International Investment Agreements and Indigenous Peoples ...

International Investment Agreements and Indigenous Peoples:

Participatory Rights in Treaty-Making

Joanne Taylor

Student Number: 2005567

Department of International and European Law

Faculty of Law, Tilburg University, the Netherlands

A thesis submitted for the degree of

Master of Laws in International and European Law

Tilburg, June 2017

Supervised by Dr AK Meijknecht

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Table of Contents List of Abbreviations .................................................................................................................................. 3

Acknowledgements ..................................................................................................................................... 4

Chapter 1: Introduction ............................................................................................................................. 5

1.1 The Issue ..................................................................................................................................... 5

1.2 Research Question ..................................................................................................................... 6

1.3 Methodology ............................................................................................................................... 6

1.4 Structure....................................................................................................................................... 8

Chapter 2: Investment Agreements and Investor-State Disputes Arbitration................................... 9

2.1 Introduction ................................................................................................................................ 9

2.2 Non-Discriminatory Treatment ............................................................................................. 10

2.3 Fair and Equitable Treatment................................................................................................. 10

2.4 Non-Expropriation .................................................................................................................. 12

2.5 The “Chilling Effect”............................................................................................................... 13

2.6 Conflict Between Investment Obligations and Other Obligations .................................. 15

2.7 Investment Arbitration and Indigenous Peoples ................................................................. 17

2.8 Interim Conclusion .................................................................................................................. 22

Chapter 3: Impacts of Investment Agreements on Indigenous Rights ............................................ 23

3.1 Introduction .............................................................................................................................. 23

3.2 Rights Concerning Regulatory Issues .................................................................................... 23

3.3 Intellectual Property Rights .................................................................................................... 24

3.4 Transparency and Democracy ................................................................................................ 26


Chapter 4: The Right to Free, Prior and Informed Consent .............................................................. 29

4.1 Introduction .............................................................................................................................. 29

4.2 Free, Prior and Informed Consent and International Law ................................................ 29

4.3 The Declaration on the Rights of Indigenous Peoples ....................................................... 30

4.4 Decisions of Human Rights Courts ...................................................................................... 31

4.5 International Institutions ......................................................................................................... 33

4.6 Defining Free, Prior and Informed Consent ....................................................................... 34


Chapter 5: State Practices and Legal Challenges .................................................................................. 40

5.1 Introduction .............................................................................................................................. 40

5.2 Canada and the China-Canada Bilateral Investment Treaty .............................................. 40

5.3 New Zealand and the Trans-Pacific Partnership Agreement ............................................ 42

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5.4 Colombia and the Canada-Colombia Free Trade Agreement ........................................... 45

5.5 Comparisons ............................................................................................................................. 47


Chapter 6: Conclusion .............................................................................................................................. 49

6.1 Introduction .............................................................................................................................. 49

6.2 Identifying Interests and Assessing Impacts ........................................................................ 50

6.3 National Participation .............................................................................................................. 53

6.4 International Participation ...................................................................................................... 54

6.5 Conclusion ................................................................................................................................. 56

Table of Authorities.................................................................................................................................. 58

Table of Cases ....................................................................................................................................... 58

Table of Legislation .............................................................................................................................. 60

Bibliography ............................................................................................................................................... 62

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List of Abbreviations CANZUS Canada, Australia, New Zealand and the United States of America

CERD Committee on the Elimination of Racial Discrimination

FET Fair and equitable treatment

FPIC Free, prior and informed consent

GATT General Agreement on Tariffs and Trade

IACtHR Inter-American Court of Human Rights

ICCPR International Covenant on Civil and Political Rights

ICESCR International Covenant on Economic, Social and Cultural Rights

ICSID International Centre for Settlement of Investment Disputes

IIA International investment agreement

ILO International Labour Organisation

ISDS Investor-state dispute settlement

MFN Most-favoured nation

NAFTA North American Free Trade Agreement

PCA Permanent Court of Arbitration

TPP(A) Trans-Pacific Partnership (Agreement)

UN United Nations

UNCITRAL United Nations Commission on International Trade Law

UNCTAD United Nations Conference on Trade and Development

UNDRIP United Nations Declaration on the Rights of Indigenous Peoples

UNHRC United Nations Human Rights Council

UN-REDD United Nations Programme on Reducing Emissions from Deforestation and

Forest Degradation

WIPO World Intellectual Property Organisation

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Acknowledgements

Thank you to my supervisor, Dr Anna Meijknecht, for her guidance and suggestions throughout

the planning and writing process of this thesis. I benefitted greatly from her assistance and

enthusiasm. Thank you also to the members of my thesis group, Joshua Fincke, Rati Gujadhur,

Alexandra Mukhina and Tanita Pechalova for their insightful comments about my thesis plan.

Lastly, I am very grateful for the support and encouragement of my parents and of my husband,

Tony Paulussen.

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Chapter 1: Introduction

1.1 The Issue

In 2013, the Hupacasath First Nation of Canada took legal action against the Canadian government,

asserting a right to be consulted before Canada entered an investment agreement with China.1

Three years later in New Zealand, the annual commemoration of the signing of the Treaty of

Waitangi between the Crown and Māori was marked by protests against the negotiation process

of the Trans-Pacific Partnership (TPP).2 Māori concerned by their lack of involvement in this

process took the matter to the Waitangi Tribunal for consideration.3

These two examples demonstrate the tensions currently arising between two developing

areas in international law. The first area concerns the increasing recognition of the participatory

rights and self-determination of indigenous peoples in government decision-making. The right to

free, prior and informed consent (FPIC) is an important development in this field. This right is

found in the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP) and the

International Labour Organisation (ILO) Convention No 169. The second area is the growth of

broad, complex bilateral and multilateral investment and trade agreements between states. This is

accompanied by an increase in investment arbitration. Indigenous peoples are gaining rights to

participate in local and national decision-making. However, this is occurring in a legal context that

is becoming increasingly globalised and where the ability for indigenous communities to participate

directly at an international level remains very limited.

Victoria Tauli-Corpuz, the Special Rapporteur on the rights of indigenous peoples (“the

Special Rapporteur”), chose investment issues as an area of emphasis for her time in the role. Her

2015 and 2016 reports both draw attention to investment treaties as a serious concern for

indigenous rights internationally. 4 These reports focus on the impact of foreign investment

projects on indigenous peoples’ rights to land, culture and self-governance. Such projects involve

the mining, oil and gas, hydroelectric and agribusiness sectors and are often in or near the territories

1 Susan Mas, ‘First nations stand between Canada-China investment deal’ (CBC News, 11 August 2013) <http://www.cbc.ca/news/politics/first-nations-stand-between-canada-china-investment-deal-1.1321805> accessed 23 May 2017. 2 Radio New Zealand, ‘Protesters complete march to Waitangi’ (Radio NZ, 6 February 2016) <http://www.radionz.co.nz/news/national/295869/protesters-complete-march-to-waitangi> accessed 23 May 2017. 3 Leigh McLachlan, ‘TPP Treaty clause picked apart’ (Radio NZ, 14 March 2016) <http://www.radionz.co.nz/news/national/298900/tpp-treaty-clause-picked-apart> accessed 23 May 2017. 4 United Nations Human Rights Council (UNHRC) ‘Report of the Special Rapporteur on the rights of indigenous peoples’ (2015) UN Doc A/HRC/30/41; UNHRC ‘Report of the Special Rapporteur on the rights of indigenous peoples’ (2016) UN Doc A/HRC/33/42.

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of indigenous peoples. The exploitation of the land and resources in these areas frequently leads

to human rights violations.5 The Special Rapporteur notes that foreign investment can lead to

similar abuses even in the absence of international investment agreements. However, she considers

that these agreements play a “significant role” in state conduct toward indigenous peoples

regarding foreign investment projects. 6 Further, she is concerned that these agreements and

dispute settlement procedures entrench the current lack of protection of indigenous rights and

obstruct potential advances in recognising these rights.7 Looking at consultation rights, she is

concerned firstly about the impact that international investment agreements may have on a state’s

willingness to carry out FPIC requirements. Secondly, she considers that excluding indigenous

peoples from the treaty-making process and ratification also violates the right to FPIC, and is itself

an important impact.8 This thesis examines this issue.

1.2 Research Question

The central question of this thesis is whether there is a place for the right to free, informed and

prior consent (FPIC) of indigenous peoples within international investment agreement negotiation

and ratification.

In answering this central question, the thesis considers several sub-questions. The chapters

of this thesis will seek to answer each of these sub-questions in turn. The first sub-question is how

investment agreements and investor-state disputes arbitration can conflict with the rights of

indigenous peoples at international law. The second sub-question is what impacts on indigenous

peoples’ rights arise from this conflict. The third sub-question is whether these impacts may reach

the threshold of FPIC standards. The final sub-question is how current state laws and policies

align with international standards.

1.3 Methodology

This thesis follows traditional legal research methodology, analysing national and international

legislation, cases, reports and legal commentary. It seeks to identify the issues that arise in practice,

5 UNHRC (2016) (n 4) [26]. 6 ibid [33]. 7 ibid [32]. 8 ibid [31].

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by examining the international standards and comparing the international discourse with national

and international litigation and other forms of disputes resolution on the subject.

There are few sources currently available offering a broad overview of this overlap. One

of these is a book chapter by Judith Levine published in 2016 on the interaction of international

investment arbitration with the rights of indigenous peoples. 9 She notes that this subject has not

received great attention to date, despite a recent series of relevant investment arbitration cases.10

However, responses to the North American Free Trade Agreement (NAFTA) and arbitration

claims questioned how that agreement relates to the international self-determination and

intellectual property rights of indigenous peoples.11 The Piero Foresti v South Africa12 arbitration

claim more recently led to discussion of state regulatory rights to take affirmative action measures,

with regard to international human rights law.13 The recent reports of the Special Rapporteur also

constitute a significant contribution to the area. Reports from the prior Special Rapporteur may

have been influential for the development of consultation rights of indigenous peoples at

international law.14 The latest reports may assist with extending this development to international

investment law. Recent articles offer legal commentary on the overlaps and impacts of

international investment law and arbitration relating to the heritage rights,15 intellectual property

rights16 and natural resource rights17 of indigenous peoples at international law. New Zealand legal

academics such as Jane Kelsey have published a series of Expert Papers online relating to the

9 Judith Levine, ‘The interaction of international investment arbitration and the rights of indigenous peoples’ in Freya Baetens (ed), Investment Law within International Law: Integrationist Perspectives (Cambridge University Press 2016). 10 ibid, 127. 11 See Brenda Gunn, ‘Impacts of the North American Free Trade Agreement on Indigenous Peoples and Their Interests’ (2006) 9 Balayi: Culture, Law and Colonialism 5. See also Charles M Gastle, ‘Shadows of a Talking Circle: Aboriginal Advocacy Before International Institutions and Tribunals’ (The Estey Centre for Law and Economics in International Trade 2002). 12 Piero Foresti, Laura De Carli and others v Republic of South Africa, ICSID Case No ARB(AF)/07/1, Award (4 August 2010). 13 Marianne W Chow, ‘Discriminatory Equality versus Non-discriminatory Inequality: The Legitimacy of South Africa’s Affirmative Action Policies under International Law’ (2009) 24 Conn J Int’l Law 291. 14 Dwight Newman, ‘Norms of Consultation with Indigenous Peoples: Decentralization of International Law Formation or Reinforcement of States’ Role?’ in Andrew Byrnes, Mika Hayashi and Christopher Michaelsen (eds), International Law in the New Age of Globalization (Brill Nijhoff 2013) 277. 15 Valentina S Vadi, ‘When Cultures Collide: Foreign Direct Investment, Natural Resources and Indigenous Heritage in International Investment Law’ (2010-211) 42 Colum Hum Rts L Rev 797. 16 Hans Morten Haugen, ‘How Are Indigenous and Local Communities’ Rights Over Their Traditional Knowledge and Genetic Resources Protected in Current Free Trade Negotiations? Highlighting the Draft Trans-Pacific Partnership Agreement (TTPA)’ (2014) 17 Journal of World Intellectual Property 81. 17 Jane A Hofbauer, ‘Foreign Investments Meet Free, Prior and Informed Consent (FPIC) – Whose Sovereignty?’ (2013) 18 ARIEL 71; Harvard Law Review, ‘The Double Life of International Law: Indigenous Peoples and Extractive Industries’ (2016) 129 Harv L Rev 1755.

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potential impacts of the TPP.18 These papers cover a range of areas relating to investment

agreements and indigenous rights, both at a national and international level.

These publications show that this area is now gaining attention. This thesis intends to

contribute to this field by providing an oversight of the FPIC standard in relation to investment

law. The following years will likely see an increase in legal decisions and commentary on specific

aspects of the impacts of specific investment agreements to the rights of certain indigenous

communities, and whether these impacts trigger FPIC rights. Awareness of this issue is increasing

in both investment law and human rights law, in response to the growing number of investment

agreements and arbitration claims.

The sort of detailed analysis anticipated from courts and legal academics in the coming

years is beyond the scope of this thesis. The thesis aims to bring together and compare recent

decisions and commentary from national and international law to gain a sense of the general

difficulties that lawyers, judges, investors, governments and indigenous communities will face

identifying the rights and obligations of states in the future. It will consider the influence that

national and international standards for participatory rights of indigenous peoples have on each

other, and the extent to which universal standards are possible and equitable in this area.

1.4 Structure

The second chapter of this thesis provides an overview of investment and trade law jurisprudence

as it relates to the rights of indigenous peoples. The third chapter identifies the potential ways that

international investment treaties can impact indigenous communities. The fourth chapter assesses

the development of FPIC as a right at international law and its current status, with regard to the

impacts identified in the preceding chapters. The fifth chapter considers the examples from

Canada and New Zealand introduced above on page 5, and relevant Colombian case law. It

identifies the practical difficulties raised by the issue of indigenous peoples’ participatory rights for

international investment treaty-making procedures. The sixth chapter concludes the thesis by

assessing these state responses and exploring the concerns raised by indigenous peoples in the case

studies. It relates these concerns to international law obligations and evaluates recommendations

from the Special Rapporteur for states to assess and mitigate the impacts of international

investment agreements relating to indigenous peoples.

18 TPP Legal, ‘Expert Papers’ (2016-2017) < https://tpplegal.wordpress.com> accessed 22 June 2017.

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Chapter 2: Investment Agreements and Investor-State Disputes Arbitration

2.1 Introduction

The focus of this chapter is the question of how investment agreements and investor-state disputes

arbitration can conflict with the rights of indigenous peoples at international law. The chapter

summarises major aspects of international investment and trade agreements that have the potential

to impact indigenous communities. It also examines the overlap between human rights obligations

and investment obligations at international law. It concludes by considering how investment

arbitration tribunals and human rights courts are facing these conflicting issues.

More than 3,000 current international investment agreements currently exist.19 Most of

these agreements are bilateral investment treaties, agreements between two nations. There are also

several significant regional free trade agreements. These regional agreements are multinational and

sometimes cover a broad range of subject matter, including investment and regulatory issues. The

Special Rapporteur describes these “mega regional” agreements as “essentially forming global

economic structural agreements”.20

Investment and trade agreements are unusual international agreements as they create rights

for third party beneficiaries that are not states but investors. While the agreements are conducted

between two or more states, they set standards to benefit investors. The aim is to encourage foreign

investment.21

Many investment agreements provide for investor-state dispute settlement (ISDS) in the

case of a dispute. It is common for these ISDS provisions to provide for forming tribunals to

decide claims by investors against states. Critics of the legitimacy of these ISDS systems question

the ad hoc appointment of arbitrators and lack of consistency between ISDS decisions.22

States could be subject to claims from investors for resource management or public policy

decisions under four broad categories. Arbitration claims often involve several of these issues. This

chapter will briefly describe these four categories of claims.

