{"id":169817,"date":"2024-06-19T10:52:03","date_gmt":"2024-06-19T08:52:03","guid":{"rendered":"https:\/\/www.erasmusmagazine.nl\/en\/?p=169817"},"modified":"2025-12-19T11:27:24","modified_gmt":"2025-12-19T10:27:24","slug":"how-investment-treaties-undermine-the-voices-of-local-communities","status":"publish","type":"post","link":"https:\/\/www.erasmusmagazine.nl\/en\/2024\/06\/19\/how-investment-treaties-undermine-the-voices-of-local-communities\/","title":{"rendered":"How investment treaties undermine the voices of local communities"},"content":{"rendered":"

Dispute settlements in international investment law protect the rights of companies. However, they suppress the voice of local communities, as Stephanie Triefus found in her PhD research.<\/p>\n

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\n\t\n\n<\/svg>\n<\/span>\n\tImage by:<\/span>\n\n\t\t\t\n\t\t\t\t\t\t\tLevien Willemse<\/a>\t\t\t\t\t<\/span>\n\t<\/p>\n<\/figcaption><\/figure>

What is your research about?<\/strong><\/p>\n

\u201cIn my research, I investigated how international investment law suppresses the perspectives of local communities. Many investment treaties have a dispute settlement mechanism. For instance, the Energy Charter Treaty contains such a clause.\u201d<\/p>\n

\u201cUnder these treaties, foreign investors can sue states directly. These disputes often involve the rights and interests of the people who are affected by a project such as a mine. However they are not a party in the dispute, that is between the state and the investor. So local communities don\u2019t really get a voice.\u201d<\/p>\n

Do you have an example of that?<\/strong><\/p>\n

\u201cYes. I conducted a case study on Ro\u0219ia Montan\u0103, a mountainous area in Romania with gold and silver deposits. A Canadian company, Gabriel Resources, invested in the site in the late nineties. Developing this land into an open-cut mine would displace over two thousand people, pollute the area with cyanide, and destroy more than two thousand years of cultural heritage. The project received a lot of backlash, starting with the local community, and protests spread throughout the country and even got international support.\u201d<\/p>\n

\u201cThe government decided to put the issue to a vote in parliament, and the project did not go ahead. Gabriel Resources then sued Romania, claiming their permit was refused for political reasons. The company demanded four billion euros. The arbitration lasted for nine years.\u201d<\/p>\n

You interviewed witnesses that were involved in the arbitration. What did you learn?<\/strong><\/p>\n

\u201cThe state used witnesses from the local community in their defence. However, up until the the dispute, the state was as much a problem for the local community as the company was. So these people didn\u2019t want to defend the state. Still, the witnesses felt they needed to participate in the arbitration, in order for their community\u2019s voices to be heard.\u201d<\/p>\n

\u201cAt first glance, the involvement of these witnesses seems a way to account for the interest of the local community. But the local community members are only heard through the lens of state versus investor. So the tribunal doesn\u2019t consider these perspectives in an influential way; they merely form the background story.\u201d<\/p>\n\n\t

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\n\t\t\u2018The local community members are only heard through the lens of state versus investor, so the tribunal doesn\u2019t consider these perspectives in an influential way\u2019\n\t<\/blockquote>\n\n\t<\/figure>\n\t\t<\/div>\n\t<\/div>\n

It sounds like there is no real win for the state in these arbitrations.<\/strong><\/p>\n

\u201cIndeed, the best outcome for a state is not to lose. The system gives enormous power to foreign companies. Foreign investors often challenge decisions that states make in response to democratic movements. Regulations or laws that, for instance, protect the environment, or the health of citizens, could potentially limit future profits of foreign investors, providing grounds for legal action under these treaties. So there can be tension between the state\u2019s obligation to uphold human rights, and its obligation to foreign investors under these treaties.\u201d<\/p>\n

How do you see this power asymmetry played out in practice?<\/strong><\/p>\n

\u201cClaims are based on the cost of what the company has already invested and the loss of future profits, so the amounts can be enormous. A claim of four billion euros is significant for any country to face. For Romania, it\u2019s more than one percent of their GDP.\u201d<\/p>\n

\u201cFaced with such a large claim, states change their behaviour. They might mitigate or revoke laws and regulations that favour the public interest. For instance, when the government thought Romania had lost the arbitration, there was significant discussion about restarting the mine project in Ro\u0219ia Montan\u0103.\u201d<\/p>\n

Why is this system of international law in place at all, if it doesn\u2019t serve the public interest?<\/strong><\/p>\n

\u201cScholars have traced the colonial origins of these systems. During colonial times, the Global North had a free run at resources in the South. After decolonisation, the Global North wanted to ensure that the relationship of extraction continued. So the narrative was created that companies don\u2019t have adequate protection under the domestic court systems in countries in the Global South. Companies would only invest in the Global South if the host state guaranteed a certain level of security and protection through private arbitration.\u201d<\/p>\n

\u201cThat is how this system of international investment law came into place. It is now so embedded in the international economic system that it is not realistic to call for complete abolition. As scholars, we can try to work towards a fairer system by pointing out these inequalities.\u201d<\/p>\n

Has there been a decision in the Ro\u0219ia Montan\u0103 case?<\/strong><\/p>\n

\u201cYes, Romania won the case. Two out of three arbitrators voted for Romania. They found that this type of decision-making is inevitably partly political, and that it is acceptable as long as it is not arbitrary or prejudicial. It\u2019s good news for the local community, though they are still in limbo as to what will happen, because the land is still owned by Gabriel Resources.\u201d<\/p>\n

Were there any challenging moments during your PhD?<\/strong><\/p>\n

\u201cI was six months into the PhD when the pandemic hit. I was far away from my family, I had just moved to Rotterdam, and I didn\u2019t know anyone. I felt like I was missing out on the typical experiences of academic life, such as conferences, meeting people, and building a network. But on the other hand we built our own community online, that has brought me a lot as well.\u201d<\/p>\n

And any highlights?<\/strong><\/p>\n

\u201cBeing able to travel to Romania, Italy and Australia was definitely a highlight. I met so many great and interesting people. I learnt qualitative empirical research skills, that are not typically part of research when studying international law, but which are so valuable.\u201d
\n\u201cAlso, I got married three days after my defence. So it\u2019s been quite the rollercoaster, but a wonderful experience.\u201d<\/p>\n\n\t

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