Investor-State Arbitrations: Can the 'Fair and Equitable Treatment' Clause Consider International Human Rights Obligations?

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* EcSocSc, LL.B., GradDipLP, LL M (cum laude) [

[email protected]

]. This was first given as the author's LL M thesis at the University of Leiden. The author would like to thank her supervisor, Dr Eric De Brabandere, and Tolga Yalkin for their comments and guidance. Please note that the views expressed in this paper are hers and sole responsibility is to be attributed to her.

In the last four decades,¹ the pace of international investor-state adjudication has steadily increased. Despite some recent figures showing a decline,² this method of dispute settlement resolution offers procedural advantages and has been shown to lead to substantial payouts.³ Nevertheless, it is almost inevitable that through an increase of such mixed arbitrations, tribunals will be called upon to grapple with sensitive policy issues.

In the recent claim of Piero Foresti, Laura De Carli and others v. Republic of South Africa (Foresti v. South Africa), ⁴ Italian mining companies (the Investors) found themselves subjected to the black economic empowerment (BEE) policies of South Africa. This, the Investors argue, amounts to a violation of the terms of the bilateral investment treaty (BIT) between South Africa and Italy. The novelty of Foresti v. South Africa is patent, as observed by Peterson: 'no arbitral tribunal is known to have grappled with the question as to how to reconcile a state's affirmative action policies with its investment treaty obligations'.⁵ As is typical of most mixed arbitrations, the Investors seek to rely on a number of clauses contained in the South Africa-Italy BIT in order to impugn the conduct of the host state. Rather than consider all these arguments, this article focuses on the claim that the legal requirements of hiring black or historically disadvantaged persons violate the fair and equitable treatment (FET) clause of the South Africa-Italy BIT.

The aim of this article is to consider the legal framework in which substantive protections (namely international human rights obligations) can be considered under the FET clause in investor-state arbitrations and then the way in which South Africa can refute the claim made by the Investors. First, based on public information, it examines the Investors' claim; as mentioned above, never before have...