19 United Nations Conference on Trade and Development (UNCTAD), ‘Recent trends in IIAs and ISDS’ (2015) UN Doc UNCTAD/WEB/DIAE/PCB/2015/1, 1. 20 UNHRC ‘Report of the Special Rapporteur on the rights of indigenous peoples’ (2016) UN Doc A/HRC/33/42, 4-5. 21 Anthea Roberts, ‘Triangular Treaties: The Extent and Limits of Investment Treaty Rights’ (2015) 56 Harv Int’l LJ 353, 353-356. 22 Arseni Matveev, ‘Investor-State Dispute Settlement: The Evolving Balance Between Investor Protection and State Sovereignty’ (2015-2016) 40 UWAL Rev 348, 351-353.

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2.2 Non-Discriminatory Treatment

Non-discriminatory treatment standards are increasingly a feature of investment agreements.23 The

national treatment standard obliges host states to treat foreign investors in the same manner that

they would their own nationals. 24 The most-favoured-nation (MFN) standard involves states

treating investments of nationals or companies of another state at least as favourably as

investments of nationals or companies of any other third state. These two standards are often

drafted to be applied “in like situations” or “in like circumstances”.25

A consequence of the increasing use of MFN clauses is that investment treaty drafting is

becoming increasingly standardised.26 This has the potential to increase clarity and consistency in

investment agreement obligations.27

However, another outcome is that MFN clauses can complicate multilateral investment

and trade agreement negotiations. Negotiators must carefully consider and weigh up the broader

consequences of making any concessions to any other state. This results in lengthy and complex

negotiation procedures, with states seeking secrecy and showing a willingness to make concessions

only as part of what is likely to be a finalised agreement.28 This leads to negotiations that lack

transparency, with limited opportunity for public participation during or following the negotiation

process.

2.3 Fair and Equitable Treatment

Most international investment agreements include a fair and equitable treatment (FET) clause.

Unfair or inequitable treatment of investors by states may include conduct that is arbitrary,

discriminatory or abusive.29

This can be a vague standard. It is uncertain whether arbitration tribunals are developing

a series of precedent for what FET entails, or if FET is a standard to be tested case-by-case

23 Pia Acconi, ‘Most-Favoured-Nation Treatment’ in Peter Muchlinski, Federico Ortino and Christoph Schreuer (eds), The Oxford Handbook of International Investment Law (Oxford University Press 2008) 364. 24 ibid. 25 ibid 365. 26 Valentina S Vadi, ‘When Cultures Collide: Foreign Direct Investment, Natural Resources and Indigenous Heritage in International Investment Law’ (2010-211) 42 Colum Hum Rts L Rev 797, 822. 27 ibid. 28 Philip M Nichols, ‘Extension of Standing in World Trade Organization Disputes to Nongovernment Parties’ (2004) 25 U Pa J Int’l Econ L 669, 689-690. 29 UNCTAD, Fair and Equitable Treatment: A Sequel (UN 2012) 1.

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according to the specific facts of each case.30 It is beyond the scope of this thesis to consider the

FET standard and this ambiguity in detail. However, it is relevant to note that states and indigenous

communities often hold different views about the uncertain nature of the FET standard.

Indigenous groups may view this uncertainty with scepticism, while states attempt to portray FET

as a benign issue. These perceptions relate to the application of FET to administrative and

regulatory decision-making, particularly concerning land and resource management, and its

potential impact on policy development in a range of areas.

An example of how challenges involving the FET standard can arise from government

policy-making is the claim of tobacco company Philip Morris against Australia for introducing

legislation requiring cigarettes to be sold in plain packaging.31 The arbitration tribunal dismissed

the claim for lack of jurisdiction, without considering the substantive issue. A claim by Philip

Morris against Uruguay for plain packaging legislation also failed, this time after the arbitration

tribunal considered the merits of the claim.

This claim failed for substantive reasons. The tribunal concluded that the plain packaging

policy was non-discriminatory and had been pursued for a legitimate objective. It found that the

police powers doctrine that is contained in many bilateral investment treaties also exists under

general international law. This doctrine allows for states to regulate in non-discriminatory ways to

pursue public policy objectives relating to areas such as public health, safety and the environment.32

Uruguay’s cigarette packaging regulation falls under this doctrine, with a clear public health

objective, as part of a clear and effective scheme of tobacco control to this end.33 It is therefore

non-expropriatory, with the result that Uruguay was not required to compensate Philip Morris for

the company’s losses.34 Both the reasoning and outcome of the decision appear to support state

confidence in the arbitration process and FET standard allowing space for legitimate state

regulatory powers.

30 ibid. See also Kenneth J Vandevelde, ‘A Unified Theory of Fair and Equitable Treatment’ (2010) 43(1) NYUJ Int'l Law & Pol 43; N Jansen Calamita, ‘International human rights and the interpretation of international investment treaties: constitutional considerations’ in Freya Baetens (ed), Investment Law within International Law: Integrationist Perspectives (Cambridge University Press 2016). 31 Philip Morris Asia Limited v the Commonwealth of Australia, PCA Case No 2012-12, Award on Jurisdiction and Admissibility (17 December 2015). 32 Philip Morris Brands Sàrl, Philip Morris Products SA and Abal Hermanos SA v Oriental Republic of Uruguay, ICSID Case No ARB/10/7, Award (July 8, 2016) 84-85. 33 ibid 88. 34 ibid 83.

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However, an important aspect of FET involves the legitimate expectations of investors, as

first seen in the award to Tecmed v Mexico.35 This standard is based on the international law principle

of good faith.36 Such expectations may arise when a representative of the host state makes a

promise or assurance to an investor that a project will progress.

Examples of arbitration awards against a state decision due to a prior assurance are Bilcon

v Canada 37 and Metalclad v Mexico. 38 Both decisions involved claims against tribunal or state

decisions to decline consents for development plans due to significant environmental impacts.

These decisions have attracted criticism and are often cited as examples of the risks of ISDS that

can arise from state decision-making.

Critics argue that these decisions inappropriately place the risks of developing a project on

the host state. They suggest that it would be more equitable for these risks to be borne by the

investor. An investor must then assess any assurances or promises against the regulatory and

administrative decision-making processes of the host state. The Special Rapporteur is among these

critics:39

The outdated belief of States that they are in a position to guarantee security for investors while ignoring

the human rights of indigenous peoples must be debunked. Investors must take responsibility for assessing

the social and political risk associated with their investments. Otherwise, their expectations cannot be

legitimate.

For indigenous communities that may bear the impacts of an assurance made about development

plans involving their traditional lands or resources, the doctrine of legitimate expectations is a

potential obstacle to state protection of their land and resource rights.

2.4 Non-Expropriation

Expropriation involves states taking property from investor ownership or control. Indirect

expropriation can involve destroying property, or equivalent measures that in effect deprive the

investor of the ability to meaningfully manage their property.40 The extent to which expropriation

35 Técnias Medioambientales Tecmed, SA v the United Mexican States, ICSID Case No ARB(AF)/00/2. 36 ibid 154. 37 Clayton Family & Bilcon of Delaware Incorporated v Government of Canada, PCA Case No 2009-04, Award on Jurisdiction and Liability (17 March 2015). 38 Metalclad Corporation v the United Mexican States, ICSID Case No ARB(AF)/97/1, Award (30 August 2000). 39 UNHRC ‘Report of the Special Rapporteur on the rights of indigenous peoples’ (2016) UN Doc A/HRC/33/42 [85]. 40 UNCTAD, Expropriation: A Sequel (UN 2012), xi.

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and FET principles apply to intellectual property is a controversial question, as investors may use

investment law in preference to existing, more stringent international intellectual property rights

regimes.41 The Philip Morris claims are examples of investment claims for intellectual property

rights.

It can be difficult to distinguish between indirect expropriation and bone fide policy-making

that pursues a legitimate objective. Both measures may have the same effect. However, regulatory

measures must be proportionate, non-discriminatory, follow due process and offer compensation

for losses.42 Defining the limits of indirect expropriation is a highly contentious area of investment

law. Many arbitration claims revolve around this issue.43

Methanex v United States is an example of a claim concerning regulatory acts that an

arbitration tribunal found did not amount to indirect expropriation.44 Methanex Corporation is a

Canadian company that is the world’s largest producer of methanol. It argued that the decision of

the state of California to ban fuel containing an additive made from methanol amounted to indirect

expropriation. It argued that by banning this additive the United States intended to encourage the

use of substitutes made from locally produced ethanol.45 The reason the state of California gave

for the policy was concern for the effects on the environment of the additive leaching from

underground storage tanks into the ground. The arbitration tribunal concluded that this was a

serious issue and that there was no malign or illicit pretext for the decision.46

2.5 The “Chilling Effect”

Several of the examples above, including the Methanex decision, demonstrate that arbitration

tribunals can and do take into account legitimate public policy concerns. The United States

government cites the Methanex outcome as an example to show that “[t]ribunals adjudicating ISDS

cases under U.S. agreements have consistently affirmed that government actions designed and

implemented to advance legitimate regulatory objectives do not violate investment obligations”.47

41 Susy Frankel, ‘Interpreting the Overlap of International Investment and Intellectual Property Law’ (2016) 19 JIEL 121, 124. 42 UNCTAD, Expropriation: A Sequel (n 40) xiii-1. 43 Suzy H Nikièma, Best Practices: Indirect Expropriation, International Institute for Sustainable Development, 2012, 2. 44 Methanex Corporation v United States, UNCITRAL, Partial Award (7 August 2002). 45 ibid. 46 ibid, Part IV, Chapter E, 8. 47 Office of the United States Trade Representative, ‘Fact Sheet: Investor-State Dispute Resolution (ISDS)’ (March 2015) <https://ustr.gov/about-us/policy-offices/press-office/fact-sheets/2015/march/investor-state-dispute-settlement-isds> accessed 13 March 2017.

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On the other hand, the Methanex arbitration is also notable due to its exceptionally long

duration and the high costs. Although the investor ultimately paid these costs, it demonstrates that

defending an arbitration claim can be a lengthy and uncertain process in and of itself, regardless

of the outcome. A state such as the United States that is economically strong and has local expertise

in international investment law can bear these costs. For other states the threat of the costs

involved in a potential claim can constitute a real imposition.

It is also a process that can be fraught with uncertainty, due to the case-by-case analysis of

standards-based obligations. The controversy surrounding the decision in the Bilcom arbitration

offers one example of this. A consistent theme in the above summary of investment arbitration is

the uncertainty of both definitions of state obligations and the development of arbitration law.

Coupled with the increase in arbitration claims over the past decade, it is becoming more difficult

for states to claim that past avoidance of arbitration awards demonstrates the unlikelihood of

future arbitration.48 Eva Nanopoulos and Rumiana Yotova divide the investment case law on

public interest regulation into three separate categories of differing approaches between tribunals.49

Some tribunals take the approach of Philip Morris v Uruguay, that good faith, non-discriminatory

regulation in the public interest does not amount to expropriation and does not require

compensation. Other tribunals take the approach that this appropriation is lawful but does require

compensation, while other tribunals weigh all factors to judge whether the regulation is

proportionate. It is primarily the second approach that leads to the chilling effect and increased

focus on careful investment agreement drafting.50 They conclude that consequences of public

interest arguments in investment claims remain controversial, and it is an area of “dynamic

development”.51 Investment tribunals are struggling to balance public and private interests.52

Some commenters believe that the system is inherently unfair for these reasons. This is

particularly so for developing nations that may lack the financial ability to compensate investors

for losses or to successfully defend a claim. Suzy H Nikièma highlights this difficulty, citing as an

example the more than 40 investment arbitration claims that Argentina has faced following

economic crisis and policy reform in 2001.53 In contrast, the United States has only faced 13

48 Matveev (n 22) 358. 49 Eva Nanopoulos and Rumiana Yotova, ‘‘Repackaging’ Plain Packaging in Europe: Strategic Litigation and Public Interest Considerations’ (2016) 19 JIEL 175, 198. 50 ibid 199. 51 ibid 199-200. 52 ibid 209. 53 Nikièma, (n 43) 3.

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arbitration claims and Australia has only faced one.54 None of these claims were successful. The

future potential of ISDS to impact the regulation of these countries may be very limited. For other

states the prediction may be very different. The situation of Argentina is one example. Another

example is the Czech Republic, which in 2003 was ordered to pay an American investor an

arbitration award to the sum of US$353 million.55

The “chilling effect” or “regulatory chill” argument against ISDS arbitration posits that

states may avoid making regulatory changes due to the potential of facing arbitration claims.56

Some suggest that companies may use arbitration procedures even for claims that are unlikely to

succeed, to encourage states to postpone or avoid policy changes.57 They argue that the process is

inherently unfair and prone to abuse. Proponents of ISDS counter that the high costs of arbitration

discourage such conduct, and that states always balance economic factors when creating policy to

encourage economic development. 58 Much of the discourse about ISDS and arbitration is

characterised by these two positions. There is likely to be some truth to both arguments, but the

general operation of ISDS lies somewhere between these two extremes, as shown by the range of

outcomes considered in this chapter.

2.6 Conflict Between Investment Obligations and Other Obligations

The fields of investment law, environmental law and human rights law create overlapping, contrary

obligations for states.59 At times tribunals and courts are able to draw from these diverse areas in

a complementary manner, but the development of such approaches has been inconsistent.60

The areas of investment law and human rights law cover overlapping issues, but

adjudicators have attempted to keep the two fields separate. As Luke Eric Peterson commented

on the inconsistent jurisprudence and ongoing frictions between investment law and human rights

law, “the global village could use a good town planner”.61

54 Matveev (n 22) 358. 55 ibid. 56 ibid. 57 Waitangi Tribunal, ‘Report on the Trans-Pacific Partnership Agreement’ (2016) WAI 252, 41. 58 Charles N Brower and Sadie Blanchard, ‘What’s in a Meme? The Truth about Investor-State Arbitration: Why it Need Not, and Must Not, Be Repossessed by States’ (2014) 52 Colum J Transnat’l L 689. 59 Moshe Hirsch, ‘Interactions Between Investment and Non-Investment Obligations’ in Muchlinski, Ortino and Schreuer (n 23) 155. 60 ibid. 61 Luke Eric Peterson, ‘Human Rights and Bilateral Investment Treaties: Mapping the role of human rights law within investor-state arbitration’ International Centre for Human Rights and Democratic Development’ (Rights & Democracy 2009) 9.

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For example, Grand River v United States62 was a claim made by Canadian First Nations

investors attempting to assert indigenous rights in trading tobacco. The arbitration tribunal

avoiding deciding on the issues of American constitutional law that were involved.63 From the

perspective of human rights courts, in the decision Case of the Sawhoyamaxa Indigenous Community v

Paraguay, the Inter-American Court of Human Rights (IACtHR) considered the relevance of a

bilateral investment treaty. The IACtHR made its position clear. The American Convention on

Human Rights “stands in a class of its own” above the treaty and the bilateral investment treaty

did not negate the rights it confers on individuals.64 Both these decisions retain the separation

between indigenous rights and investment issues.

