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View this email in your browser <https://mailchi.mp/law/perspective-381?e=dd153d6a25> 哥伦比亚大学国际直接投资展望中文版都可以在我们的网站查看: https://ccsi.columbia.edu/content/columbia-fdi-perspectives <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=d3faca21d8&e=dd153d6a25> . *Columbia FDI Perspectives* Perspectives on topical foreign direct investment issues Editor-in-Chief: Karl P. Sauvant ([log in to unmask]) Managing Editor: Chioma Menankiti ([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. 381 April 15, 2024 *Mandatory human rights due diligence: what does it mean for foreign investors and why should it be in IIAs?* <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=18df3a64ca&e=dd153d6a25> by Yulia Levashova* <#m_-6698764789826797762__edn1> Worldwide, human rights due diligence (HRDD) laws are gaining momentum. Various countries have adopted HRDD standards derived from the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=2554c0acd8&e=dd153d6a25> and the United Nations Guiding Principles <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=e5707f7eb7&e=dd153d6a25> that require companies to identify, prevent and mitigate human rights and environmental risks. The EU is currently in the process of adopting the EU’s Corporate Sustainability Due Diligence Directive (CSDD) <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=756d2ac18e&e=dd153d6a25> and the EU Corporate Sustainability Reporting Directive <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=c610f7d506&e=dd153d6a25>; they will harmonize the HRDD and sustainability reporting requirements for EU and non-EU companies. These developments will have a significant impact on foreign investments. This *Perspective *argues that it is imperative to align international investment agreements (IIAs) with the mandatory HRDD requirements for MNEs to ensure a harmonized approach to fostering responsible business conduct. In March 2024 <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=a18223dbb0&e=dd153d6a25>, a compromise draft text for the CSDD was agreed upon. Upon its entry into force, the Directive will compel large EU companies and some non-EU companies[1] <#m_-6698764789826797762__edn2> producing goods and services for the EU market, to conduct human rights and environmental due diligence throughout their supply chains. Currently, more than 35% <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=dd3bd18396&e=dd153d6a25> of total EU assets belong to foreign-owned companies. Under the CSDD, some of these foreign enterprises investing in the European market, as well as EU companies investing in third countries, will be required to engage in a continuous process that integrates due diligence into their policy. That includes prevention, mitigation, the establishment of a grievance procedure, monitoring the effectiveness of due diligence measures, and reporting about it. CSDD will also impact medium and small enterprises (SMEs) that are part of a supply chain: MNEs subject to the CSDD will need to ensure their supply-chain partners (including SMEs), e.g., suppliers and distributors, have conducted human rights due diligence. Supervisory authorities at the member-state level can impose sanctions for failure to comply with the CSDD. Further, MNEs can be sued for damages under national law under the civil liability mechanism of the CSDD. Companies will also be required to seek contractual assurances from a business partner with whom they have a direct business relationship, to guarantee compliance with human rights obligations. In international investment law, the concept of investor due diligence is not new. It has become a significant factor <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=370c188759&e=dd153d6a25> in determining whether the legitimate expectations of an investor give rise to protection under the fair-and-equitable-treatment (FET) standard <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=c52e75c774&e=dd153d6a25>. Further, with the rise in importance of corporate social responsibility (CSR) requirements for foreign investors, the reference to human rights and environmental due diligence has also appeared in a few IIAs, e.g., the 2019 Dutch Model BIT <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=07e8f2fe36&e=dd153d6a25> and the Sustainable Investment Facilitation Agreement between the EU and Angola <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=5cc999d513&e=dd153d6a25>. However, references to HRDD are rare in IIAs. There are a number of advantages to including a provision on HRDD in IIAs. First, a careful drafting of due diligence steps may benefit states and investors for early mitigation and the prevention of investment disputes, as the timely consideration of human rights standards in a host state by an investor may effectively reduce the state’s interference, such as license cancellation. The latter approach might be more efficient than the insertion of broadly formulated CSR clauses that are difficult to enforce. Second, the CSDD has an extraterritorial effect and, with the implementation of new mandatory standards in the EU, the lack of a globally harmonized approach to HRDD will undermine a level playing field among enterprises in terms of responsible business conduct compliance. To this end, policymakers may consider referring to mandatory HRDD in formulating new IIAs by: - Inserting the requirement to conduct HRDD by foreign investors by referencing the OECD Due Diligence Guidance for Responsible Business Conduct <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=9681ab556a&e=dd153d6a25> that includes six steps of the due diligence process. The OECD’s definition of HRDD is widely adopted in HRDD laws and has already been applied by many companies on a voluntary basis. - Ensuring the compliance with the HRDD provision. One option is to include requirements that arbitrators consider the failure of an investor to