56,    58–60, 68, 70, 95, 96, 117, 177, 178, 183, 195, 210, 242, 243, 291, 294–313, 409, 427, 430 World Trade Organization (wto) 9, 12, 13,    98, 146, 199, 201, 210, 219, 262, 317–337, 339–359, 361–379, 431, 432 Xákmok Kásek 77, 79, 85, 86, 88–91