Law
Human Rights Impact Assessments in International Investment Agreements
Quick fact
Under traditional investment treaties, a foreign investor can sue a state for lost profits even if the state was protecting public health—but newer treaties and arbitration rulings are beginning to use human rights impact assessments to tip the balance in favor of people.
Why this is interesting
You might think that international investment agreements are only about protecting companies—but increasingly, they are becoming arenas where human rights are tested. What if a host country's promise to protect foreign investors clashes with its duty to protect its own people?
Read the full explanation
Understanding Human Rights Impact Assessments in International Investment Agreements
Imagine a company building a dam under an investment agreement. The agreement gives the company the right to sue the host country if it changes regulations that hurt profits. Now imagine the dam displaces thousands of people or pollutes a river. A human rights impact assessment (HRIA) is a structured process that looks at these effects before the project goes ahead. It asks: What rights are affected? Who is harmed? How can harm be prevented? Countries can include requirements for such assessments in their investment treaties, making them a condition for investor protection. For example, a treaty might say that investments must not violate human rights, and that an HRIA must be carried out to show compliance. If the assessment reveals serious problems, the state might be justified in taking corrective action without being penalized by an investor lawsuit. This shifts the focus from pure profit to a balance of interests.
A deeper explanation
The mechanism works by embedding human rights considerations into the legal framework of investment. When an investor signs a contract or obtains a license, an HRIA scans the project's design against internationally recognized human rights, such as the right to health, housing, or water. The assessment is not just a paper exercise—it can be used as evidence in disputes. If a state is sued for violating an investment agreement, it can cite the HRIA to show that its actions were necessary to protect human rights, which can be a valid defense under international law. This is possible because many investment treaties include clauses on public welfare and because arbitrators increasingly interpret treaties in light of human rights obligations. For instance, in disputes over water privatization, tribunals have considered the state's duty to ensure access to water, and HRIAs have helped demonstrate that the state acted reasonably. Without such assessments, states risk paying huge compensation for taking measures to curb pollution or protect indigenous rights. HRIAs thus serve as both a preventive tool and a shield in legal disputes, promoting the idea that investment should not come at the cost of fundamental freedoms.