Human rights should be at the heart of investment policy making

If foreign investment is to promote inclusive sustainable development, investment policy must take human rights seriously.

Lorenzo Cotula's picture
Insight by 
Lorenzo Cotula
20 October 2014
A farmer's house and sugar cane field in Cambodia, where there is concern about large-scale investment in sugar plantations driving local people off the land (Photo: Brian Hoffman, via Creative Commons)

A farmer's house and sugar cane field in Cambodia, where there is concern about large-scale investment in sugar plantations driving local people off the land (Photo: Brian Hoffman, CC BY-NC-SA 2.0)

Why human rights matter

As economic globalisation extends its reach, rights are being renegotiated in multiple arenas that bring into contact governments, companies and communities. Cross-border investment processes can have far-reaching implications for human rights.

For example, investments in petroleum, mining or agriculture may squeeze the land rights of farmers, herders and foragers, affecting fundamental human rights such as the right to property, the right to housing or the right to food. Similarly, privatising water supply services may affect the urban poor's right to water.

Labour relations and costs may be a key consideration for people making investment decisions, yet fundamental labour rights are at stake, including freedom of association or collective bargaining. 'Political' rights such as access to information, or freedom of expression and assembly, are essential for citizens to be able to scrutinise and influence investment policy making.

The United Nations' Guiding Principles on Business and Human Rights (PDF) recognise the relevance of human rights to investment processes the principles embody a clear recognition that human rights are relevant throughout business activities, including investment.

They also feature an addendum that contains Principles for Responsible Contracts (PDF), which provides guidance on how to integrate human rights considerations in investor-state contracts a strategic arena where the state's 'duty to protect' human rights and the corporate 'responsibility to respect' those rights come directly into contact.

Unbalanced law promotes unfair investments

Yet, human rights are rarely factored into investment policymaking. And the legal frameworks affecting investment have tended to evolve at variable speeds.

On the 'investment side', the national and international instruments that promote foreign investment have seen rapid and far-reaching developments. There are now more than 3,000 investment treaties worldwide, and major new treaties are being negotiated. Investor-state arbitration provides effective systems for investors to have their rights protected. National policies promote investment through legal reform, tax incentives or administrative streamlining.

Conversely, international human rights instruments, although they have also experienced far-reaching evolutions, have so far fallen short of providing effective redress in important areas. Much international guidance in social and environmental matters is left to non-binding instruments that cannot be enforced. Explicit consideration of human rights in national-level investment policy making remains rare, and in many contexts rights remain insecure and arrangements for meaningful community engagement fragile.

This disconnection between investment policy and human rights, and these imbalances in applicable legal frameworks, cause many problems.

From a host country perspective, promoting investment is not an end in itself, but a means to an end. The exact framing of these ultimate policy objectives varies but the general goal is, or should be, to improve livelihood opportunities for example through creating jobs or generating public revenues – while respecting the environment.

Investments that undermine human rights are unlikely to promote inclusive sustainable development. A country may well receive investments but these do not necessarily translate into broad-based socioeconomic benefits. And while international instruments on human rights and on sustainable development have been shaped by different historical trajectories, people's enjoyment of their human rights, including both civil and political rights and economic, social and cultural rights, is closely interconnected with the successful balancing of social, environmental and economic considerations that is at the heart of sustainable development.

In fact, weak safeguards for rights promote lose-lose outcomes. They expose poorer groups to dispossession, and companies, even 'responsible' ones, to contestation and even conflict because even compliance with applicable law may not be enough to shelter companies from criticism. Contestation about 'land grabbing' in relation to the recent wave of agribusiness investments powerfully illustrates this point.

Taking human rights seriously

The world needs to bridge the gap between human rights and investment policy – to ensure that investment policy making fully factors in the human rights dimensions, to strengthen overall policy coherence and to address existing imbalances in legal frameworks.

Doing this requires action at multiple levels:

  • International investment treaties, for example, should strike the right balance between investment protection and the right to regulate, but also develop arrangements to ensure that investments respect human rights and promote inclusive sustainable development
  • Investor-state contracts should integrate human rights considerations into their negotiation and administration, building on the guidance provided by the Principles for Responsible Contracts (PDF), and
  • In national policy making, human rights must be a mainstream consideration, not just in policies explicitly labelled as 'investment', but in the wider range of policies and laws that affect investment processes – from transparency and democratic governance to labour through to land rights.

Civil society action can make a difference

Governments play a central role in shaping investment policies that promote human rights. But this is not just a government job. Civil society organisations can and should play, and have been playing, a very important role in shaping how investment policy considers human rights. Recent examples from different parts of the world include:

While some governments see civil society's sometimes-confrontational tactics as a threat, civil society action ultimately helps improve the quality of investment policy, and is therefore a public good.

Human rights must have a place at the centre of investment policy making. Sustained action by both government and civil society is critical in making this happen.

Lorenzo Cotula is a principal researcher in IIED's Natural Resources Group and leads the institute’s work on legal tools. This blog is a lightly revised version of remarks made at a session on Human Rights and Investment Policy Making: Relevance and Integration, which was held at the World Investment Forum 2014.

Human rights standards for conservation discussion paper

Useful resources:
Foreign investment, law and sustainable development: A handbook on agriculture and extractive industries, Lorenzo Cotula (2013), IIED Natural Resource Issues series