Ei-iE

Concerns Grow Over Investor Rights

published 9 April 2008 updated 9 April 2008

Development groups and trade unions are warning that treaties that regulate international investment are undermining democracy and human rights.

Globally, there are now close to 3,000 bilateral investment treaties (BITs) intended to protect foreign investors from arbitrary nationalization or discrimination. Many of these treaties include dispute settlement provisions that allow private investors to formally challenge government measures before international tribunals.

A rash of controversial disputes in recent years now has many wondering if these deals have granted too much power to investors to overturn sensitive regulations.

A group of European investors, for instance, has recently challenged South Africa’s Black Economic Empowerment regulations requiring mining companies to meet affirmative action hiring requirements.

And Argentina has been hit by dozens of claims following the financial crisis in 2001-2002, when the government froze utility prices to protect consumers. Foreign companies including Mobil, France Telecom and Vivendi have won a string of rulings against Argentina, but the government has so far refused to pay any of the awards.

Despite these problems, however, the number of BITS being negotiated continues to grow as businesses lobby their governments for stronger protections and rights. The U.S., for instance, is currently in negotiations with Brazil, Russia, India and China.