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This article is written by Advocate Neha Kaushik at Jodhpur, Rajasthan, an intern under Legal Vidhiya


Investment arbitration is a modern day solution to the international disputes between states and foreign private investors. Investment arbitration in an international background along with the addition of human rights provides the perfect combination for a safe international arena for foreign investors promotes different states to do business. This setup promotes a just, fair and equitable atmosphere while protecting their rights.

This article will explain in detail what investment arbitration and human rights are along with the influence of human rights on investment arbitration. Further it will discuss the need for investment arbitration, and human rights issues in international investment agreements.


Investment Arbitration, Investor-State Dispute Settlement, Human Rights, International Human Rights Law, Foreign Investors, Host States, Arbitrators, International Investment Laws, International Investment Agreement.


Globalisation enlightened nations across the world to trade and invest not only in their nation but also in other nations throughout the world.

While trading and investing within one’s own country, the laws of that country must be followed. Different dispute settlement authorities are made specifically to deal with such issues. In the same way, while dealing with foreign investors, the concept of investment arbitration comes into the picture.

Investment arbitration is a process to resolve disputes between foreign investors and the host states. Such a legal mechanism plays a crucial role in the dispute settlement between the parties because with the elevation in international investments, there was a need to shield the investors from the risks involved in making foreign investments.

When the concept of investment arbitration is studied, it must automatically be assisted with the concept of human rights. Human rights are the universal principles that every person is entitled to and they are essential for individuals to live with dignity, freedom and equality. Every person is entitled to human rights irrespective of their religion, nationality, gender, ethnicity or any other status.

In order to ensure that investment activities uphold the fundamental rights and values of both individuals and communities affected by investment projects, human rights play a crucial role in investment arbitration. Human rights ensure the protection of the fundamental rights of the parties by balancing their interest and enhance the legitimacy and accountability of the arbitration process.


Investment arbitration is also known as investor state dispute settlement, which is a process to resolve disputes between foreign investors and host states. It involves two parties, one being a sovereign host state and another, a foreign investor. The need of investment arbitration arises when the investor is of the opinion that the host state has violated the provisions of the international investment agreement (IIA)[1] between them. The existing investment law system provides a well-balanced system that is beneficial for the investors as well as the host states.

In the event of disagreement between the contracting parties, the investor can file for arbitration against the host state. This process of investment arbitration is undertaken by one or more independent and qualified legal experts who are chosen by the parties or appointed through arbitral institutions as arbitrator. They decide the issue in compliance with the standards of protection under international agreements and render binding decisions on the parties.  Foreign investors cannot rely upon the domestic courts for pragmatic remedies.

An arbitral award is recognized and enforced in almost all countries after the New York Convention on Recognition and Enforcement of Foreign Arbitral Awards[2]. The key element is to settle the disputes between host states and investors impartially and guarantee fair and equitable treatment, protection against expropriation without compensation. The main aim behind the idea of investment arbitration was that the security provided would supposedly increase investment which would stimulate economic development.

In addition to providing a neutral forum for dispute resolution, investment arbitration also allows investors to seek compensation for alleged breaches of their investment rights under international law. Except for a certain degree of transparency the investment proceedings are confidential; some of the information of the awards is publicized by amicus curia. Though critics raise concerns about the lack of transparency and inconsistency in the arbitral decisions. At times the ability of the investors to challenge legitimate public policy measures taken by host states is also challenged. Efforts to reform investment arbitration are going on.


 The need for investment arbitration arose from some of the following factors-

  • Legal Certainty 

Investment arbitration plays a vital function in the international economy by offering an impartial and equitable means of settling conflicts between foreign investors and host countries. Investment arbitration fills the need for a specialized forum to settle disputes resulting from international investment agreements in a world where cross-border transactions are becoming more and more common.

  • Political Interference

Investment arbitration provides a substitute for domestic judicial systems, as domestic judicial systems can be biased or influenced by politics. Independent arbitral tribunals oversee arbitration procedures, which contributes to the impartiality and equity of the resolution of disputes between states and investors.

  • Safeguarding Investments

The increase in international investments also requires the need to protect the investors from the risk corresponding to investing in foreign nations to save them from unfair treatment or any other violation of their rights. In the area of foreign investment, investment arbitration aids in the establishment of customary international law and the harmonisation of investment norms. Arbitral tribunals aid in the creation of unified legal norms regulating foreign investment through their interpretation and application of investment treaties.

  • Economic Development 

By giving investors more assurance about the stability and security of their investments, investment arbitration helps to foster economic development. As a result, host nations may see an increase in international investment, economic growth, and job creation.


Human rights are the fundamental rights and freedoms that every person is entitled to irrespective of their nationality, religion, gender, race, ethnicity, language or any other status. Right to life and liberty, freedom of expression, right to work, and freedom from slavery and torture are also a part of human rights.