Advocates of international investment argue that investment agreements have the potential

to raise standards internationally in a wide range of areas, from environmental protection to labour

issues and intellectual property rights. Investment agreements can contain references to human

rights and to the ability of states to regulate in the public interest in preambles or specific provisions.

The Obama administration presented the TPP as offering an opportunity to create “the most

progressive trade agreement in history”, 65 with provisions that would raise standards regarding the

environment, labour and intellectual property. 66 However, the Special Rapporteur notes that

references to human rights within investment agreements continue to be rare.67 She recommends

that all investment agreements include a reference to human rights as a general policy objective in

the preamble.68

Some international investment agreements do include references to the rights of specific

ethnic groups, particularly as exceptions relating to affirmative action policies. Examples in

bilateral investment agreements include references to preferential treatment for Māori according

62 Grand River Enterprises Six Nations, Limited and others v United States of America, UNCITRAL, Award (redacted version) (12 January 2011). 63 Lauren Boisson de Chazournes and Brian McGarry, ‘What Roles Can Constitutional Law Play in Investment Arbitration?’ (2014) 15 Journal of World Investment & Trade 862, 873. 64 Sawhoyamaxa Indigenous Community v Paraguay, Merits, Reparations and Costs, Inter-American Court of Human Rights Series C No 146, 29 March 2006 [140]. 65 The White House, ‘What They're Saying: Environmental Advocates Point to the Trans-Pacific Partnership as a Historic Opportunity to Protect Our Oceans, Forests, and Wildlife’ (The White House Blog, 31 March 2015) <https://obamawhitehouse.archives.gov/blog/2015/03/31/what-theyre-saying-environmental-advocates-point-trans-pacific-partnership-historic-> accessed 20 April 2017. 66 Office of the Press Secretary, The White House, ‘FACT SHEET: How the Trans-Pacific Partnership (TPP) Boosts Made in America Exports, Supports Higher-Paying American Jobs, and Protects American Workers’ (The White House, 5 October 2015) <https://obamawhitehouse.archives.gov/the-press-office/2015/10/05/fact-sheet-how-trans-pacific-partnership-tpp-boosts-made-america-exports> accessed 20 April 2017. 67 UNHRC (n 20) [78]. 68 ibid [88].

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to the principles of the Treaty of Waitangi in New Zealand, to the Black Economic Empowerment

programme in South Africa and to affirmative action programmes in Malaysia.69

Investment agreements may also make implicit or explicit mention of FPIC obligations.

The TPP is a rare recent example of this. With the withdrawal of the United States prior to

ratification the TPP will not be entering into force. However, it is potentially a significant example

for future investment agreement drafting that the agreement referred to international and national

obligations to FPIC.70 Article 20.13(4) in the Trade and Biosecurity chapter on the use of genetic

resources is notable, referring to prior informed consent measures that may apply at national law.

While the new, broader multilateral investment agreements threaten to expand investment

law and arbitration to cover greater areas of human rights and indigenous law, the negotiations

and drafting of these agreements show awareness of this conflict. Whether such steps could be

sufficient to assist with avoiding and resolving conflicts is yet to be tested.

2.7 Investment Arbitration and Indigenous Peoples

There are several ways in which arbitration may involve indigenous peoples. Firstly, indigenous

peoples may themselves be involved in investment or trade. An example of indigenous claimants

in investment arbitration is Grand River, discussed above on page 16. In contrast to the award in

Glamis Gold v United States,71 discussed below on page 19, the arbitration tribunal directly addressed

the issue of indigenous rights.72 The tribunal’s statements suggest that future arbitration tribunals

may be open to incorporating indigenous rights within investment arbitration where these rights

are relevant and appropriate:73

All members of the Tribunal agree that the U.S. states … do not appear to have been at all sensitive to

the particular rights and interests of the Claimants or the indigenous nations of which they are citizens,

including those interests in maintaining and developing cross-border trade relations in accordance with

longstanding traditions in promoting economic development opportunities for indigenous communities. The

69 Howard Mann, ‘International Investment Agreements, Business and Human Rights: Key Issues and Opportunities’ (International Institute for Economic Development 2008), 11-12. 70 Carwyn Jones and others, ‘‘Māori Rights, Te Tiriti o Waitangi and the Trans-Pacific Partnership Agreement’ (TPP Legal Expert Papers, January 2016) <https://tpplegal.files.wordpress.com/2015/12/tpp-te-tiriti.pdf> accessed 22 April 2017. 71 Glamis Gold, Ltd v United States of America, International Centre for Settlement of Investment Disputes, Award, 8 June 2009 (Glamis Gold). 72 Judith Levine, ‘The interaction of international investment arbitration and the rights of indigenous peoples’ in Freya Baetens (ed), Investment Law within International Law: Integrationist Perspectives (Cambridge University Press 2016), 113. 73 Grand River (n 62) [186].

18

Tribunal cannot avoid noting the strong international policy and standards articulated in numerous written

instruments and interpretive decisions that favour state action to promote such rights and interests of

indigenous peoples.

However, the tribunal concluded that the concept of indigenous investors having special rights

“cannot readily be reconciled”74 with the idea of a minimum standard of treatment that applies to

all investors. The tribunal therefore denied the claim. Despite this outcome, these comments

suggest that arbitration tribunals will potentially be alert to international law relating to indigenous

peoples and willing to consider arguments on indigenous rights that may apply to investment law.

Where appropriate, the tribunal may properly weigh these arguments against other considerations.

Several examples exist of investment arbitration involving impacts on policies relating to

affirmative action or indigenous culture, but these examples have had very limited impact. The

Piero Foresti v South Africa75 claim is the first arbitration claim to directly challenge affirmative action

policies as breaching an investment agreement.76 To the apparent disappointment of some legal

commentators, the South African government settled this claim. The question of how an

arbitration tribunal would approach this vexed issue therefore remains uncertain. It appears that

the claim was the result of poorly considered and coordinated public policy and investment

planning. This is perhaps due to lack of resources, although it is also possible that the government

of South Africa deliberately ignored the conflicting policies as part of a broader strategy to attract

investors.77 In either case, South Africa has now made a dramatic change in approach. The state is

now reconsidering all of its investment agreements for consistency with its affirmative action

policies, and drafting agreements to explicitly allow space for affirmative action policies.78

Burlington Resources v Ecuador79 is a relevant recent claim. In this dispute, an American oil

investor company faced opposition from indigenous communities, which culminated in violence

and death threats.80 After attempting to negotiate and failing to reach a settlement, the company

74 ibid [213]. 75 Piero Foresti, Laura De Carli and others v Republic of South Africa, ICSID Case No ARB(AF)/07/1, Award (4 August 2010). 76 Annika Wythes, ‘Investor-State Arbitrations: Can the ‘Fair and Equitable Treatment’ Clause Consider International Human Rights Obligations?’ (2010) 24 LJIL 241, 242. 77 Marianne W Chow, ‘Discriminatory Equality versus Non-discriminatory Inequality: The Legitimacy of South Africa’s Affirmative Action Policies under International Law’ (2009) 24 Conn J Int’l Law 291, 330-332. 78 ibid 355. 79 Burlington Resources Incorporated v Republic of Ecuador, ICSID Case No ARB/08/5, Decision on Jurisdiction (2 June 2010). 80 ibid [30].

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requested assistance from the state of Ecuador.81 The investor company alleged that Ecuador failed

to provide any assistance, and therefore failed to protect the investment.82 The arbitration tribunal

dismissed this part of the claim for lack of jurisdiction.83 This claim is interesting as the facts

overlap with the case of the IACtHR, Kichwa Indigenous People of Sarayaku v Ecuador,84 discussed scan

arise from the same circumstances, resulting from tensions with indigenous peoples created by

investment development plans.

Another recent claim is Glamis Gold v United States.85 Glamis Gold, a Canadian mining

company, brought a claim against the United States under the North American Free Trade

Agreement (NAFTA). Glamis Gold claimed expropriation of mining rights. The proposed open

pit mine would have impacted on a Native American sacred site. The Tribunal made a clear

statement at the outset of its award that it would refrain from commenting on the interests of

indigenous peoples or the need for public regulation by the state, as these issues were not directly

relevant to its decision. It put these thorny issues aside entirely, to be a “difficult task faced squarely

by some future tribunal”.86

This looming task may now be before the Permanent Court of Arbitration (PCA). The

PCA is currently considering the claim of South American Silver v Bolivia.87 The mining company that

brought this claim alleges that the Bolivian government fomented opposition to the mining project

of indigenous peoples in the area, and attempted to use indigenous rights as a “shield” to oppose

penalties following the expropriation of the mines.88 They also argue that indigenous rights are not

a relevant consideration of investment law arbitration unless explicitly contained in the investment

agreement89. It remains to be seen how the PCA will respond.

A procedural order of the arbitration tribunal for the two related claims of von Pezold v

Zimbabwe and Border Timbers v Zimbabwe90 sets out the requirement of independence of indigenous

81 ibid [32]. 82 ibid [33]. 83 ibid [343]. 84 Kichwa Indigenous People of Sarayaku v Ecuador, Merits and reparations, Inter-American Court of Human Rights Series C No 245, 27 June 2012. 85 Glamis Gold (n 71) 3. 86 ibid. 87 South American Silver Limited v the Plurinational State of Bolivia, PCA Case No 2013-15, Claimant Reply to Respondent Counter-Memorial on the Merits and Objections to Jurisdiction and Admissibility (English) (30 November 2015). 88 ibid 117. 89 ibid 115. 90 Pezold, Bernhard von and Others v Republic of Zimbabwe, ICSID Case No ARB/10/15 and Border Timbers Limited, Border Timbers International (Private) Limited, and Hangani Development Co (Private) Limited v Republic of Zimbabwe, ICSID Case No ARB/10/25, Procedural Order No 2 (26 June 2012).

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groups that wish to be amici curiae, additional parties to the claim.91 This is based on the rules of

arbitration. Amici curiae must bring an additional perspective to the arbitration. This indicates that

they must be independent. The petitioners also made a claim that they have their own standing at

international law. This claim was based on the “interdependence” of international investment law

and international arbitration law, and on the indigenous rights contained in Article 26 of

UNDRIP.92 The tribunal rejected this claim, as this issue was “clearly outside the scope of the

dispute”.93

In response to the amici curiae applications for this claim, the claimant argued that it was

for the parties to establish the scope of the dispute. The scope of the current arbitration included

no reference to indigenous rights or to the obligations of states to indigenous peoples under

international law. They further argued that the law that applies to the arbitration only consists of

the areas of law applicable to the context of the dispute. These include the applicable public

international law. This excludes “international human rights law on indigenous peoples”,94 as

indigenous rights in public international law “are in their nascent stages of development”. 95

Additionally, the indigenous communities had not established whether they were in fact considered

to be “indigenous peoples” at international law. For an arbitration tribunal to properly deliberate

on these issues would require a significant increase in resources.96

The tribunal agreed that, “in order for the Arbitral Tribunals to consider such a submission,

they would need to consider and decide whether the indigenous communities constitute

‘indigenous peoples’ for the purposes of grounding any rights under international human rights

law.”97 Such a decision is clearly beyond the scope of the Tribunal.98 The tribunal set aside the

question “of whether or not the Arbitration Tribunal are the appropriate arbiters of this

decision”.99

The argument that indigenous rights at international law are separate to “public

international law” is troubling. It demonstrates the continual marginalisation of indigenous peoples’

rights under conventional human rights law instruments, such as the right to self-determination in

91 ibid [49]. 92 ibid [58]. 93 ibid [60]. 94 ibid [32]. 95 ibid [31]. 96 ibid. 97 ibid [60]. 98 ibid. 99 ibid.

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the ICESCR and ICCPR. Unsurprisingly, the Tribunal did not take up this argument. It must also

be noted that the claim concerned complex ethnic discrimination issues of Zimbabwe’s land

seizure practices, so there is a strong argument that traditional indigenous ownership claims were

not directly relevant. For an investment tribunal to consider and rule on the entirely of these

complex human rights and constitutional issues is also likely to be an extension of its jurisdiction

beyond justification.

To some extent fragmentation at international law is inevitable, with indigenous traditional

land claims better left to national institutions or regional human rights courts. On the other hand,

indigenous traditional ownership in some cases will be an important aspect of the context of a

claim. The comments the tribunal made in Grand River about the significance of indigenous rights

remain relevant. The concerning aspect of the issue that this claim highlights is that for indigenous

peoples to claim indigenous rights before an arbitration tribunal, the tribunal will first need to

decide on the group’s indigenous status where this is in dispute. With no accepted definition of

indigenous peoples at international law, this appears to be an impossible task for a tribunal that is

intended to arbitrate narrowly on disputes between two parties in the specific field of investment

law.

A failure to recognise indigenous groups is a failure of national constitutional law or a

failure of international human rights law. Arbitration tribunals must push back on these highly

contentious issues, which deserve to be heard in more appropriate forums. On the other hand,

cooperation between human rights institutions and investment arbitration institutions seems

unlikely, given the oft-opposing nature of decisions of these institutions. The place of indigenous

rights and the right to FPIC within international investment law, its early stage of development

and the unresolved issue of defining “indigenous” remain real, practical issues for any potential

consideration of FPIC by investment tribunals. A situation where the state recognises the

indigeneity of the community but the investor disputes this status would raise many other issues.

Through raising such contentions an investor could potential block the standing of indigenous

representatives before investment tribunals, walling off indigenous participation by placing

indigenous rights beyond the tribunal’s jurisdiction. Careful drafting of investment agreements

could help to evade such situations.

These arguments also present issues concerning the exclusion of indigenous communities

due to the scope of arbitration and a lack of independence. On the one hand, indigenous rights

are excluded by the state and foreign investor in setting the scope of the arbitration. On the other

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hand, indigenous peoples are also excluded because in joining the arbitration their involvement

would unfairly prejudice either the state or foreign investor. The tribunal had some concerns about

the tensions involved, requiring both independence and a significant interest in the proceedings.100

Despite the relevance of FPIC to investment law, references to these rights in international

investment law and investment arbitration are rare. The only time an investment tribunal has

explicitly addressed FPIC was for Grand River, which concerned an indigenous investor. Where

indigenous peoples are impacted by the investment projects of others, international investment

law so far has been silent on their rights to consultation and consent. This is at odds with the

growing recognition of FPIC by governments and financial institutions.101

2.8 Interim Conclusion

Investment law and arbitration is in a state of inconsistency and uncertainty regarding the

integration of human rights, indigenous rights and state regulatory powers in the public interest.

Arbitration tribunals are beginning to engage with these areas and will need to address the issues

involved directly in the future. It is less certain whether the resulting awards will create principles

to bring clarity and a perception of legitimacy to ISDS.

Arbitration tribunals have taken principled stances on indigenous rights, showing

consideration for the limitations of arbitration tribunals to hear these issues. In this way tribunals

have avoid directly adjudicating on the conflict between investment law and indigenous rights. As

claims continue to involve indigenous rights, tribunals will be unable to take this stance indefinitely.

It is inequitable that indigenous communities risk being denied participation in arbitrations due to

their involvement in the issues being too strong to be independent of the government, while at

the same time they are denied their own standing.

Aspects of investment law with the potential to impact on indigenous rights include

standards of non-discriminatory treatment, fair and equitable treatment and non-expropriation.

