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*Columbia FDI Perspectives*
Perspectives on topical foreign direct investment issues
Editor-in-Chief: Karl P. Sauvant ([log in to unmask])
Managing Editor: Riccardo Loschi ([log in to unmask])

*The Columbia FDI Perspectives are a forum for public debate. The views
expressed by the authors do not reflect the opinions of CCSI or our
partners and supporters.*

No. 312   August 23, 2021
*Materializing corporate social responsibility in investor-state dispute
Tomoko Ishikawa * <#m_6966805733528408313__edn1>

Increasing references to the concept of corporate social responsibility
(CSR) are a relatively recent phenomenon in international investment
agreements (IIAs).[1] <#m_6966805733528408313__edn2> Most CSR provisions
serve only as a reaffirmation by contracting parties of the importance of
encouraging enterprises to voluntarily incorporate international CSR
standards into their internal policy: this may reflect the understanding of
CSR as action beyond legal requirements.

However, in today’s context, considering CSR as only a series of voluntary
commitments is no longer tenable. CSR increasingly interacts and integrates
with legal obligations in various ways, as discussed below. Accordingly,
there are circumstances in which a breach of CSR commitments by a
corporation may cause legal responsibility. In investor-state dispute
settlement (ISDS), this suggests the possibility that a host country may
pursue an investor’s CSR-based responsibility through counterclaims.

Host countries may turn CSR commitments into legal requirements through
such actions as requiring them as a condition to receive licenses for the
operation of businesses.[2] <#m_6966805733528408313__edn3> However, even in
the absence of such a direct legal relationship, a corporation’s voluntary
commitments may give rise to legal responsibility, in different ways.
First, when an MNE’s internal regulations are found to set the required
standards for the group’s operations in multiple jurisdictions, corporate
conduct that falls below required standards and results in damage may cause
corporate liability through domestic law. The *Erika* case, concerning an
oil spill on the French coast, is an example of how such conduct formed the
basis of corporate liability through criminal law.[3]

Second, corporations often publish their codes of conduct, CSR reports and
other types of commitments. They do so for different reasons, including to
express their affirmation that they do bear social responsibilities,
marketing purposes and responding to reporting requirements. It should be
noted here that, since the beginning of the 21st century, the EU,[4]
<#m_6966805733528408313__edn5> as well as certain countries,[5]
<#m_6966805733528408313__edn6> have introduced laws and regulations that
make social and environmental reporting a mandatory requirement. Once they
are published, they may create expectations in host countries and their
societies that, when there is a gap between stated commitments and local
standards, investors would apply the former. Societal expectations thus
created may affect the determination of the standard of diligence or
required conduct as an element of duty,[6] <#m_6966805733528408313__edn7>
and thereby contribute to the establishment of tort liability in situations
where a corporation’s conduct fell below the stated standards and resulted
in damage.

The judgment of the Ontario Superior Court of Justice in* Choc v. HudBay
Minerals Inc*. is suggestive in this regard. In this case, the court
concluded that the parent Canadian mining company directly owed a *prima
facie* duty of care to the victims with respect to the harm caused by
security personnel it authorized. In reaching this conclusion, the court
stated, *inter alia*, that the expectations of local people concerning the
standards of corporate conduct created by “public representations” made by
the parent company gave rise to “sufficient proximity” between the parties,
justifying the imposition of a duty of care on the parent company.[7]

More generally, when an investor’s CSR-based legal responsibility is
established by reference to the domestic law of the host country in the
ways described above, it may provide legal grounds for counterclaims by
host countries, provided that the conditions for filing counterclaims are

Given the discussed practical implications of CSR, and in light of the
increasingly felt need to address the “one-sidedness” in investment-dispute
settlement, future negotiations of IIAs should take the importance of CSR
one step further. A progressive approach is adopted in Article 19 of the
Morocco-Nigeria BIT, which requires investments to meet or exceed “national
and *internationally* accepted standards in corporate governance” (emphasis
added), as well as establish and maintain “local community liaison
processes.”[8] <#m_6966805733528408313__edn9> This is the direction that
advances responsible investment in the IIA regime, and it should be taken
in future IIA negotiations.