The United Nations created a comprehensive body of human rights law- IHRL[3]. The UN charter and the Universal Declaration of Human Rights which were ratified by the General Assembly in 1945 and 1948 respectively serve as the cornerstones of this body of legislation. Governments are obligated by international human rights law to take specific actions or abstain from taking specific actions in order to protect and promote the fundamental freedoms of human rights of individuals and groups. After the years 1945 and 1948, the UN incorporated various other rights as Human Rights such as specific standards for children, women, minorities and people with disabilities. Human rights encompass a wide range of human rights principles like-

  • civil and political rights
  • economic, social and cultural rights
  • right to equality and non-discrimination
  • right to self-determination
  • right to freedom from violence and exploitation
  • rights of Indigenous people


The Human Rights obligation investor state disputes settlement are entering new dimensions as the states does not confine themselves to just international investment agreements but also to human rights.

In investor state dispute settlement, the international arbitral tribunal has become more willing to use human rights norms while interpreting the international investment agreements.

Most published international treaties and investment arbitrations are silent on human rights law. However, in today’s time the references to human rights law are increasing.

The recognition of human rights principles acts as the authoritative in guiding policies and decision making process.

Human rights play an important role for state parties, foreign investors and affected communities.


Instances of human rights concerns include:


There can be times when Human Rights problems become the background of investment disputes between the parties. When the foreign investor breaches the human rights of the local people of the host state, this issue becomes an international investment dispute and conversely when the state violates the human rights of the independent foreign investor, it becomes investor state proceedings.

The most common human rights violated in these circumstances are the right to health, the right to work, the right to a healthy and safe environment. It is also found that at times the measures that the states adopt for safeguarding the rights of their people may adversely affect the rights of the foreign investors. The International Human Rights Law (IHRL) plays a crucial role in interpreting the code of conduct of international investment laws. 


In an international dispute, the role of human rights can vary depending on the investors, host states and the arbitrators themselves.


The host state invokes the human rights to justify the actions of their state which led to the violation of the right of the investor.

Also, at times the respondent state can use human rights argumentation as counterclaims addressing the conduct of the investors.


Investors have deliberately engaged in human rights in 2 ways-

  • By directly citing abuse of human rights together with International investment agreement provisions in support of their claims.
  • By using human rights law and jurisprudence to show breach through favourable techniques or arguments.

The specific International investment arbitration requirements in a case will determine whether an investor or the host state can prevail in an independence claim or counterclaim based on human rights violations.

In the case of Urbaser vs Argentina[4], the jurisdiction of tribunals was upheld over counterclaims based on international human rights law.


Human Rights influence how international investment law regulations are interpreted. It is used as a framework for understanding the provisions of international investment laws. Many ISDS transactions are also based on the basic principles of International human rights law. IHRL is interpreted in many case laws as well as treaties and the investor state dispute settlement tribunals also depend upon such interpretation. Human Rights norms align with the key ideas of investment protection including comprehensive protection and security, access to justice, fair and equitable treatment. In the current time, the investment arbitration tribunals have resorted to the international human rights law for the interpretation and basic understanding of the rules and regulations of the states.

States and foreign investors are governed by international investment rules which include treaties, agreements and conventions. These laws establish the rights and responsibilities of each party and offer mechanisms for settling potential conflicts. This approach acknowledges the relationship between investment activities and human rights as well as the fact that investment can have a significant impact on individuals, communities and society. Policy makers, arbitrators and others stakeholders try to make sure that international investment regulation supports social justice, sustainable development and respect for human dignity by basing their decisions on human rights.

Practically this can entail interpreting investment rules in light of governments’ commitment under international human rights law, taking into account the possible effects of investment projects on human rights and bringing human rights concerns into the process of making investment decisions. It may also entail striking a balance between the interests of the general public which includes so sure economic welfare, environment preservation and Human Rights protection.


In conclusion, the relationship between investment arbitration and human rights highlights a significant development in the fields of international law and economic governance. Investment arbitration offers an impartial and equitable means of settling disputes between international investors and host countries, which plays a vital role in the global economy. Investment arbitration fills the need for a specialized forum to settle disputes resulting from international investment agreements in a world where cross-border transactions are becoming more and more common.

Human rights are not just moral precepts but they are also enshrined in local and international laws through constitutional provisions, treaties and conventions.

Investment arbitration is necessary to support foreign investment, preserve sovereign rights, strengthen the rule of law, and mitigate political risk. These goals are consistent with the more general goals of advancing and defending human rights. Therefore, it is evident from the impact of human rights on investment arbitration that economic interests and human rights commitments are intertwined. It emphasizes how crucial it is to strike a balance between investor rights and the larger public interest, which includes social welfare and environmental sustainability.

Thus, the current scenario explores various functions of human rights in arbitration investment laws.


[1] https://unctad.org/topic/investment/international-investment-agreements

[2] (New York, 10 June 1958), https://www.newyorkconvention.org/english

[3] International Human Rights Law

[4] (ICSID Case No. ARB/07/26)

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