These standards may decrease transparency in investment agreement negotiations and encourage

confined state approaches to land, resource and policy decision-making. The following chapter

will consider how these consequences impact on indigenous rights.

100 ibid [62]. 101 Jane A Hofbauer, ‘Foreign Investments Meet Free, Prior and Informed Consent (FPIC) – Whose Sovereignty?’ (2013) 18 ARIEL 71, 97.

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Chapter 3: Impacts of Investment Agreements on Indigenous Rights

3.1 Introduction

Major areas of concern for indigenous peoples relating to international investment and trade

agreements include affirmative action and public health policy, environmental protection and

resource management decision-making and intellectual property rights. The breadth of these

concerns reflects the increasingly wide subject matter of some investment agreements. This

chapter examines the extent to which international investment agreements can impact on

indigenous rights under international law.

3.2 Rights Concerning Regulatory Issues

Many rights contained in UNDRIP relate to state policy. Articles 20 to 24 concern rights to health

and other matters of economic and social policy that may be impacted by regulatory limitations

that international investment agreements place on states. Obligations include taking effective and,

where appropriate, specialised measures to ensure continuing improvement of economic and

social conditions of indigenous peoples.102 Article 23 sets out the rights of indigenous peoples to

determine their own strategies for development and to be actively involved in health, housing and

other economic and social programmes affecting them, where possible through their own

institutions. It further states, “Indigenous individuals have an equal right to the enjoyment of the

highest attainable standard of physical and mental health.” States are to take the necessary steps

with a view to progressively realising this right. Article 20 provides the right of indigenous peoples

to maintain and develop their own political, economic and social systems or institutions. An

investment agreement is an obstacle for indigenous rights development under UNDRIP to the

extent that it may limit the ability of indigenous peoples to develop separate institutions or for

states to assist in this process or provide appropriate affirmative action policies.

Environment and land rights are another focus of UNDRIP. These include rights to

traditionally owned, occupied or used land and territories103 and the right against forcible removal

from land and territories or any relocation prior to FPIC. 104 The UNDRIP also sets out

requirements for land adjudication processes that recognise customary tenure. 105 Indigenous

102 UNDRIP, Article 21(2). 103 ibid Article 26. 104 ibid Article 10. 105 ibid Article 27.

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peoples have a right to restitution or redress for land that has been confiscated, taken, used or

damaged without FPIC.106 Article 29(1) concerns environmental rights, containing the right to

conservation and protection of the environment of indigenous peoples, and of the productive

capacity of their land or territories and resources. States must establish and implement programmes

for this conservation and protection.

Article 32 is significant for both land and environmental protection rights and policy-

making. It states that indigenous peoples have the right to determine and develop priorities and

strategies for the development or use of their land or territories or other resources. It also

establishes the right of FPIC regarding any project affecting these lands, territories or resources,

particularly in connection with the development, utilisation or exploitation of mineral, water or

other resources. States must provide effective measures for just and fair redress for any such

activities. They must take appropriate measures to mitigate adverse environmental, economic,

social, cultural or spiritual impacts on these rights.

In both Canada and New Zealand, indigenous peoples have voiced considerable concern

about the potential “chilling effect” of investment agreements. The concern is that by enacting

policies that favour indigenous peoples, governments could open themselves up to claims of

indirect regulatory expropriation or national treatment. The two issues that arise here are whether

the “chilling effect” exists and whether it relates to indigenous issues specifically.

The Special Rapporteur believes potential regulatory impacts need to be viewed against the

“legal vacuum” that often exists for indigenous rights at domestic law.107 Many states have much

work to do to develop their laws and policies to bring these in line with international law human

rights standards. International investment agreements “tend to block necessary advances and

developments in domestic legal frameworks”, by entrenching investor protections and preventing

human rights reform.108

3.3 Intellectual Property Rights

The UNDRIP contains several articles relating to intellectual property rights of indigenous people.

These are Articles 11, 24 and 31. Article 11 concern rights to traditions and customs, with redress

106 ibid Article 28. 107 UNHRC ‘Report of the Special Rapporteur on the rights of indigenous peoples’ (2016) UN Doc A/HRC/33/42 [28]. 108 ibid [32].

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from states for intellectual property taken without FPIC. Pursuant to Article 31, indigenous

peoples have the right to maintain, control, protect and develop their intellectual property over

cultural heritage, traditional knowledge and traditional cultural expressions.

This definition of intellectual property is broad, including rights to genetic resources,

traditional knowledge and traditional cultural expressions. It includes manifestations of sciences,

technologies and cultures of indigenous peoples. These may involve human and genetic resources,

seeds, medicines, knowledge of the properties of fauna and flora, oral traditions, literatures, designs,

sports and traditional games and visual and performing arts. States must take effective measures

to recognise and protect these rights in conjunction with indigenous peoples. Article 24 sets out

an associated right to traditional medicines and health practices.

International investment agreements that involve intellectual property rights can impact

significantly on these rights. The Waitangi Tribunal suggested that impacts from intellectual

property rights may be a significant aspect of the TPP.109 The Special Repporteur was also

concerned by this aspect of the TPP, considering that the intellectual property rights contained in

the agreement could have a “profound impact” on indigenous rights to traditional knowledge.110

In her view, experience shows that this knowledge can be commercialised where safeguards are

inadequate.111 While the TPP contained an exception clause relating to intellectual obligations

concerning traditional knowledge, the Special Rapporteur believed it was possible that this

exception clause could be interpreted by an ISDS tribunal to have little real effect.112

Article 8(j) of the Convention on Biological Diversity specifically relates to state obligations

to respect, preserve and maintain traditional knowledge and practices, and encourage equitable

sharing of the benefits of its utilisation. However, this article can be limited by national legislation,

and it only applies “as far as possible and as appropriate”. The General Agreement on Tariff and

Trade (GATT) created major concerns for Māori relating to intellectual property. Māori have

raised the concern that the New Zealand government may now be unlikely to include rights to

resources in settlements with Māori, due to potential conflict with international trade obligations.113

Considering these arguments, the New Zealand Law Commission concluded, “The need to work

109 Waitangi Tribunal, ‘Report on the Trans-Pacific Partnership Agreement’ (2016) WAI 252, 54. 110 UNHRC ‘Report of the Special Rapporteur on the rights of indigenous peoples’ (2016) UN Doc A/HRC/33/42, [76]. 111 ibid [74]. 112 ibid [75]. 113 New Zealand Law Commission, ‘The Treaty Making Process: Reform and the Role of Parliament’ (1995) [67]-[68].

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through the competing claims, as a result of the internationalisation of law, at both international

and domestic level is apparent.”114

The World Intellectual Property Organisation (WIPO) Intergovernmental Committee on

Intellectual Property and Genetic Resources, Traditional Knowledge and Folklore is currently

negotiating international legal instruments in intellectual property, traditional knowledge and

traditional cultural expressions. Traditional cultural expressions are an area of particular focus for

WIPO, due to the questions they raise for intellectual property law.115 These expressions may

include “music, dance, art, designs, names, signs and symbols, performances, ceremonies,

architectural forms, handicrafts and narratives, or many other artistic or cultural expressions”.116

International negotiations have previously involved a high level of disagreement. Gaining wide

state acceptance of proposed instruments will be a challenging task.117 Against this lack of state

consensus on international obligations to traditional knowledge rights, international investment

agreements and ISDS pose a concern.

3.4 Transparency and Democracy

Transparency is a major issue in treaty-making and for investment agreements specifically.

Investment agreement negotiations often involve intense secrecy. Indigenous claimants in both

Canada and New Zealand have raised objections to this lack of transparency, which creates

mistrust and excludes participation.

Including representatives from indigenous groups in negotiations can increase the

transparency of the negotiations only to a limited extent, unless indigenous groups are prepared to

take on new roles of relaying information to the general public.118 There are also risks that the

participation of representatives from indigenous groups can decrease the democracy of processes

and lead to undesired consequences.119 These outcomes could include overburdening indigenous

groups with heavy financial and time commitments or excluding other groups and individuals from

the process. Information from the negotiations may remain private and may not be shared even

114 ibid [69]. 115 WIPO, ‘Traditional Cultural Expressions’ <http://www.wipo.int/tk/en/folklore>, accessed 24 June 2017. 116 ibid. 117 Jane Anderson, ‘Indigenous/Traditional Knowledge & Intellectual Property’ (Center for the Study of the Public Domain, Duke University School of Law 2010). 118 Erik B Bluemel, ‘Separating Instrumental from Intrinsic Rights: Toward an Understanding of Indigenous Participation in International Rule-Making’ (2005) 30 Am Indian L Rev 55, 79. 119 ibid 59-60.

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by representatives within groups. Representatives of indigenous groups are often elected through

non-democratic processes, raising concerns about the potential effects of their involvement in a

process that is already criticised for lacking democratic legitimacy. 120 Opening treaty-making

procedures to the involvement of communities risks small groups seeking clear outcomes having

more influence than large groups that lack clear stances on issues due to internal divisions.121

Where groups aspire for self-determination, this can at times come at the expense of the human

rights of individuals, through efforts to silence dissenting members.122

Transparency issues affect the relationship of indigenous peoples with the state, both as

collectives and as individual citizens. The Special Rapporteur has suggested that efforts of states

to engage with indigenous peoples on investment agreements take place in the context of “broader

efforts” to increase the social dialogue.123

Transparency is a general issue relating to democratic issues and the relationship of citizens

with the government. Involving representatives from indigenous groups directly in treaty-making

does not necessarily improve transparency for all members of the group or for society. Where

concerns relate to democratic participation generally, this is a broad issue and it is appropriate to

view it this way. The most appropriate solution is to increase transparency for all individuals in

society, on the grounds of individual rights.124 Otherwise, the risk is that indigenous groups are

burdened with a role of advocating at considerable cost and effort for general issues like

transparency and healthcare on behalf of wider society.125 The requirements of FPIC balance an

interest in democracy against specific interests of indigenous peoples. For some agreements, a

better alternative to FPIC may be informing or consulting with all citizens or with numerous

interest groups. For some states, such as New Zealand with the concept of a partnership between

the Crown and Māori, public or constitutional law may go beyond this requirement. In fact, some

commentators are unenthusiastic about applying FPIC standards in New Zealand for this

reason.126

120 ibid 73. 121 ibid 76-77. 122 Benedict Kingsbury, ‘Reconciling Five Competing Conceptual Structures of Indigenous Peoples’ Claims in International and Comparative Law’ (2001-2002) 34 NYUJ Int’l L & Pol 189, 233. 123 UNHRC ‘Report of the Special Rapporteur of the Human Rights Council on the rights of indigenous peoples on the impact of international investment and free trade on the human rights of indigenous peoples’ (2015) UN Doc A/70/301, [77(a)]. 124 Kingsbury (n 122) 80. 125 ibid 100. 126 Kiri Rangi Toki, ‘What a Difference a ‘Drip’ Makes: The Implications of Officially Endorsing the United Nations Declaration on the Rights of Indigenous Peoples’ (2010) 16 Auckland U L Rev 243, 271.

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International investment agreements have the potential to impact on various rights of indigenous

peoples at international law. Many of the rights contained in UNDRIP involve state policy

relating to land, resources and the environment, and also health and wellbeing. Intellectual

property rights of indigenous peoples are also vulnerable, with very limited current protection

despite international acknowledge of the broad nature of these rights. The lack of transparency

typical of international investment negotiations can also negatively impact the relationship

between indigenous peoples and governments. General efforts to increase transparency could

potentially lessen these effects while also increasing democratic participation. Potential regulatory

and intellectual property rights impacts may require more focussed approaches.

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Chapter 4: The Right to Free, Prior and Informed Consent

4.1 Introduction

This chapter aims to identify the FPIC standards that exist at international law, and the thresholds

for applying these standards to state decisions and actions. There is no single accepted definition

of FPIC. It is an ambiguous and debated concept. Despite this, many see FPIC as an emerging

norm with developing guidelines. This chapter reflects on the development of FPIC at

international law, its current status and state responses.

4.2 Free, Prior and Informed Consent and International Law

The right of indigenous peoples to FPIC aims to ensure that states uphold the rights to self-

determination and protection of property and culture. The International Covenant on Civil and

Political Rights (ICCPR) and the International Covenant on Economic, Social and Culture Rights

(ICESCR) are important early sources of these rights. The first articles of both covenants set out

the rights of all peoples to self-determination, while Article 27 of the ICCPR concerns cultural

rights:

In those States in which ethnic, religious or linguistic minorities exist, persons belonging to such minorities

shall not be denied the right, in community with the other members of their group, to enjoy their own culture,

to profess and practise their own religion, or to use their own language.

The United Nations Human Rights Committee found that in certain circumstances states will have

a duty to consult with indigenous peoples to uphold their cultural integrity in connection with this

article,127 stating:128

The enjoyment of those rights may require positive legal measures of protection and measures to ensure the

effective participation of members of minority communities in decisions which affect them.

The ILO developed the first explicit references to consultation rights of indigenous peoples in

international law. The influence of the Convention is limited, as only 22 states have ratified it.

127James Anaya, ‘Indigenous Peoples' Participatory Rights in Relation to Decisions about Natural Resource Extraction: The More Fundamental Issue of What Rights Indigenous Peoples have in Lands and Resources’ (2005) 22 Ariz J Int’l & Comp Law 7, 12; see also Ilmari Länsman and others v Finland, Comm. No. 511/1992, Hum Rts Committee, 52d Sess, UN Doc CCPR/C/33/D/511/1992 (1994) and Jouni E Länsmann and others v Finland, Comm. No. 671/1995, Hum Rts Committee, 58th Sess, UN Doc CCPR/C/58/D/671/1995 (1996). 128 United Nations Human Rights Committee, General Comment 23, Article 27 (15th session, 1994) UN Doc HRI/GEN/1/Rev1 [7].

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However, several of these states are in Central and South America. The consultation rights are

relevant to the indigenous peoples in these countries.

Article 6 of Convention 169 relating to Indigenous and Tribal Peoples states that in

applying the provisions of the Convention, governments shall “consult the peoples concerned,

through appropriate procedures and in particular through their representative institutions,

whenever consideration is being given to legislative or administrative measures which may affect

them directly”. Further, governments shall “establish means by which these peoples can freely

participate, to at least the same extent as other sectors of the population, at all levels of decision-

making in elective institutions and administrative and other bodies responsible for policies and

programmes which concern them”. States must consult “in good faith and in a form appropriate

to the circumstances, with the objective of achieving agreement or consent to the proposed

measures”. Article 7(1) is also relevant, requiring participation of the people concerned in

formulating, implementing and evaluating development plans and programmes that directly affect

them.

Significant references to the consent of indigenous peoples are contained in the

Convention on Biological Diversity and a statement of the Committee on the Elimination of Racial

Discrimination (CERD).129 Article 8(j) of the Convention on Biological Diversity requires prior

informed consent for accessing traditional knowledge, innovations and practices of indigenous

and local communities, as discussed above on page 26. The statement of CERD sets out that states

must ensure that indigenous peoples have equal rights in respect of effective participation. States

must also ensure that no decisions directly relating to indigenous peoples’ rights and interests are

taken without their consent.

