The Ruggie Guiding Principles and the dichotomy of legitimate policy demands : An answer to R. Grabosch

December 22, 2010

By Antoine Martin.
Robert Grabosch  and I recently discussed the insights of John Ruggie’s recently published Draft Guiding Principles for the Implementation of the United Nations ‘Protect, Respect and Remedy’ Framework, and interestingly came to different conclusions. This Note reacts to Robert’s Recent comment on the draft’s dichotomy of legitimate policy demands (available here).

Whilst the protection of human rights is undeniably complicated by other legitimate policy demands towards investments, market access, jobs, technology and skills (¶ 5), Robert suggests that Draft Principles fail to address the issue. The conflict opposing ‘legitimate policy demands’ to ‘legitimate human rights demands’, that is, is left unconsidered so that the Principles overall “lack a vision of how these policy demands can be conciliated”.

By contrast with Robert, I do believe that the Principles (attempt to) consider the point and provide clues on how to “shift from institutional misalignments onto a socially sustainable path” (as formulated in the report at 4). The point, however, is not tackled through a single clear-cut Principle or comment, but rather throughout various elements of the Draft, some of which will be considered below.

As the Report recalls, the international economic community is essentially organized around international trade and investment rules. While trade matters are regulated under the WTO agreements, investments -and more specifically Foreign Direct Investments (FDI)- are dependent on 3000 bilateral investment treaties (BITs) conditioning investment matters to specific treaties, which as some argue, tend to ‘deputize’ domestic legal authority and regimes. These treaties, as a general trend, provide broad rights and protections to foreign investors together with efficient dispute settlement mechanisms internationalizing quarrels. However, and as the Report rightly notes, “absent any internationally-recognized hierarchy of treaty obligations, States are unlikely to place every single human right they have recognized above their legal obligations in those other areas”(report at 5). FDI protection treaties, that is, might accordingly be given priority over human right in practice, depending on the needs and interest of sovereign states.

As above-mentioned, the Draft therefore clearly suggests the necessity to shift from such institutional misalignments onto a socially sustainable path, and provides several suggestions as to how a balance could be achieved.

Policy coherence

First, Principle n°3 recalls that an essential way to ensure “policy coherence” consists in making sure that the governmental departments, agencies and institutions which shape business practice are aware of States’ human rights obligations while fulfilling their mandate. This is important, because it suggests that the human rights obligations of the States, if not higher, should at least be placed on the same footing as business-related policies.

Maintaining policy space

In addition, Principle n°4 importantly suggests that “States should maintain adequate domestic policy space to meet their international human rights obligations when pursuing business-related policy objectives with other States or business enterprises, particularly when they enter into investment treaties or contract”. Although (during our exchanges) Robert questioned the provision as a worrisome implication that states are able to waive their human rights policy space, I rather understand from the above that States should, to the contrary, use their sovereignty to make sure that business-related policies will not infringe on human rights protections. This has major implications.

Investment protection treaties, on the one hand, are essential tools in promoting and attracting FDI. They can nevertheless lead to international disputes and the payment of important amounts of money which domestic courts would have most likely not granted. Principle n°4, therefore, suggests that an acceptable compromise must be found between the will of States to abandon some sovereignty in order to attract investors, and the need to protect human rights. In practice, this can be seen in recent FDI trends suggesting that developing states increasingly review their treaty models so as to include clarifications that public interest is to be considered in investor protection as well as in investor-state disputes. For instance, dispute settlement clauses now appear to be increasingly excluded from the scope of application of Most Favoured Nations (MFN) provisions which give an investor the benefit of a clause imported from a more favourable treaty.[1] Concretely, this means that States might, in the future, make clear that more favourable dispute settlement provisions found in third-parties’ treaties will not be importable to a dispute.

Investment contracts, on the other hand, are also considered within the wording of Principle n°4. This makes reference to the so-called stabilization clauses designed to force States to renegotiate deals with investors when new measures or regulations trouble the economic equilibrium of a contract. The Principle, that is, suggests that States should increasingly consider sovereignty as a right to regulate on economic and social maters, in the public interest and in order to achieve development rather than in a pro-investor manner, while corporations and investors ought to recognize, accept and respect the notion of State sovereignty on these matters. However, although the Draft recalls that businesses “should” (rather than must) respect human rights (n°12), it lacks a clear statement as to any responsibility or obligation to respect the sovereign regulations and policies of Host-States. For instance, the following provisions of the 2003 UN Norms on Transnational Corporations could have been integrated to the proposal and would have made clearer the idea defended in Principle n°4 of the 2010 Draft:

E. Respect for national sovereignty and human rights
10. Transnational corporations and other business enterprises shall recognize and respect applicable norms of international law, national laws and regulations, as well as administrative practices, the rule of law, the public interest, development objectives, social, economic and cultural policies including transparency, accountability and prohibition of corruption, and authority of the countries in which the enterprises operate.