undertake the HRDD at the merits stage while deciding on the violation of substantive IIA provisions, such as FET or indirect expropriation. Several <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=881db147ea&e=dd153d6a25> tribunals <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=5f03400e78&e=dd153d6a25> assessing FET standard have adopted a similar approach toward general investors’ due diligence. Another possibility is to consider investors’ failure to undertake HRDD at the stage of determining the amount of compensation. Inserting HRDD provisions into IIAs may help states and investors mitigate and avert investment disputes and level the playing field for companies operating across different jurisdictions ------------------------------ * <#m_-6698764789826797762__ednref1> Yulia Levashova ( [log in to unmask]) is an Associate Professor, Nyenrode Business University, The Netherlands. The author wishes to thank Loukas Mistelis, Alessandra Mistura and an anonymous peer reviewer for their helpful peer reviews. [1] <#m_-6698764789826797762__ednref2> Non-EU companies falling under the Directive include foreign companies with a net turnover of more than EUR 450 million generated in the EU. *The material in this Perspective may be reprinted if accompanied by the following acknowledgment: “Yulia Levashova, ‘**Mandatory human rights due diligence: what does it mean for foreign investors and why should it be in IIAs?**’ Columbia FDI Perspectives, No. 381, April 15, 2024. Reprinted with permission from the Columbia Center on Sustainable Investment (* http://ccsi.columbia.edu <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=3c22649c3c&e=dd153d6a25>*).” 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, Chioma Menankiti, [log in to unmask] *Most recent Columbia FDI Perspectives* <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=12b91712a0&e=dd153d6a25> - No. 380, John Gaffney, ‘Helping ensure respect for the SDGs under bilateral investment treaties: the case of human rights <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=f9b474bfcf&e=dd153d6a25>,’ *Columbia FDI Perspectives*, April 1, 2024 - No. 379, Joshua Paine and Elizabeth Sheargold, ‘Facilitating climate friendly FDI: the importance of ongoing cooperation <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=618a8c873d&e=dd153d6a25>,’ *Columbia FDI Perspectives*, March 18, 2024 - No. 378, Rob Van Tulder, ‘“Strategy changes, principles remain”: why policy makers should stay focused on the SDGs <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=29b69fee62&e=dd153d6a25>,’ March 4, 2024 *All previous FDI Perspectives are available at https://ccsi.columbia.edu/content/columbia-fdi-perspectives <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=00640d8329&e=dd153d6a25>* . *Other relevant CCSI news and announcements**:* - *Applications are open* for our annual Executive Training on Investment Treaties and Arbitration for Government Officials <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=002ad21bce&e=dd153d6a25>, which will be held virtually from *September 9 to 13, 2024*. This course is designed for government officials facing complex and pressing issues relating to international investment treaties, including the consideration of unilateral and multilateral reform options. *Visit our website <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=d9b5de1375&e=dd153d6a25> for more information and to apply by July 15, 2024!* Applications are reviewed on a rolling basis. - *Enroll now for free:* CCSI's Massive Open Online Course (MOOC) on Mining and Materials for Sustainable Development Transformations <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=4a8df31696&e=dd153d6a25> will address challenges and opportunities for mining and materials value chains in the energy and digital transitions. *Visit our website <https://columbia.us6.list-manage.com/track/click?u=ab15cc1d53&id=55ee618944&e=dd153d6a25> to learn more and enroll*. Karl P. 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JGH 825, New York, NY 10027 | p: (212) 854 0689 | cell: (646) 724 5600 e: [log in to unmask] | w: www.ccsi.columbia.edu | t: @CCSI_Columbia <https://twitter.com/CCSI_Columbia> "The WTO's FDI Challenge <https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4735932>", "How to Get the Best Deal for Massive FDI Incentives <https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4616026>", "The New WTO Investment Facilitation for Development Agreement <https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4531684>", "The Limits of Capacity Building for Investment Contract Negotiations <https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4474456>", "Establishing an Advisory Centre on International Investment Law: Key Challenges Ahead <https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4386436>", *Investment Facilitation for Development: A Toolkit for Policy Makers. Second Edition <https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3830031>,* "Agenda for Practice-oriented Research <https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4103768>", "More Attention to Policies! Improving the Distribution of FDI Benefits <https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3818974>", "Facilitating Sustainable FDI in a WTO Investment Facilitation Framework: Four Concrete Proposals <https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3496967>", "An Inventory of Concrete Measures to Facilitate the Flow of Sustainable FDI: What? Why? How? <https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3739179>" (third edition) are available at https://ssrn.com/author=2461782 . ____ AIB-L is brought to you by the Academy of International Business. For information: http://aib.msu.edu/community/aib-l.asp To post message: [log in to unmask] For assistance: [log in to unmask] --- You must be an active AIB member to post to AIB-L . 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