4.3 The Declaration on the Rights of Indigenous Peoples

The most significant contribution to the FPIC framework is UNDRIP. Developed over many

years of input from indigenous leaders, UNDRIP emphasises the importance of FPIC. Several

articles refer to FPIC, with Article 19 setting out a general duty:

129 Committee on the Elimination of Racial Discrimination, ‘General Recommendation No. 23: Rights of indigenous peoples’ UN Doc A/52/18 (1997).

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States shall consult and cooperate in good faith with the indigenous peoples concerned through their own

representative institutions in order to obtain their free, prior and informed consent before adopting and

implementing legislative or administrative measures that may affect them.

Article 32(2) contains a specific FPIC duty relating to land and resources:

States shall consult and cooperate in good faith with the indigenous peoples concerned through their own

representative institutions in order to obtain their free and informed consent prior to the approval of any

project affecting their lands or territories and other resources, particularly in connection with the development,

utilization or exploitation of mineral, water or other resources.

The impact of UNDRIP is limited in several respects. Firstly, it is a non-binding declaration.

Secondly, it contains little guidance for how states are to apply their duties in practice, purposefully

leaving states with a wide margin of appreciation. Thirdly, the settler states of Canada, Australia,

New Zealand and the United States have only recently endorsed UNDRIP after many years of

opposition. This has slowed the potential influence and application of FPIC. However, UNDRIP

is receiving some recognition in international and national courts and institutions, and its influence

on state practices may increase in the coming years.130

4.4 Decisions of Human Rights Courts

The IACtHR has contributed significantly to developing FPIC jurisprudence. The IACtHR has

achieved this contribution over a series of cases involving the land and resource rights of

indigenous peoples.

In the Case of the Saramaka People v Suriname,131 the IACtHR found that the state had a duty

to allow for the effective participation of the Saramaka community in development or investment

plans. This right to effective participation includes a state duty to actively consult with the

community, involving constant communication in both directions.132 Consultation must occur in

good faith at an early stage of a development or investment plan, to ensure there is time for

discussion and feedback. It must occur in accordance with the traditions of the people concerned

130 Tara Ward, ‘The Right to Free, Prior and Informed Consent: Indigenous Peoples’ Participation Rights within International Law’ (2011) 10(2) Northwestern Journal of International Human Rights 54, 59. 131 Saramaka People v Suriname, Preliminary Objections, Merits, Reparations, and Costs, Inter-American Court of Human Rights Series C No 172, 28 November 2007. 132 ibid [133].

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and take into account traditional decision-making methods. The state has a duty to ensure

awareness of possible risks, plus knowledge and voluntary acceptance of the development plan.133

In Kichwa Indigenous People of Sarayaku v Ecuador, the IACtHR referred to its comments in

the Saramaka decision. However, in this decision the IACtHR changed its language, referring to a

standard of “consultation” rather than consent. The IACtHR stated that the right to consultation

is a fundamental guarantee of indigenous participation in a pluralistic, multicultural and democratic

society, and is based on the right to cultural identity.134 The IACtHR noted that while this right is

found in the ILO Convention 169, it is also found in the case law of many countries that have not

ratified this Convention, such as the United States and New Zealand. On this basis, “the obligation

to consult, in addition to being a treaty-based provision, is also a general principle of international

law.”135

The African Commission on Human and Peoples’ Rights has also taken up the FPIC

concept, with its judgment in the Endorois case 136 referring to the Saramaka decision. The

Commission emphasised that a duty existed to actively consult with the community according to

their customs, to ensure effective participation in development or investment plans within the

community’s territory:137

This duty requires the State to both accept and disseminate information, and entails constant

communication between the parties. These consultations must be in good faith, through culturally

appropriate procedures and with the objective of reaching an agreement.

The Commission concluded that the state had a duty to not only consult but obtain free, prior and

informed consent where any development or investment project would have a major impact within

the Endorois community’s territory.138

133 ibid. 134 Kichwa Indigenous People of Sarayaku v Ecuador, Merits and reparations, Inter-American Court of Human Rights Series C No 245, 27 June 2012, [159]-[160]. 135 ibid [164]. 136 Centre for Minority Rights Development (‘CEMIRIDE’) (Kenya) and Minority Rights Group International on Behalf of Endorois Welfare Council v Kenya (Endorois Case), African Commission on Human and Peoples’ Rights 142 ILR 1 (4 February 2010). 137 ibid [289]. 138 ibid [291].

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4.5 International Institutions

As a more recent example of how these concepts are being adopted in practice, the World Bank

refers to free, prior and informed consultation in its guidelines. However, as these guidelines refer

to consultation and not consent, it is debatable whether the guidelines are evidence for or against

a developing norm.139 The choice to use a consultation standard was a deliberate attempt to avoid

the potential for groups to exercise a veto right.140 The Equator Principles are another example.

These principles are a risk management framework for financial institutions adopted by many

banks. They contain an FPIC requirement.141

The World Bank defines free, prior and informed consultation as “consultation that occurs

freely and voluntarily, without any external manipulation, interference, or coercion, for which the

parties consulted have prior access to information on the intent and scope of the proposed project

in a culturally appropriate manner, form, and language”.142 Under these guidelines, the World Bank

task teams must assist with carrying out consultation with affected communities for projects

involving indigenous peoples.

The United Nations Programme on Reducing Emissions from Deforestation and Forest

Degradation (UN-REDD Programme) Guidelines aim to create a framework for partner countries

to use in implementing FPIC under the UN-REDD Programme.143 These guidelines provide a

useful summary of the current understanding of FPIC. However, some criticise the guidelines for

including additional unnecessary elements and for suggesting that there is stronger consensus on

the FPIC requirements than that which actually exists.144 On the other hand, there is a growing

consensus concerning the components of FPIC and the minimum measures that states must take.

The guidelines also note that there is room for variation between regions, provided this variation

does not undermine the nature and purpose of the obligation: “International law has now

139 Dwight Newman, ‘Norms of Consultation with Indigenous Peoples: Decentralization of International Law Formation or Reinforcement of States’ Role?’ in Andrew Byrnes, Mika Hayashi and Christopher Michaelsen (eds), International Law in the New Age of Globalization (Brill Nijhoff 2013), 270. 140 Jennifer Franco, ‘Reclaiming Free Prior and Informed Consent (FPIC) in the context of global land grabs’ (Transnational Institute for Hands Off the Land Alliance 2014) 13. 141 Equator Principles Association, Equator Principles III (2013) 8 142 World Bank, Operation Manual BP 4.10: Indigenous Peoples (2005, as revised 2013). 143 UN-REDD Programme, ‘Guidelines on Free, Prior and Informed Consent’ (January 2013). 144 Hans Morten Haugen, ‘The right to veto or emphasising adequate decision-making processes? Clarifying the scope of the Free, Prior and Informed Consent (FPIC) requirement’ (2016) 34(3) NQHR 250-273, 261.

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recognized that FPIC is a legal norm imposing clear affirmative duties and obligations on States”.145

FPIC is a normative obligation that sets a standard that a state must satisfy before acting.146

This minimum standard for UN-REDD purposes is consulting in good faith with a view

to agreement. This does not mean a “blanket application” of FPIC. The Guidelines instead must

be applied when the effects on a community’s rights and interests reach a certain threshold. States

are to evaluate this on a case-by-case basis.147

The guidelines define free as referring to consent given voluntarily and in absence of

“coercion, intimidation or manipulation … a process that is self-directed from the community

from which consent is being sought, unencumbered by coercion, expectations or timelines that

are externally imposed …”148 Prior is defined as consent sought in the early stages of a plan, in

advance of authorisation or commencement of activities, for both consultation and for consent to

actually be given after consulting. It must include time to analyse information, with respect to the

decision-making timeline and culture of the community.149

Informed is the most intensive requirement and most difficult to achieve.150 The guidelines

set out a list of requirements for the form and delivery of information. Information should be

“accessible, clear, consistent, accurate, constant, and transparent”, objective, in an appropriate

language, complete, and be delivered in an appropriate manner that reaches the entire community,

on an ongoing basis.151

The consent requirement involves the collective decision reached through decision-making

processes. How this process takes place is largely left up to the community. Consent is the objective

of consultation processes, but not all processes will necessarily lead to consent. Non-consent must

be accepted in certain circumstances.152

4.6 Defining Free, Prior and Informed Consent

The concept of FPIC is still developing into a framework and currently falls short of being a legal

principle.153 However, some see FPIC as transitioning to an emerging norm. It is also a highly

145 UN-REDD Programme (n 143) 9. 146 ibid 10. 147 ibid 11. 148 ibid 18. 149 ibid 19. 150 Haugen (n 144) 262 and 271-272. 151 UN-REDD Programme (n 143) 19. 152 ibid 20. 153 Ward (n 130) 54-55.

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ambiguous concept. Because of this, commentators perceive FPIC as going through a period of

debate and transition.154 Investors and project developers attempt to use this transitory phase to

strongly advocate for a definition that views FPIC as a risk management concept.155 While some

state governments have attempted to portray FPIC as an impossibly high standard, investors and

companies are attempting to shape the definition in the other direction, pushing for a standard of

consultation rather than strict consent. Lands rights activists criticise this development, arguing

that such attempts to redefine FPIC seek the appearance of setting a high standard that in fact

means little in practice.156

Many commentators define participatory rights under FPIC as a right to consultation in

good faith and with the objective of achieving consent, with resulting duties to mitigate impacts if

consent cannot be achieved.157 The emphasis is therefore on the means used by a state rather than

obtaining a result of consent.158 Others disagree, arguing that effective FPIC requires a right to

“veto” government decisions.159 One commentator criticises the movement to define consent in

the context of international finance with the term “consultation ‘plus’”.160

States such as Canada have also represented FPIC in this way in the past. Such

representations present FPIC in an unnuanced way, that is seemingly incompatible with state

development and resource management.161 The debate about whether FPIC can constitute a veto

has been lengthy and unproductive, and it remains unsettled. States are unwilling to engage with

the issue. This creates concern that resistance to veto rights can prevent FPIC’s wider

application.162 Advocates have pointed out that indigenous voices are being lost in this debate and

have attempted to move past this issue, encouraging state engagement by shifting the focus to the

requirements for each aspect of FPIC.163

154 Megan Davis, ‘Indigenous Struggles in Standard Setting: The United Nations Declaration on the Rights of Indigenous Peoples’ (2008) 9 Melbourne Journal of International Law 439, 465-466; Bartolomé Clavero, ‘The Indigenous Rights of Participation and International Development Policies’ (2005) 22(1) Ariz J Int’l & Comp Law 41. 155 Shalanda H Baker, ‘Why the IFC’s Free, Prior and Informed Consent Policy Does Not Matter (Yet) to Indigenous Communities Affected by Development Projects’ (2012) 30 Wis Int’l LJ 668, 686. 156 Franco (n 140) 7. 157 Anaya (n 127) 10-11. 158 Luis Enrique Chávez, ‘The Declaration on the Rights of Indigenous Peoples: Breaking the Impasse: The Middle Ground’ in Claire Charters and Rodolfo Stavenhagen (eds) Making the Declaration Work: The United Nations Declaration on the Rights of Indigenous Peoples (International Work Group for Indigenous Affairs 2009) 103. 159 Davis (n 154) 466; Franco (n 140) 13. 160 Baker (n 155) 688. 161 Lorraine Land, ‘Who’s afraid of the big, bad FPIC? The evolving integration of the United Nations Declaration on the Rights of Indigenous Peoples into Canadian law and policy’ (Northern Public Affairs 2016) 42. 162 Abbi Buxton and Emma Wilson, ‘FPIC and the extractive industries: A guide to applying the spirit of free, prior and informed consent in industrial projects’ (International Institute for Environment and Development 2013) 5. 163 Newman (n 139).

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Between these two viewpoints are a range of possible interpretations,164 which Bartolomé

Clavero refers to as “an extremely wide spectrum between simple consultation and strict

consent.”165 Some see FPIC as running along this spectrum between good faith consultation with

a view to achieving consent and a strict requirement of consent. Where a government act or

decision would fall on this spectrum will depend on how much it will involve or impact on the

rights of the indigenous people. It is unlikely that an indigenous community could veto a decision

that will have an inconsequential effect on them.

On the other hand, achieving unanimous consent to a proposal is also unlikely. Luis

Enrique Chávez, former Chairperson-Rapporteur of the Commission on Human Rights’ Working

Group to the draft UNDRIP, believes that states could not accept a veto right in the draft of

UNDRIP for reasons of both practice and principle. These reasons are highly relevant to the issue

of state consultation on international agreements. Practically, “the state could not renounce either

its powers or its responsibility when taking decisions on issues of public order”.166 In principle,

indigenous peoples could not receive beneficial rights greater than other members of society.167

Some see FPIC as developing into two distinct standards for different situations, rather

than a range of possibilities, with one standard for consultation and another for consent.168 This

seems consistent with the interpretation of the IACtHR in the Saramaka decision, and perhaps the

IACtHR will provide clarity in a later judgment about this distinction and when it may apply.169 If

FPIC effectively amounts to consultation in good faith and meeting certain requirements, then it

is difficult to make sense of findings of the IACtHR and the African Commission that suggest that

consultation and FPIC are different standards. The idea of two separate standards within FPIC

makes sense of these judgments. However, the term FPIC continues to be used in a confused way,

with the requirement interchangeably described as “seeking FPIC” or “obtaining FPIC”, as though

164 Akilah Jenga Kinnison, ‘Indigenous Consent: Rethinking US Consultation Policies in Light of the UN Declaration on the Rights of Indigenous Peoples’ (2011) 53 ACJ 1301, 1327. 165 Clavero (n 154) 41. 166 Chávez (n 158) 103. 167 ibid 103-104. 168 Newman (n 139). 169 Jackie Hartley, ‘Indigenous Peoples and FPIC: When does the ‘C’ mean ‘Consent’?’ (21 March 2014, accessed 28 February 2016) <http://asiapacific.anu.edu.au/regarding-rights/2014/03/21/indigenous-peoples-and-fpic-when-does-the-c-mean-consent>.

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these are the same thing.170 In either case, if consultation requires consulting “in order to obtain

consent”, this in itself will be a high standard to achieve.171

These tensions in applying FPIC do not just relate to the issue of consultation versus

consent, or the definitions of these concepts.172 The uncertainty runs deeper, to the concept of

self-determination and its meaning. It involves the question of whether participatory rights of

indigenous peoples are part of a human rights framework or part of a broader decolonisation

movement – or even, as private investors would prefer, mere risk mitigation.173 The right to self-

determination found in the ICCPR and ICESCR had potential to form the origin for FPIC rights,

on the grounds that effective self-determination requires control over land and resources. 174

However, the actual development of FPIC has concerned rights to culture, plus property rights

and non-discrimination rights.175 The reluctance of states and legal institutions to engage with the

concept of self-determination led indigenous peoples to press for the development of UNDRIP.176

A major feature of the FPIC rights within UNDRIP is that these rights are clearly based on the

right to self-determination.177

Four states have shown marked opposition to UNDRIP, and concern about its FPIC

standards. These states are Canada, Australia, New Zealand and the United States. Collectively

they are often referred to as CANZUS or the settler states, highlighting their historical, political

and legal similarities.