12. Transnational corporations and other business enterprises shall respect economic, social and cultural rights as well as civil and political rights and contribute to their realization, in particular the rights to development, adequate food and drinking water, the highest attainable standard of physical and mental health, adequate housing, privacy, education, freedom of thought, conscience, and religion and freedom of opinion and expression, and shall refrain from actions which obstruct or impede the realization of those rights.

G. Obligations with regard to environmental protection

14. Transnational corporations and other business enterprises shall carry out their activities in accordance with national laws, regulations, administrative practices and policies relating to the preservation of the environment of the countries in which they operate, as well as in accordance with relevant international agreements, principles, objectives, responsibilities and standards with regard to the environment as well as human rights, public health and safety, bioethics and the precautionary principle, and shall generally conduct their activities in a manner contributing to the wider goal of sustainable development. (Emphasis added)

Involving Financial institutions

It should also be added that while most FDI and corporate projects are financed through debt, the role of financiers and international financial institutions is often left unconsidered in the human rights protection debate. The Draft Principles, however, consider this ‘State-Business Nexus’, and suggest that States “should take appropriate steps to ensure respect for human rights by business enterprises that receive support and services from the State, including through export credit agencies and official investment insurance or guarantee agencies” (n°8). This, I think, constitute an important point, because it importantly suggests that more attention should be given to the so-called ‘equator principles’ which have in the past attempted to draw guidelines for responsible financing although they have been criticized on many occasions. This, in other words, means that FDI-funders and project finance in need for long-term stability should increasingly grant some more wiggle-room to Host-States, and accept the legitimacy of sovereign policies oriented towards local development, even if this implies that the economic equilibrium of a contract will be modified.

The Draft also provides insights as to the need to handle business in conflict-affected areas with care (n°10), although I won’t go in more depth on this point in this Note.


Overall, although I disagree with Robert’s point on the lack of a vision on how these policy demands can be conciliated, I should emphasise three points. First, debate is an important aspect of analysing new propositions and I am glad that the International Law Notepad provides a chance to discuss this.

Second, I do agree with Robert that the frequent use of the undefined terms “appropriate and effective”, “adequate” and “discretion” throughout the Principles and Commentary, as well as the remark that “the Guiding Principles are not a toolkit … one size does not fit all” (¶ 14 of the Report) confer the Principles a degree of vagueness which it did not need, so that Robert’s suggestion that a paragraph as follows could do well in the Introduction of the Guiding Principles is very convincing:

“Where there are signs of business enterprises’ involvement in human rights violations, legitimate economic objectives, including the need for investment, jobs, as well as access to markets, technology and skills, shall not be used by States or business enterprises as a reason for refraining from or postponing adequate measures to realize their respective human rights duties and responsibilities”.

Third, I should say that I am surprised to see that Robert has not made any comment (yet, I am sure), on the lack of suggestion for follow-up mechanisms in Ruggie’s Draft Principles. Indeed, although I do think that the Draft provides several suggestions as to how a shift from such institutional misalignments onto a socially sustainable path can be made, the lack of opportunity to make sure that the path will be followed constitutes a weakness of the proposal.

[1] The issue was recently considered during the OECD Second Symposium on Foreign Direct Investments (Paris 14 Decembre 2010)

One Response to “The Ruggie Guiding Principles and the dichotomy of legitimate policy demands : An answer to R. Grabosch”

  1. Robert Grabosch Says:

    I do agree, as I indicated, that the Draft Guiding Principles contain important provisions which address procedural and institutional aspects of the said dichotomy. However, this is insufficient. The DGPs lack guidance as to the outcome of decisions. Without the amendment that I suggested, the DGPs make it very easy for States to take this position:

    “We have maintained sufficient policy space when concluding treaties and we have trained and advised all officials concerning human rights duties and responsibilities of the State and businesses. However, paying due respect to all interests involved, we have come to the following conclusion: there is no need for the State to interfere in the cases of reported indentured labour, exposure to hazardous substances and eviction from real property, because even if these allegations are true, they would be outweighed by more investment, trade, jobs, supply with goods and hence a higher living standard for everyone as a result of the alleged circumstances. This is what we believe ‘ensuring human rights’ means.”

    The DGPs re-style institutions and procedures but allow for the same outcomes as before.

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