* <#m_6966805733528408313__ednref1> Tomoko Ishikawa (
[log in to unmask] is professor at the Graduate School of
International Development, Nagoya University, Japan. The author wishes to
thank Nathalie Bernasconi, Peter Muchlinski, Githa Roelans, and an
anonymous reviewer for their helpful peer reviews.
[1] <#m_6966805733528408313__ednref2> Among 1,000 randomly analyzed
treaties, 59 IIAs mention this concept; 54 of them were signed after 2010.
[2] <#m_6966805733528408313__ednref3> See, e.g., Oman’s Mining Law (Royal
Decree No. 27/2003) and executive regulations under Ministerial Decision
No. 77/2010.
[3] <#m_6966805733528408313__ednref4> “Communiqué relatif à l’arrêt no.
3439 du 25 septembre 2012 (10-82.938) de la Chambre criminelle
(Press release relating to judgment no. 3439 of Sept. 25, 2012 (10-82.938)
of the Criminal chamber).
[4] <#m_6966805733528408313__ednref5> On 21 April 2021, the EU revised
the Non-Financial
Reporting Directive
based on the European Commission’s proposal for a Corporate Sustainability
Reporting Directive
and extend the scope of companies subject to the reporting requirement and
the scope of sustainability information to be disclosed. The first set of
EU sustainability reporting standards will be adopted by October 2022.
[5] <#m_6966805733528408313__ednref6> For a list of domestic laws on
non-financial reporting of different countries, see “Global CSR
disclosure,” *Initiative for Responsible Investment*
[6] <#m_6966805733528408313__ednref7> Hervé Ascensio, “Les activités
normatives des entreprises multinationales,” in Laurence Dubin, Pierre
Bodeau-Livinec, Jean-Louis Iten, and Vincent Tomkiewicz, eds., *L’entreprise
multinationale et le droit international*, (Paris: Pedone, 2017), pp. 275–6.
[7] <#m_6966805733528408313__ednref8> Angelica Choc v Hudbay Minerals Inc*.*,
ONSC 1414 (2013)
para. 69.
[8] <#m_6966805733528408313__ednref9> Morocco-Nigeria BIT (2016), Art. 19(1)
*The material in this Perspective may be reprinted if accompanied by the
following acknowledgment: “Tomoko Ishikawa, ‘Materializing corporate social
responsibility in investor-state dispute settlement,’ Columbia FDI
Perspectives No. 312, August 23, 2021. Reprinted with permission from the
Columbia Center on Sustainable Investment (***
A copy should kindly be sent to the Columbia Center on Sustainable
Investment at **[log in to unmask]* <[log in to unmask]>*.*

For further information, including information regarding submission to the
*Perspectives*, please contact: Columbia Center on Sustainable Investment,
Riccardo Loschi, [log in to unmask]

*Most recent Columbia FDI Perspectives*

   - No. 311, Matthew Stephenson, “The OFDI policy path and the product
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   - No. 310, Mario Mancuso, “CFIUS and China in the post-COVID
   environment,” Columbia FDI Perspectives, July 26, 2021
   - No. 309, Rafael Ramos Codeço and Ana Rachel Freitas da Silva, “CSR in
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   bottom’ to a ‘march to the to’,” Columbia FDI Perspectives, July 12, 2021

*All previous FDI Perspectives are available at
Karl P. Sauvant, Ph.D.
Resident Senior Fellow
Columbia Center on Sustainable Investment
Columbia Law School - Earth Institute
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Fax: (212) 854-7946
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*Karl P. Sauvant, PhD*

*Resident Senior Fellow*
*Columbia Center on Sustainable Investment*
Columbia Law School - The Earth Institute, Columbia University
435 West 116th St., Rm. JGH 825, New York, NY 10027
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