Looking at responses from these states, President Obama of the United States

demonstrated an intention to define FPIC as a consultation requirement with no veto power for

indigenous peoples. His statement makes clear that the United States considers that the word

consent in FPIC means something less than consent:178

170 Haugen (n 144) 263. 171 Mauro Barelli, ‘Free, Prior and Informed Consent in the Aftermath of the UN Declaration on the Rights of Indigenous Peoples: Developments and Challenges Ahead’ 2012 16 IJHR 1, 11. 172 S James Anaya, ‘Divergent Discourses About International Law, Indigenous Peoples, and Rights over Lands and Natural Resources: Toward a Realist Trend’ (2005) 15 Colo J Int’l Envtl L & Pol’y 237. 173 Baker (n 155) 686. 174 Ward (n 130) 55. 175 ibid. 176 Clavero (n 154) 44. 177 Ward (n 130) 58. 178 The White House, ‘Announcement of U.S. Support for the United Nations Declaration on the Rights of Indigenous Peoples’ Initiatives to Promote the Government-to-Government Relationship & Improve the Lives of Indigenous Peoples’ (2010) <http://www.achp.gov/docs/US%20Support%20for%20Declaration%2012-10.pdf> accessed 24 May 2017.

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… the United States recognizes the significance of the Declaration’s provisions on free, prior and informed

consent, which the United States understands to call for a process of meaningful consultation with tribal

leaders, but not necessarily the agreement of those leaders, before the actions addressed in those consultations

are taken.

A statement from New Zealand’s representative Pita Sharples endorsing UNDRIP emphasised

the partnership relationship between the Crown and Māori, and the intention to interpret FPIC as

being met by current domestic standards:179

… where the Declaration sets out principles for indigenous involvement in decision-making, New Zealand

has developed, and will continue to rely upon its own distinct processes and institutions that afford

opportunities to Māori for such involvement. These range from broad guarantees of participation and

consultation to particular instances in which a requirement of consent is appropriate.

Canada, in endorsing UNDRIP, took a very similar approach to New Zealand, a no-change-

required approach that also emphasised a partnership relationship:180

Canada believes that our constitutional obligations serve to fulfil all of the principles of the declaration,

including “free, prior and informed consent.” We see modern treaties and self-government agreements as

the ultimate expression of free, prior and informed consent among partners.

Australia was the first of these states to endorse UNDRIP. In doing so, its representative

emphasised Article 46 of UNDRIP, and the principle contained in this Article that UNDRIP

cannot be interpreted in a way that impairs the territorial integrity or political unity of a state:181

We want all Australians to participate fully and freely in our democratic processes. While there is

continuing international debate about the meaning of ‘free, prior and informed consent’, we will consider

any future interpretations in accordance with Article 46. We recognise how important it is for Indigenous

Australians to have a voice, and a means to express it.

179 Ministerial Statements: UN Declaration on the Rights of Indigenous Peoples – Government Support. Hon Simon Power quoting the speech of Hon Dr Pita Sharples (2010) 662 NZPD 10229. 180 Carolyn Bennett, ‘Speech delivered at the United Nations Permanent Forum on Indigenous Issues, New York, May 10’ (Government of Canada, 10 May 2016) <http://news.gc.ca/web/article-en.do?nid=1064009>, accessed 24 March 2017. 181 Jenny Macklin, ‘Statement on the United Nations Declaration on the Rights of Indigenous Peoples’ (3 April 2009) <http://www.un.org/esa/socdev/unpfii/documents/Australia_official_statement_endorsement_UNDRIP.pdf> accessed 24 March 2017.

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All statements show an underlying anxiety to limit any veto or self-determination rights

for indigenous groups, and to continue to develop laws on indigenous participation without

external influence, particularly for the interpretation of “consent”.


The rights of indigenous peoples to FPIC contained in UNDRIP and ILO Convention 169

remains ambiguous, despite recent developments by human rights courts and international

institutions. Both governments and financial institutions are attempting to resist expansions to the

definition. However, a principle is emerging of a minimum standard of consultation with

indigenous peoples in good faith with a view to consent, where a potential impact on indigenous

interests exists.

This involves assessing the extent to which impacts relate specifically to indigenous groups

and the scale of these impacts. Whether FPIC will require a high standard of consent or a lower

standard of consultation will depend on these factors. Inconsistent language and tests from various

institutions confuses the practical application of these standards. FPIC standards proposing sliding

scales or two separate standards of consulting and consent could potentially bridge these issues.

The next chapter examines how national courts are addressing these issues, to identify

potential challenges to assessing the FPIC standard in practice.

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Chapter 5: State Practices and Legal Challenges

5.1 Introduction

This chapter addresses the question of what challenges an FPIC standard for investment

agreement negotiation and ratification will face in practice. It draws on examples from Canada and

New Zealand to identify concerns indigenous peoples have raised on this issue, including potential

impacts on policy-making and intellectual property rights, and state responses to these concerns.

A feature of FPIC is that a gap often exists between concepts and state practice.182 In comparing

state approaches, it is clear that indigenous advocates throughout the world raise similar issues and

concerns about how investment treaties may affect them and about their lack of involvement in

the treaty-making process. It is also clear that governments tend to downplay these concerns.

Due to the ambiguity of the definition and applicability of FPIC, indigenous peoples face

a difficult task to establish that a treaty will have a real and direct impact on their community. The

effects of investment agreements can be complex, indirect and systemic, hard to predict and

varying greatly between states.

This chapter begins with two case studies looking at the legal responses to China-Canada

bilateral investment treaty in Canada and the Trans-Pacific Partnership Agreement in New Zealand.

It then considers relevant Colombian case law. The Canadian and New Zealand governments have

taken different stances on the duty to consult. The Canadian situation demonstrates the arguments

that are used for and against the existence of a duty, while the New Zealand example highlights

the potential for uncertainty surrounding the extent of a duty and the difficulties of fulfilling it in

practice.

5.2 Canada and the China-Canada Bilateral Investment Treaty

In Canada, the Hupacasath First Nation brought before the Canadian courts on judicial review the

issue of whether Canada had a constitutional duty to consult with indigenous peoples before

entering a bilateral investment treaty with China. The Federal Court found that no duty to consult

existed. 183 On appeal of this decision, the Federal Court of Appeal held that the Federal Court

made no breach of constitutional law in making this finding. 184

182 Tara Ward, ‘The Right to Free, Prior and Informed Consent: Indigenous Peoples’ Participation Rights within International Law’ (2011) 10(2) Northwestern Journal of International Human Rights 54, 55. 183 Hupacasath First Nation v Canada (Minister of Foreign Affairs) 2013 CF 900 (FC). 184 Hupacasath First Nation v the Minister of Foreign Affairs Canada and the Attorney General of Canada 2015 FCA 4 (FCA).

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The Federal Court reached its decision that there was no duty to consult on the agreement

by applying a three-part test previously established in Canadian case law. The claim failed on the

third element of this test. This element requires a causal relationship to exist between the

government decision and the potential for adverse impacts on indigenous claims or rights. Under

Canadian law, the required causal relationship has two elements. There must be an effect on

indigenous rights or their exercise. Secondly, this must be an “appreciable adverse effect that is

more than merely speculative”, albeit while taking “a generous, purposive approach”.185 Applying

this test, the Federal Court concluded that the effects of the investment treaty on indigenous rights

were both “non-appreciable and speculative.”186

Kathryn Tucker has criticised the Federal Court’s decision for “narrowly applying” the

three-part test”.187 She viewed the judgment as a lost opportunity, that “too quickly and easily

dismissed” the concerns.188 She acknowledged that the case raised difficulties and impracticalities,

but hoped that the appeal would result in a “more nuanced judicial response to this complex and

challenging case.”189 This hope appears to have been at least partly disappointed.

On judicial review, the appellants argued that the Court needed to apply a very low

threshold and consider a possible “chilling effect” on government decision-making, an argument

they claimed to be based on logic and common sense.190 The Court summarised this argument as

the speculation that in effect, "… when push comes to shove, Canada will subordinate Aboriginal

rights to its desire to avoid economic penalties under the Agreement.”191 The Court refuted this

argument, arguing that it is uncertain whether the agreement will ever “clash” with Aboriginal

rights, that any analysis of this is “guesswork” and that it is just as possible that Canada would

choose to protect rights despite economic penalties as it would deny these rights.192

The Court’s reasoning created an important distinction between “possibilities” that give

rise to a duty to consult and “speculations” that do not.193 In short, “the duty to consult is triggered

not by imaginings but by tangibilities.”194 This case involved speculation. The effect was indirect,

185 ibid [56]. 186 ibid [105]. 187 Kathryn Tucker, ‘Reconciling Aboriginal Rights with International Trade Agreements: Hupacasath First Nation v Canada’ (2014) 9(2) McGill International Journal of Sustainable Development Law and Policy 109, 129. 188 ibid 111. 189 ibid. 190 Hupacasath First Nation v the Minister of Foreign Affairs Canada and the Attorney General of Canada (n 184) [93]-[95]. 191 ibid [96]. 192 ibid [97]-[98]. 193 ibid [101]. 194 ibid [99].

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may not happen at all and had no estimation of probability. Further, any possible effects could be

addressed at a later point. The Court emphasised the ability of the appellants to access

administrative decision-makers and courts for protection from decision-making. Imposing a duty

to consult in this situation would not further the aims of the duty.

Newman and Ortega Pineda view this decision as a major contribution to the Canadian

law on the duty to consult, with the finding that effects must be non-speculative for a duty to

consult to arise.195 The reason for this limitation is that otherwise, “there would be an overly

aggressive application of the duty to consult that would subject massive amounts of government

action to consultation”. 196 However, in making this distinction, the Court “leaves open the

possibility that the negotiation of some international treaties may trigger the constitutional duty to

consult, thus opening a complex nexus between constitutional and international law”. 197 They

believe that some international treaties will meet the standard of direct causal effect on indigenous

rights and require consultation. Migratory bird treaties are one possible example.198

5.3 New Zealand and the Trans-Pacific Partnership Agreement

In 2016, Māori claimants brought the issue of consultation on an international investment

agreement to the Waitangi Tribunal.199 The grounds for their claim were that the exception clause

the government negotiated to protect Māori interests in the TPP was inadequate. They claimed

that the TPP therefore breached the principles of the Treaty of Waitangi, the founding document

of the relationship between the New Zealand government and Māori. These principles are the

basis for the Tribunal’s enquiries. The Tribunal considered what level of Māori engagement and

input would be required prior to ratifying the TPP.200

It is important to note that the Waitangi Tribunal is not a court. It produces reports and

non-binding recommendations, and does not follow precedents or apply formal rules of

evidence.201 It is not possible to compare directly between its report and the findings of the

Canadian courts. The TPP is also a different kind of investment agreement to the bilateral

195 Dwight Newman and Wendy Elizabeth Ortega Pineda, ‘Comparing Canadian and Colombian Approaches to the Duty to Consult Indigenous Communities on International Treaties’ (2016) 25(1) Constit Forum 29. 196 ibid 30. 197 ibid 29. 198 ibid 30-31. 199 Waitangi Tribunal, ‘Report on the Trans-Pacific Partnership Agreement’ (2016) WAI 2522. 200 ibid 3. 201 Schedule 2 Treaty of Waitangi Act 1975 (NZ). See also Waitangi Tribunal, ‘Waitangi Tribunal Practice Note: Guide to the Practice and Procedure of the Waitangi Tribunal’ (May 2002).

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agreement the Canadian Courts considered, both for the very broad scope of its subject matter

and the number of parties involved.

However, the differences in responses of the respective governments to these challenges

are noteworthy. All parties to the Tribunal claim agreed that the Crown had a duty to consult with

Māori organisations before entering into an international investment or trade agreement. This duty

is based on the partnership relationship between Māori and the Crown and the Crown’s duty to

actively protect Māori. This is comparable to the aims of the Canadian duty, but with an additional

focus on a relationship of partnership. In contrast to Canada, the New Zealand government had

attempted to consult with Māori to fulfil this requirement. Governments representatives also

stated a wish to learn from the hearing to improve future consultation procedures.

The Tribunal did not conduct a detailed investigation of the consultation process the

government had already carried out, but did make several critical comments. The claimants viewed

the consultation as too limited and selective, treating Māori as stakeholders rather than partners.

The Tribunal agreed with this view, criticising the government for viewing Māori only in roles “as

investors, businesses, or land owners”. The Tribunal concluded, “This seems to us to be an overly

reductionist approach to Māori interests, and to the reach of the TPP.”202

The Tribunal found that the wording of an exclusion clause in the TPP relating to the

government’s obligations under the Treaty of Waitangi was adequate to protect Māori interests. It

acknowledged the achievement of the government in negotiating for this exclusion. No other state

had a similar provision, even though most other state parties had indigenous populations. Canada

is one example. The Special Rapporteur for the rights of indigenous peoples also noted this

situation in her 2016 report, questioning the unbalanced nature of this exception clause.203

After reaching this conclusion, the Tribunal went on to raise several concerns relating to

Māori engagement and input prior to ratification of the TPP. The Special Rapporteur has voiced

her agreement with these concerns.204 As the Tribunal stated, “Restricted access to information,

and a lack of transparency on the Crown’s part, has led to claimant frustration and mistrust of the

consultation process.” In support of this statement, the Tribunal quoted a claimant, Pita Tīpene,

who stated that “…due to the secrecy that has shrouded the TPP process and the Crown’s

202 Waitangi Tribunal (2016) (n 199) 19. 203 UNHRC ‘Report of the Special Rapporteur on the rights of indigenous peoples’ (2016) UN Doc A/HRC/33/42 [74]. 204 ibid [70].

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complete failure to engage with us on its development, our people are confused, suspicious,

agitated and aggrieved”.

In contrast with Canada, the New Zealand government did not argue that it could choose

to depart from the agreement. The Tribunal stated:205

Once the TPPA is ratified and in force, future New Zealand governments cannot act domestically in ways

that contravene TPPA provisions. New Zealand’s policies, subsidiary legislation and exercise of

Ministerial and regulatory authority discretions must align with the TPPA, even if changes to statutes are

not required.

This comment from the Tribunal contrasts with the following assertion from the then Prime

Minister of New Zealand, John Key. He stated:206

Nothing in the TPP will prevent the Crown from meeting its Treaty obligations to Māori, and the Treaty

provision in the Agreement ensures the government retains the ability to make legitimate public policy

decisions and to take measures to implement that policy.

It is ambiguous whether this comment is a promise that the TPP will not impact on Māori interests

or a promise that the New Zealand government will support Māori interests even if the TPP were

to have such an impact. The Tribunal suggested that the government consider developing a formal

policy to commit to attempting to utilise the exception clause if it ever faces a potential relevant

arbitration claim.207

The Tribunal suggested that the government could engage in “prudent risk management”

but, in contrast to the Canadian decisions, concluded that the chilling effect argument was a real

issue. This can be seen in the quote below from the Tribunal’s report. An expert witness for the

government had argued for the concept of prudent risk assessment. The Tribunal had questioned

whether this was simply a rephrasing of the chilling effect.208 The Tribunal noted it did not have

the time or expertise available to make findings on the issue, but concluded that the chilling effect

was an issue:209

205 Waitangi Tribunal (2016) (n 199) 17. 206 ibid, 25. 207 ibid 57. 208 ibid 41. 209 ibid 45.

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If the TPPA is ratified, it will be a complex question of fact to determine whether a particular Crown act

or omission in the face of an ISDS claim (or the threat or apprehension of one) is the result of prudent risk

management, or the improper curbing of legitimate policy action due to a chilling effect. While the debate

over the chilling effect can be factually and semantically complex, we do not doubt that it is an issue.

