The ILA Guidelines for the Sustainable Management of Natural Resources : a roadmap for investment regulation?

A helpful tool to guide States and private actors

The International Law Association’s new guidelines on the Role of International Law in the Sustainable Management of Natural Resources for Development (Guidelines) were officially launched in the UK in March. The Guidelines are a helpful tool for States and private actors alike to shape their conduct in line with the priorities of the international community and avoid unnecessary disputes down the line. 

The international regime sets largely aspirational environmental targets for States. They in turn implement these at a domestic level in a manner which can be inconsistent, causing uncertainty for businesses. The Guidelines aim to define the sustainable management of natural resources through existing international law, and provide a roadmap for its future.

Sector-by-sector guidelines to clarify States’ international law obligations with respect to natural resources

The Guidelines offer sector-by-sector guidelines for the sustainable management of global (oceans), regional (forests, rivers) and national (soil, minerals) natural resources. They rely on a wide collection of binding treaties, as well as other non-binding instruments and standards. For States to achieve their targets under these binding instruments (such as under the Paris Agreement), they must make increased efforts to manage their resources in a sustainable manner.

These sectoral collections of treaties and standards are a valuable, forward-looking tool for investors in describing the obligations and responsibilities of a host State under international law, and illustrating how the private sector can work with States in achieving these environmental goals. They can help to reduce conflicts between the investor’s and the State’s objectives: they establish key norms which should form a central feature of the investor’s decision-making, and conversely help States understand what they should expect from investors.

The Guidelines can also assist and inform negotiations between investors and States, who regularly enter into concession agreements in connection with large projects. The international obligations binding the parties can be clarified and apportioned appropriately in these contracts, at an early stage. These commercial agreements can also, in themselves, be a specific and effective tool to push international investment into a more sustainable direction.

Sustainability is an increasingly common requirement in binding trade and investment agreements

The Guidelines encourage States to use trade and investment policy instruments to strengthen “sustainable and renewable energy-related activities and governance systems”. They also argue that States should promote and incentivise the generation and use of sustainable energy in their legal and regulatory systems, which private investors are well placed to contribute to.

In this respect, certain States are already ahead of the curve – such as the Netherlands, whose Model BIT explicitly refers to sustainable investment and carefully balances the rights and obligations of States and investors. Likewise, the Morocco-Nigeria BIT requires that human rights and standards be prioritised over a favourable investment climate; and imposes an obligation on investors to contribute to the sustainable development of the State, using socially responsible practices.

The African Union’s Kampala Convention also provides an example of a formalised balancing act between development projects and vulnerable communities. It requires signatory States to prevent, to the extent possible, internal displacement caused by development projects, and to carry out a number of impact assessments before undertaking such projects.

These trends are now visible in numerous regional trade agreements; and are reflected in recent evaluations on the exploitable value of national resources.

Non-binding principles and standards increase transparency and accountability, which influences the behaviour of a host State

International standards and non-binding principles continue to shape sustainability in the private sector. The UN Guiding Principles on Business and Human Rights, which recognise that corporates owe human rights obligations, but put the legal onus on States to enforce this at a domestic level, are one such example. These standards and principles have in turn influenced States to enact, at a domestic level, norms which promote higher standards of corporate practice through, for instance, disclosure and due diligence requirements.   

This fosters greater transparency and oversight in the sustainable management of States’ resources and energy production, and adds public pressure on States to demonstrate that they are taking their international obligations seriously. The Sustainable Development Goals (SDGs) – 17 interconnected goals adopted by the UN Member States in 2015 – are an example of a non-binding target which States are under public pressure to work towards. They are a policy objective which can be furthered through trade and investment agreements.

The Guidelines note how public participation allows individuals and civil society into “a realm which was formerly reserved for national and international actors”. In this respect, the conduct of States and investors is closely scrutinised not just by national courts and/or international tribunals, but also by the wider international community.

Greater transparency is capable of reducing conflicts between investors and States. It dissuades States from acting arbitrarily and inconsistently – it reduces the influence of vested interests and promotes accountability for a state’s management of its natural resources – but it also requires investors to hold themselves to higher standards.

Human rights and the environment in international jurisprudence

The Guidelines argue that international law recognises a duty to manage natural resources sustainably, and that human rights and the protection of natural resources are intertwined. They posit that access to, and enjoyment of, natural resources is a human right that requires protection – particularly as regards vulnerable communities – and States, and private actors, can be responsible for a variety of breaches.

This trend is apparent in the jurisprudence of international courts and tribunals, including in investment arbitrations, which have seen the emergence of human rights-based defences and counterclaims against investors. International investors can, too, become subjects of international law. Their legitimate expectations when investing should factor in a State’s legal, social and economic framework, including its binding human rights and environmental obligations.

The Guidelines observe, therefore, that international dispute settlement mechanisms not only resolve issues which may impact the environment, but also help States to understand their own binding obligations. This is turn may assist investors in understanding what is expected of them under international law, and the Guidelines may assist them in their own due diligence.

States have, finally, contended with a number of domestic challenges relating to their environment-related action or inaction (in the Philippines, Netherlands and most recently France). Individuals are not just challenging present or past breaches of their human rights, but asserting their rights to derive a future benefit from the environment. As States increasingly face this novel form of pressure, there may well be knock-on effects in their dealings with investors. 

Conclusion

Given the trend towards sustainable development, the Guidelines are a timely and helpful tool to understand and monitor the direction of investment regulation. They can function as an effective roadmap to encourage the public and private sector to carry out appropriate due diligence, and help investors and States consider how to avoid future disputes by understanding their international law obligations.

The insights which the Guidelines offer are a particularly helpful tool in the context of the covid-19 pandemic. Huge sums will be required to rebuild the world’s economies, and much of it will need to come from the private sector. This offers an opportunity for, and likely foreshadows, a more concerted effort towards sustainable development and appropriate regulation of foreign investment. The pandemic has highlighted the potential for States to act collectively in the face of an urgent, global threat – so why not as a reaction to climate change?