Bilateral investment treaties and investors’ social accountability: the law and praxis in South Asia

• Date: 28 August 2024
• Pages: 129-153
• DOI: https://doi.org/10.1108/JITLP-04-2024-0025
• Published date: 28 August 2024
• Subject Matter: Strategy,International business,International business law,Economics,International economics,International trade
• Author: Sai Ramani Garimella,Soumya Rajsingh

Bilateral investment treaties and

investors’social accountability: the

law and praxis in South Asia

Sai Ramani Garimella

Faculty of Legal Studies, South Asian University, New Delhi, India and

Research Centre on Private International Law in Emerging Countries,

University of Johannesburg, Johannesburg, South Africa, and

Soumya Rajsingh

Faculty of Legal Studies, South Asian University, New Delhi, India

Abstract

Purpose –International investment law governs matters related to transnational investments. The

extensive reach of transnational corporations (TNCs) has granted them substantial economic, political

and social inf‌luence, often intertwining them with public interest issues and implications in human

rights violations. This paper aims to explore the profound inf‌luence exerted by TNCs in today’s

globalized world and its implications for human rights and social responsibility within the framework

of international investment law. Particularly, it acknowledges the vulnerability of economically

weak South Asian states and cites past instances such as the Bhopal gas tragedy in India and the Rana

Plaza disaster in Bangladesh as egregious violations of human rights. Focusing on South Asian

bilateral investment treaties (BITs), this paper aims to examine the scope of investors’social

accountability.

Design/methodology/approach –This research engages with doctrinal and analytical methods in

traversing throughprimary and secondary sources. It would parse the arbitral tribunals’jurisprudence for their

discussion on the inclusion of social accountability obligations within international investment agreements

(IIAs). Further, it engages in a quantitative analysis related to the nature of the social accountability-related

obligationof the corporation within South Asian BITs.

Findings –The f‌indings reveal a glaring absence of the law on investors’social accountability and the

need for enhanced regulatory mechanisms to address the escalating inf‌luence of TNCs on human and

social rights. The absence of a robust legal framework, coupled with the asymm etric nature of

international investment law, granting investors greater rights and leverage compared t o states,

exacerbates this challenge. The phenomenon of “regulatory chill”inhibits states from effectively

enforcing regulatory measures aimed at protecting human ri ghts and the environment. Furthermore,

the broad interpretation of clauses such as “fair and equitable treatment”by investment tribunals

often undermines states’ability to implement measures in the public interest. While international

organizations such as the UNCTAD and the UNCITRAL Working Group III are actively discussing

reforms to IIAs, the existing guidelinesaddressing investors’social accountability are woefully lacking

in the content as well as the method of their integration with international human rights law. The f‌indings

underscore the imperative for South Asian nations, the subject of this research’s empirical analysis, to

adopt a comprehensive approach involving both domestic law reforms t o promote corporate social

accountability and active pursuit of negotiations for the inclusion of binding social obligations for

investors within IIAs.

Practical Implications –This research, drawing upon international law developments, offers

suggestions for incorporation of social accountability provisions via relevant domestic law reform. The

research could be viewed as a prelude for mapping the legal developments in the area of investors’

social accountability within investment agreements, as well as investment contracts, drawing guidance

from international law instruments.

Journal of

International

Trade Law and

Policy

129

Received15 April 2024

Revised9 July 2024

Accepted26 July 2024

Journalof International Trade Law

andPolicy

Vol.23 No. 2/3, 2024

pp. 129-153

© Emerald Publishing Limited

1477-0024

DOI 10.1108/JITLP-04-2024 -0025

The current issue and full text archive of this journal is available on Emerald Insight at:

https://www.emerald.com/insight/1477-0024.htm

Originality/Value –To the best of the authors’knowledge, no other study analysed the scope of investors’

social accountabilityin South Asian BITs.

Keywords International investment law, Investors’social accountability,Bilateral investment treaties,

Investor obligations, Human rights

Paper type Research paper

Introduction

Transnational Corporations (“TNC”s) have gained an inf‌luential position in the globalized world

through their international operations and extensive access to resources. Were they countries,

Apple would be ranked 47th, Volkswagen at 43rd and Walmart at 24th in theworld in GDP terms.

Spanish supermarket chain Mercadona’sannual earnings surpassed, for example, Nepal’s GDP in

2016, reiterating the essence of the report referred to above [1]. Contrastingly, the South Asian

region, consisting of eight countries facing economic and social vulnerabilities, is home to at least

four of the nine least developed countries in Asia [2]. South Asia also has a signif‌icant

concentration of multidimensional poverty and a relatively low share of global income [3].

Approximately a third of the global population lives here with a negligible holding and

contribution of the total income (Global Multidimensional Poverty Index, 2023).

The extensive presence and power wielded by the TNCs have had a collateral and detrimental

impact on human rights. Nike and GAP have been accused of violating their workers’right to fair

wages and safe work conditions (International Labour Rights Forum, 2005). Coca-Cola has been

accused of abuse of workers’rights, water privatization and worker discrimination [4].The

French company Suez was noted as the perpetrator of the water privatization signif‌icantly

impacting the human right of access to clean water [5]. South Asia witnessed two industrial

disasters –the Union Carbide plant gas leakage and the Rana Plaza collapse –that resulted in

immense human suffering. The leakage of methyl isocyanide gas in December 1984 at Union

Carbide’spesticide plant in Bhopal, India, caused multiple deaths and extensive inter-generational

health issues (Elli-Petersen, 2019). The disaster, arising from inadequate safety measures and

negligence of the American multinational and its Indian subsidiary, caused extensive human loss

and suffering, yet justice remained elusive to the victims owing to insuff‌icient domestic and

international regulations governing corporate conduct (Choukroune, 2018).TheRanaPlaza

complex in Dhaka, Bangladesh, housing many garment out-sourced manufacturing units,

collapsed in April 2013 causing more than a thousand deaths and injuring several more (West ,

2021). This incident exposed widespread exploitation of workers in unsafe working conditions in

a sector that is largely driven by business from multinational enterprises (Rahman, 2013;Human

Rights Watch, 2014). Insuff‌iciencyand i ndeterminacy within the domestic and international legal

frameworks, as evidenced in the above two examples, result in TNCs evading their legal

responsibilities, exacerbating the lack of accountability (Mehta, 2020;Haque and Azmat, 2015).

Regulation of TNCs and their business practices is, therefore, pertinent. The law to a very large

extent, as discussed in the following pages, is located in voluntary compliance measures inspired by

soft law principles developed by various international organizations. The enforceability of such

principles remains a concern. Attribution of responsibility is diff‌icult because of the State-centric

nature of international framework. TNCs are thus expected to conscientiously embrace responsible

business practices, thereby ensuring the protection of human and social rights. This expectation is

encapsulated in the concept of corporate social responsibility (“CSR”)–a corporation’s

acknowledgement of its societal duties and its efforts to def‌ine ethical boundaries within the legal

framework [6]. However, the absence of legal personality of the TNCs and the enforceability

concerns arising from the soft law principles, result in largely ineffective normative content and the

prevalence of voluntary obligations. Thus, the inherent weakness of int ernational law on TNCs’

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