Regarding consultation procedures for international treaties, the Waitangi Tribunal commented

that it had considered these and made recommendations in an earlier claim, discussed below on

page 46. The Tribunal was concerned that the Crown could not demonstrate how it had changed

its strategy to meet these recommendations. The Tribunal was particularly critical about the lack

of engagement on intellectual property issues:210

This is not simply an issue of poor process. It harms the relationship and increases the probability of a low-

trust and adversarial relationship going forward.

The Tribunal also noted that the government had some flexibility to negotiate the terms of the

TPP in light of consultation.211 The Tribunal did not make formal recommendations, but did make

some suggestions. The Tribunal suggested that the government enter into additional dialogue with

Māori about the exception clause, although this dialogue would not necessarily need to result in

any change. The Tribunal also suggested that the government adopt a protocol that it would use

in the case of any ISDS claim that may involve Māori interests.212

5.4 Colombia and the Canada-Colombia Free Trade Agreement

Dwight Newman and Wendy Elizabeth Ortega Pineda have compared the Canadian approach

with Colombian case law. 213 The Constitutional Court of Colombia reviews international

agreements on the basis of its constitution and relevant obligations such as the ILO Convention

169. Unlike Canada and New Zealand, Colombia is a signatory to this convention. The

Constitutional Court of Colombia applies a test of whether the international agreement directly

impacts indigenous peoples.214 It is not relevant whether the impact is likely to be positive or

negative. The existence of an impact creates an obligation to consult.215

210 ibid 56. 211 ibid. 212 ibid 56. 213 Newman and Otega Pineda (n 195). 214 ibid 31-32. 215 ibid 31.

46

A free trade agreement with Canada did not meet this standard, as the standards in the

agreement applied in the same way to the entire population.216 The purpose of the agreement did

not relate specifically to ethnic interests.

However, the Constitutional Court has found that other international agreements do meet

this specific impact threshold. These agreements were found to be unconstitutional due to

insufficient consultation with indigenous groups. Notably, these included the International

Convention for the Protection of New Varieties of Plants due to the potential impact on

indigenous peoples that could result from intellectual property rights to seeds.217 This suggests that

if a trade or investment agreement contains intellectual property provisions, at least those relating

to seeds, this agreement will also require consultation with indigenous communities in Colombia.

In their analysis, Newman and Ortega Pineda summarise these cases as containing the

principle of whether an actual, “direct impact” on indigenous peoples exists, in contrast to the

“causal link” approach of the Canadian courts.218 This suggests that the Court found that the trade

agreement did not meet the threshold on a consideration of the content of its provisions, rather

than its overall form and purpose. However, the Colombian courts have yet to state this principle

clearly and explicitly.219

Newman and Ortega Pineda hope that the courts will do so in the future. They believe

that the Canadian jurisprudence could benefit from adopting aspects of the tried and tested

Colombian analysis rather than “reinventing the wheel”.220 While they caution that the different

legal and cultural contexts limit the ability to make international comparisons, they believe

adopting a comparative approach to this issue could have benefits.221

This argument suggests that there is a place for international standards on this matter,

rather than seeing it as a matter for each jurisdiction to develop separate principles, tests and

standards. However, the statements of state representatives endorsing UNDRIP that are quoted

on pages 38-39 above suggest that states are likely to favour approaches based on developing

independent interpretations, founded in the domestic law of each jurisdiction.

216 ibid 31-32; Corteconstitucionalgovco, Sentencia C-187/11, (2011), online: <http://www.corteconstitucional.gov.co/RELATORIA/2011/C-187-11.htm>. 217 ibid; Corteconstitucionalgovco, Sentencia C-1051/12, (2012), online: <http://www.corteconstitucional.gov.co/relatoria/2012/C-1051-12.htm>. 218 ibid 33. 219 ibid. 220 ibid. 221 ibid 33-34.

47

Such an approach also has potential dangers, as recognised by Newman and Ortega Pineda.

For instance, the approach of the New Zealand government appears to potentially set a lower

threshold for obligations to consult than standards in other jurisdictions. However, unlike Canada

and Colombia, New Zealand has no written constitution and Māori do not have the opportunities

to apply for legislation to be declared unconstitutional by the courts that are available in Canada

or Colombia.

Newman and Ortega Pineda also make the important point that we can look beyond the

CANZUS states for answers to these questions.222 While there has been a large focus on the

CANZUS opposition to UNDRIP and FPIC and the ways that this opposition is now changing,

Latin American states are also considering these same issues, perhaps in more productive ways. A

truly international focus to the issue of international agreements could assist governments and

courts in developing rules and policies in this area.

5.5 Comparisons

Both the Canadian and New Zealand approaches to consultation appear to align with the idea of

a sliding scale approach. The idea of a spectrum can be clearly seen in Canadian case law. In fact,

this case law is likely to have been a major influence on the interpretation of the FPIC principle at

international law.223

The New Zealand government explicitly refers to the sliding scale in responding to the

Waitangi Tribunal claim, emphasising that the government will carry out consultation

“proportionate to the impacts”. The central issue is an assessment of the strength of connection

and likelihood of impacts on indigenous peoples. The Waitangi Tribunal established this sliding

scale for consultation on international agreements in its report, commonly known as the “flora

and fauna claim”, concerning rights to culture and identity:224

Considering the broad spectrum of international matters, it would be impractical and undesirable for the

Crown to engage in full-scale consultation with Māori over every international instrument. Sometimes

Māori interests are small, identical to those of other New Zealanders, or confined to small parts of an

222 ibid 34. 223 Dwight Newman, ‘Norms of Consultation with Indigenous Peoples: Decentralization of International Law Formation or Reinforcement of States’ Role?’ in Andrew Byrnes, Mika Hayashi and Christopher Michaelsen (eds), International Law in the New Age of Globalization (Brill Nijhoff 2013) 276. 224 Waitangi Tribunal ‘Ko Aotearoa Tēnei: A Report into Claims Concerning New Zealand Law and Policy Affecting Māori Culture and Identity’ (WAI 262, 2011) 237.

48

agreement. On other occasions, they may be much greater or relate to the whole of an instrument. There can

be no ‘one size fits all’ approach. Rather, the Treaty standard for Crown engagement with Māori operates

along a sliding scale. Sometimes, it may be sufficient to inform or seek opinion from the Federation of

Māori Authorities, which tends to speak for iwi business interests. But there will also be occasions in which

the Māori Treaty interest is so central and compelling that engagement should go beyond consultation to

negotiation aimed at achieving consensus, acquiescence or consent. DRIP would seem to be one such example.

There may even be times when the Māori interest is so overwhelming, and other interests by comparison so

narrow or limited, that the Crown should contemplate delegation of its role as New Zealand’s ‘one voice’

in international affairs; negotiations over the repatriation of taonga [ancestral treasures] might be an

example.

The first two broad approaches relate to consultation and consent (without a veto). The last

possibility seems to contemplate an approach of direct involvement beyond veto rights, either in

partnership with the state or on the community’s own behalf.


The New Zealand approach can be summarised as a right to consultation with Māori on

international agreements covering a broad range of matters, with perhaps a standard of consent

for certain agreements that would significantly involve exclusively Māori interests. The Canadian

and Colombian approaches, in contrast, appear to place the major threshold before consultation.

It is clear from the developing law on FPIC that whether an international agreement requires

consultation with or consent from an indigenous group will depend on whether the agreement

could reach a threshold of impact on indigenous interests. The extent to which these impacts must

be specific to indigenous interests differs between jurisdictions.

The central question is where along the scale for consultation investment agreements fall.

In all approaches, this depends on the level of specific impacts on the indigenous community. The

potential impacts identified by indigenous peoples in the Canadian and New Zealand examples

can be summarised as relating to the following areas: land and natural resource development and

exploitation; health policies and access to medication; intellectual property rights relating to native

flora and fauna and traditional knowledge; and policy intended to benefit indigenous peoples.

49

Chapter 6: Conclusion

6.1 Introduction

This chapter concludes this thesis by assessing its central question, whether there is a place for

FPIC within investment agreement negotiation and ratification. Investment agreements and

investor-state disputes arbitration can conflict in various ways with the rights of indigenous peoples

at international law, with indigenous peoples asserting rights as investors, seeking to participate as

a third party or being involved directly in the dispute. These conflicts can potentially impact on

indigenous peoples in a range of ways, notably by influencing state regulation or by undermining

indigenous intellectual property rights. However, given the difficulties of assessing these risks and

the current uncertainty surrounding the FPIC standards and thresholds at international law, the

place for FPIC in investment law is limited. Investment tribunals may often not even be

appropriate venues for assessing FPIC issues. Careful drafting of international investment

agreements that anticipates these issues and a rethink of ISDS systems and procedures are two

possibilities for progress on this issue.

Both investment law and state consultation processes appear more open to identifying and

accommodating indigenous rights and FPIC where the indigenous community is asserting rights

as an investor rather than as a third party. In such cases, participation rights are not an issue. The

Grand River arbitration involved indigenous investors and it is probably no coincidence that it is

the most relevant example to date of an arbitration tribunal considering indigenous rights. In the

TPP Waitangi Tribunal claim, the level of consultation with Māori businesses and investors was

not in question. José Aylwin speculates that the higher levels of Māori involvement in investment

agreement negotiation in comparison to other indigenous peoples could be at least in part

attributable to high levels of Māori involvement in international trade. In his view, the New

Zealand government has possibly been successful with Māori participation in free trade

agreements for “pro-corporate” reasons.225 These limitations are fundamental to the nature of

investment arbitration, as the Special Rapporteur concludes:226

… at its core, the investor-State dispute settlement system is adversarial and based on private law, in which

affected third-party actors, such as indigenous peoples, have no standing and extremely limited opportunities

225 José Aylwin, ‘The TPP and Indigenous Peoples: Lessons from Latin America” in Jane Kelsey (ed), ‘No Ordinary Deal - Unmasking the Trans-Pacific Partnership Free Trade Agreement’ (Bridget Williams Books 2010) 80-81. 226 UNHRC ‘Report of the Special Rapporteur on the rights of indigenous peoples’ (2016) UN Doc A/HRC/33/42, [67].

50

to participate. Amicus submissions and participations at the request of States are grossly inadequate in a

context where States and investors are involved in causing and benefiting from harm to indigenous peoples’

rights.

This chapter will consider the issues involved with identifying and assessing impacts and allowing

for indigenous participation at national and international levels.

6.2 Identifying Interests and Assessing Impacts

Potential impacts specific to indigenous peoples arising from international investment agreements

include intellectual property rights, affirmative action policies and land and resources use. While

the Special Rapporteur recommends for states to identify international agreements that will involve

the interests of indigenous peoples,227 current FPIC jurisprudence and state practices show that

indigenous rights could be undermined when employing such a strategy. States consistently

downplay the potential impacts on indigenous peoples, so this recommendation needs to be

viewed against a context of attempts to read down the interpretation of FPIC, particularly

concerning land and resources, by both states and investors.

Additionally, legal tests often require that indigenous claimants prove direct impacts on

indigenous peoples. The impacts of investment agreements may be more remote than the

connections that these tests require. Investment agreements are only one of a range of factors a

government may take into account when making decisions on resource use or policy. Identifying

and assessing regulatory impacts is difficult, and state responses reflect this. The Waitangi Tribunal

position on the chilling effect contrasts with the findings of the Canadian courts. The Canadian

courts concluded that this argument was speculative, partly because the appellants could point to

no earlier examples. However, the Waitangi Tribunal was unconvinced by the argument that New

Zealand had never faced investment arbitration on a policy relating to Māori interests. It could still

be a possibility in the future. Further, the Tribunal pointed out, “… it is a clear matter of fact that

the possibility of a claim against the Government was a factor in the Government delaying a law

it otherwise intended to promote.” 228

The Waitangi Tribunal was referring here to the New Zealand government’s response to

the Philip Morris arbitration against Australia. This arbitration is discussed above on page 11. The

227 ibid [95]. 228 Waitangi Tribunal, ‘Report on the Trans-Pacific Partnership Agreement’ (2016) WAI 252, 241.

51

New Zealand government postponed intended legislation to introduce compulsory plain

packaging of cigarettes in part to await the result of the arbitration. This is an example of how an

investment treaty can impact on a government’s policy-making, resulting in the decision to delay

a measure intended to improve health outcomes. As the Special Rapporteur has observed, such a

delay can disproportionately affect the health outcomes of indigenous peoples.229

Another example is the South African response to the Piero Foresti arbitration claim,

discussed above on page 18. Developing nations are likely to continue to face these issues in the

future when attempting to confront the significant inequality between social and ethnic groups.

These inequalities are due to the ongoing impacts of civil war, colonisation and poverty. While

addressing these issues, these states must at the same time encourage foreign investment to bolster

their struggling economies. 230 Developing nations may also have greater incentives to lower

standards relating to human rights and the environment to attract this investment.231

A country such as Canada with a strong economy can potentially choose to pay a penalty

and continue with a policy. For another nation without this economic strength the options may be

more limited. The impact will differ depending on the state involved. However, Canada also chose

not to proceed with proposed tobacco plain packaging legislation following a NAFTA arbitration

claim in 1994.232 Arguably this was not relevant for considering the bilateral agreement with China.

Arguments include that NAFTA is very different to a bilateral agreement due to both its scope

and the nations involved,233 and that Canada has in the intervening years paid significant sums to

settle several arbitration claims relating to regulatory decision-making.234 Looking at the Waitangi

Tribunal report, one can argue that the TPP has much more in common with NAFTA than the

Canada-China agreement, and the New Zealand government’s ability to settle significant claims is

as yet unproven.

The Special Rapporteur recommends that states ensure that investment agreements are

drafted in ways that acknowledge human rights obligations and leave states with sufficient

229 UNHRC, ‘Report of the Special Rapporteur of the Human Rights Council on the rights of indigenous peoples on the impact of international investment and free trade on the human rights of indigenous peoples’ (2015) UN Doc A/70/301, [43]. 230 Andrew Friedman, ‘Flexible Arbitration for the Developing World: Piero Foresti and the Future of Bilateral Investment Treaties in the Global South’ (2010) 7 BYU Int’l L & Mgmt R 37, 38-42. 231 Valentina S Vadi, ‘When Cultures Collide: Foreign Direct Investment, Natural Resources and Indigenous Heritage in International Investment Law’ (2010-2011) 42 Colum Hum Rts L Rev 797, 832. 232 Eva Nanopoulos and Rumiana Yotova, ‘ ‘Repackaging’ Plain Packaging in Europe: Strategic Litigation and Public Interest Considerations’ (2016) 19 JIEL 175, 198. 233 Hupacasath First Nation v Canada (Minister of Foreign Affairs) 2013 CF 900 (FC), [85]. 234 ibid [112].

52

regulatory space for developing policy and making decisions. Specific ways to achieve this include

drafting preambles and substantive provisions referring to human rights obligations.235 She is

perhaps less recommendatory of the use of exception clauses. She concurs with the very cautious

approval by the Waitangi Tribunal of the exception clause for the Treaty of Waitangi in the TPP.236

She is concerned that exception clauses should be used only where no other approach is possible.

As she notes, the New Zealand exception in the TPP left indigenous peoples in other states

without any similar assurance, an outcome that is clearly contrary to the universal aspirations of

human rights law and UNDRIP.237

If the use of exception clauses increases, investment law and human rights law will

continue to exist as fragmented, conflicting areas of international law. Broad changes to investment

agreement drafting could go some way to bridging this gap and offer guidance to arbitration

tribunals that are increasingly grappling within the current grey zone. The Special Rapporteur

wishes to see a harmonisation of investment law and human rights law through investment

agreement drafting changes that incorporate human rights obligations into the preambles and

provisions of these agreements.238

Exception clauses remain an important tool for carving out a space for state policy-making,

as the Special Rapporteur acknowledges. She recommends that use of exception clauses where it

is appropriate.239 It is difficult to envisage how including human rights provisions within the

agreement could otherwise provide assurance for states that wish to implement affirmative action

policies towards indigenous peoples. These policies may conflict with standards of equality of

treatment that go to the heart of many investment agreements. The question of whether affirmative

action policies encourage or depart from the principle of equality can be controversial even within

a human rights context, as can the relationship between indigenous rights and human rights law

generally. This can be seen in the development of FPIC and the long-standing resistance to

developing the concept of self-determination. Increasing the jurisdiction of arbitration tribunals to

rule on these issues will not necessarily be a positive step for indigenous rights, unless there are

significant changes to ISDS systems or to the drafting of investment agreements. Further,

235 UNHRC, ‘Report of the Special Rapporteur on the rights of indigenous peoples’ (2015) UN Doc A/HRC/30/41 [77]-[78]; UNHRC (2016) (n 226) [88]. 236 UNHRC (2016) (n 226) [80]. 237 ibid [73]. 238 ibid [78]-[79]. 239 ibid [89].

53

indigenous peoples also have specific rights relating to areas such as intellectual property. Broad

human rights obligations may be insufficient to recognise these interests.

6.3 National Participation

The Special Rapporteur recommends increasing the dialogue on human rights concerns in

investment law generally and involving state legislative branches in considering international

investment agreements.240 She is concerned about transparency in ISDS, and recommends that

states adopt measures that will increase the transparency of these procedures generally. For

instance, she recommends that states ratify the United Nations Convention on Transparency in

Treaty-based Investor-State Arbitration.241

The lack of Parliamentary involvement in investment agreements regarding indigenous

peoples’ rights has been a focus of criticism in New Zealand. A report of the New Zealand Law

Commission into treaty-making processes was critical of the lack of involvement that the New

Zealand Parliament had in treaty-making. 242 In theory Parliament decides on implementing

international agreements, but in practice the treaty-making of the executive branch of government

leaves little space for effective Parliamentary participation at a later stage.243

Parliamentary participation could serve as an important opportunity for Māori

participation, as Māori have guaranteed representation in the New Zealand Parliament.244 The

report raised concern about the lack of Parliamentary participation leading to both democratic and

indigenous concerns. The Law Commission produced this report in 1997, yet its conclusions

remain highly relevant. Sir Kenneth Keith, former President of the New Zealand Court of Appeal

and now judge of the International Court of Justice, has in the past advocated for New Zealand

to increase Parliamentary participation, suggesting that the executive begin to regularly table certain

types of treaties in Parliament for comments from Members of Parliament and the public.245

The Law Commission also recommended that a Treaty Committee in Parliament be

established to give treaties proper consideration. This institution could engage with Māori concerns

240 UNHRC (2015) (n 235) [77] 241 UNHRC (2016) (n 235) [97]. 242 New Zealand Law Commission, ‘The Treaty Making Process: Reform and the Role of Parliament’ Report 45, December 1997, Wellington, New Zealand. 243 ibid [29]-[30]. 244 ibid [59]. 245 Kenneth Keith, ‘Governance, Sovereignty and Globalisation’ (1998) 28 VUWLR 477, 489.

54

and ensure that the government produces impact statements that incorporate these concerns.246

Significantly, many Māori raised the possibility of developing frameworks of intellectual property

laws that could protect against international agreements encroaching on their rights. Considering

the potential effectiveness of these proposals was beyond the scope of the Law Commission’s

report.247

The Law Commission included an overview of all OECD state practices in the report.248

Only four countries in the OECD did not require Parliamentary approval for certain types of

treaties, namely the United Kingdom (although currently European Union procedures apply),

Canada, Australia and New Zealand. While treaties are not self-executing in these nations, the

report suggests that at least in New Zealand this is not a real imposition to ratification. The

recommendation of the Special Rapporteur for increased Parliamentary involvement could be

considered by all states to improve transparency and identify potential issues.

6.4 International Participation

According to the Special Rapporteur, indigenous peoples must have an opportunity to participate

in negotiating and drafting international investment agreements. In a 2015 report specifically

covering this issue, she made the following comment about how the privacy of interstate

investment negotiations denies indigenous peoples the right to free, informed and prior consent

of indigenous peoples at international law:249

The Special Rapporteur is not aware of representatives of indigenous peoples and/or officials from

recognized indigenous self-governing structures being invited to participate in the formal negotiation and

drafting of investment and free trade agreements that will have direct impacts on them. Given that such

agreements are formally binding on all levels of government and that many investment projects have

significant impact on indigenous peoples, that situation is, in and of itself, a violation of the rights to free,

informed and prior consent, participation, consultation and self-determination.

This statement raises the question of how governments could effectively include indigenous

peoples in treaty-making for investment agreements. It is unclear how it will be possible for states

246 New Zealand Law Commission (n 242) [193]. 247 ibid [194]. 248 ibid Appendix A. 249 UNHRC ‘Report of the Special Rapporteur of the Human Rights Council on the rights of indigenous peoples on the impact of international investment and free trade on the human rights of indigenous peoples’ (2015) UN Doc A/70/301, [31].

55

to uphold the participation and self-determination rights of indigenous peoples under international

law while negotiating, drafting and ratifying investment agreements. Treaty-making traditions allow

little place for participatory rights of third parties. Further, the confidentiality and complexity of

investment agreement negotiations present specific difficulties. As the United Nations moves to

mainstream and integrate indigenous peoples’ issues on the basis of self-determination and

participation, 250 the rights of indigenous peoples increasingly apply at an international level.

However, with a continuing perception that the self-determination of indigenous peoples applies

only at a national level, there is currently little place for indigenous community representatives

within international law-making processes.251

The Waitangi Tribunal report on the TPP made several suggestions for how the New

Zealand government could support Māori perspectives at an international level, both in

negotiations and ISDS.252 Firstly, it suggested that for some international agreements of utmost

importance to Māori, it may be appropriate for the government to delegate decision-making to

Māori. Secondly, it suggested that the government have a plan for how it will deal with Māori

interests in the possibility of an ISDS claim. The Tribunal also suggested that the government

could support Māori in making amicus curiae applications to the arbitration tribunal. However, it

noted that because these applications must be independent third-party applications, an arbitration

tribunal may view state support of amicus curiae as inappropriate.253 This support could potentially

breach rules and procedures on amicus curiae, resulting in their rejection or scrutiny of state

involvement.

By bringing these issues to an international level, a state may need to walk a difficult line

between fulfilling its obligations to indigenous peoples and providing fair and equitable treatment

to foreign investors. There is a risk of states using indigenous rights as a shield to attempt to justify

expropriation, with or without real concern for the indigenous community themselves. The result

will be that arbitration tribunals will be determining the extent of indigenous peoples’ legitimate

interests at national constitutional law and at an international level. Arbitration tribunals have

shown little enthusiasm for this role.

250 United Nations Development Group, ‘Guidelines on Indigenous Peoples’ Issues’ (2008). 251 Timo Koivurova and Leena Heinamaki, ‘The participation of indigenous peoples in international norm-making in the Arctic’, (2006) 42 Polar Record 101, 102. 252 Waitangi Tribunal (2016) (n 228) 57. 253 ibid.

56

Where investment agreements explicitly refer to indigenous rights and FPIC, and identify

the indigenous communities in question, it will be more difficult for parties to use these arguments.

Suggestions to include such provisions in international investment agreements therefore place a

potential future burden on arbitration tribunals to engage with and resolve these issues. Indigenous

peoples and states must consider whether and how they wish investment tribunals to be making

decisions on indigenous law. There are questions about whether it is appropriate to create these

provisions without also examining the rules and procedures for how ISDS institutions must

approach this task.

6.5 Conclusion

International investment agreements may raise potentially significant issues for indigenous

communities concerning public policy-making and decision-making on land, resources and

intellectual property rights. These issues will be disputed before ISDS courts and tribunals. The

Special Rapporteur has drawn attention to the inappropriateness of current ISDS processes, noting

that strong arguments exist that the system requires an overhaul before indigenous rights will

receive their due recognition.254 Some issues that investment law may raise are more general

concerns, relating to transparency and democracy issues that require broad solutions relating to

the entire population or to the participation of special interest groups. However, some issues

relating to land, resources, health and traditional knowledge and cultural expressions are so

intrinsic to indigenous communities to create a real need for new processes. If states do not take

up the recommendations of the Special Rapporteur, indigenous peoples’ rights will continue to be

side-lined and unenforceable in these areas.

The question of whether FPIC will be required under international law principles for

investment agreement negotiation, even as a non-binding requirement, will depend on the extent

to which the agreement could impact on the indigenous community and their interests specifically.

This is a lower requirement than that suggested by the strong language of the Special Rapporteur

in her recent reports. However, broad, multilateral investment agreements could meet this standard,

impacting on issues of intellectual property rights, health policies or land and resource management

with specific impacts on indigenous peoples.

254 UNHRC (2016) (n 226) [84].

57

When an investment agreement does trigger the FPIC requirement, the requisite level of

consultation or consent will depend on the scope of these impacts. States are likely to downplay

the potential impacts. The recommendations of the Special Rapporteur for increased

Parliamentary input, human rights dialogue and human rights impact assessments could serve as

important mechanisms to strengthen indigenous rights in this context.

The intersection between participatory rights of indigenous peoples and investment law is

a murky area. Both FPIC and human rights in investment law are uncertain, developing areas.

Despite the ad hoc nature of investment arbitration, there also appear to be trends towards

increasing standardisation and the application of principles. However, regulatory impacts continue

to be an area of concern.

By incorporating human rights and indigenous rights into international investment

agreements, arbitration tribunals are more likely to determine that these areas fall within their

ambits. Despite this, current ISDS rules and procedures offer little guidance on how tribunals

could hear and consider these issues. The standing of indigenous peoples within ISDS proceedings

is far from clear, and is a potential area for further research. Intellectual property rights within

investment law form another area of uncertainty that would benefit from further research. Unless

states address these issues directly during investment agreement drafting, human rights courts and

investment tribunals may continue down different paths. applying increasingly conflicting

principles. While in theory a place exists for FPIC within investment law, from a procedural point

of view these rights will be difficult to defend or enforce.

Word count: 16,947

58

Table of Authorities

Table of Cases

African Commission on Human and Peoples’ Rights

Centre for Minority Rights Development (‘CEMIRIDE’) (Kenya) and Minority Rights Group

International on Behalf of Endorois Welfare Council v Kenya (Endorois Case), African

Commission on Human and Peoples’ Rights 142 ILR 1, 4 February 2010

Canada

Hupacasath First Nation v Canada (Minister of Foreign Affairs) 2013 CF 900 (FC)

Hupacasath First Nation v the Minister of Foreign Affairs Canada and the Attorney General of

Canada 2015 FCA 4 (FCA)

Colombia

Acuerdo en materia de informes anuales sobre derechos humanos y libre comercio entre la

República de Colombia y Canadá, Sentencia C-187/11 (2011) (Corteconstitucionalgovco)

Ley aprobatoria de tratado sobre protección de obtentores vegetales, Sentencia C-1051/12 (2012)

(Corteconstitucionalgovco)

Inter-American Court of Human Rights

Kichwa Indigenous People of Sarayaku v Ecuador, Merits and reparations, Inter-American Court

of Human Rights Series C No 245, 27 June 2012

Saramaka People v Suriname, Preliminary Objections, Merits, Reparations, and Costs, Inter-

American Court of Human Rights Series C No 172, 28 November 2007

Sawhoyamaxa Indigenous Community v Paraguay, Merits, Reparations and Costs, Inter-American

Court of Human Rights Series C No 146, 29 March 2006

59

International arbitration

Border Timbers Limited, Border Timbers International (Private) Limited, and Hangani

Development Co (Private) Limited v Republic of Zimbabwe, ICSID Case No ARB/10/25,

Procedural Order No 2 (26 June 2012)

Burlington Resources Incorporated v Republic of Ecuador, ICSID Case No ARB/08/5, Decision

on Jurisdiction (2 June 2010)

Clayton Family & Bilcon of Delaware Incorporated v Government of Canada, PCA Case No

2009-04, Award on Jurisdiction and Liability (17 March 2015)

Glamis Gold, Limited v the United States of America, UNCITRAL, Award (8 June 2009)

Grand River Enterprises Six Nations, Limited and others v United States of America, UNCITRAL,

Award (redacted version) (12 January 2011)

Methanex Corporation v the United States of America, UNCITRAL, Partial Award (7 August

2002)

Metalclad Corporation v the United Mexican States, ICSID Case No ARB(AF)/97/1, Award (30

August 2000)

Pezold, Bernhard von and Others v Republic of Zimbabwe, ICSID Case No ARB/10/15,

Procedural Order No 2 (26 June 2012)

Philip Morris Asia Limited v the Commonwealth of Australia, PCA Case No 2012-12, Award on

Jurisdiction and Admissibility (17 December 2015)

Philip Morris Brands Sàrl, Philip Morris Products SA and Abal Hermanos SA v Oriental Republic

of Uruguay, ICSID Case No ARB/10/7, Award (July 8, 2016)

Piero Foresti, Laura De Carli and others v Republic of South Africa, ICSID Case No

ARB(AF)/07/1, Award (4 August 2010)

South American Silver Limited v the Plurinational State of Bolivia, PCA Case No 2013-15,

Claimant Reply to Respondent Counter-Memorial on the Merits and Objections to Jurisdiction

and Admissibility (English) (30 November 2015)

Técnias Medioambientales Tecmed, SA v the United Mexican States, ICSID Case No

ARB(AF)/00/2, Award (29 May 2003)

60

United Nations Human Rights Committee

Länsman, Ilmari and others v Finland, Comm. No 511/1992, Hum Rts Committee, 52d Sess, UN

Doc CCPR/C/33/D/511/1992 (1994)

Länsmann, Jouni E and others v Finland, Comm. No 671/1995, Hum Rts Committee, 58th Sess,

UN Doc CCPR/C/58/D/671/1995 (1996)

Waitangi Tribunal

Waitangi Tribunal, Report on the Trans-Pacific Partnership Agreement (WAI 2522, 2016)

Waitangi Tribunal, Ko Aotearoa Tēnei: A Report into Claims Concerning New Zealand Law and

Policy Affecting Māori Culture and Identity (WAI 262, 2011)

Table of Legislation

International treaties and declarations

Convention on Biological Diversity

International Convention for the Protection of New Varieties of Plants

International Covenant on Civil and Political Rights

International Covenant on Economic, Social and Cultural Rights

International Labour Organisation Convention No 169

United Nations Convention on Transparency in Treaty-based Investor-State Arbitration

United Nations Declaration on the Rights of Indigenous Peoples

Regional treaties

American Convention on Human Rights

International trade agreements

Canada-Colombia Free Trade Agreement

61

China-Canada Bilateral Investment Treaty

North American Free Trade Agreement

Trans-Pacific Partnership

New Zealand Legislation

Treaty of Waitangi Act 1975

62

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