Bear Creek Case: Tribunal Misses “Silver Opportunity” for Holistic Legal Interpretation

By Lise Johnson, Kaitlin Cordes and Jesse Coleman
August 22, 2016

Are a country’s obligations under international human rights law relevant in interpreting its potential liability under investment treaties? Does a company’s responsibility to respect human rights come into play when assessing which of its expectations should be protected in an investment dispute? When important public interest implications of investment treaty interpretations are at stake in the resolution of a company’s treaty-based claims against a government, can amicus curiae –“friend of the court” –briefs help fill in gaps in the parties’ own submissions?

These and similar questions are increasingly being asked as international lawyers grapple with the implications of investment treaty disputes for public policymaking and the fulfillment of human rights, as well as with the continued fragmentation of international law. These questions are particularly important in the context of specific investment disputes that stand to affect the rights of third parties. In June 2016, the Columbia Center on Sustainable Investment (CCSI) submitted an application to file a written submission as amicus curiae in one such case, Bear Creek Mining Corporation v. Republic of Peru. On July 21st, the Tribunal charged with determining the dispute decided to reject CCSI’s application; CCSI responded with a letter articulating its concerns.

Background

Bear Creek v. Peru concerns a dispute between a Canadian mining company, Bear Creek, and the Peruvian government regarding a proposed silver mining project in the Puno region of Peru. In 2011, following opposition to the mine from indigenous Aymara communities, as well as several disruptive and violent protests, the Peruvian government adopted a series of measures that sought to respond to the concerns of local groups. In addition to suspending the admission of new mining projects in specific areas and enacting a new law on prior consultation with indigenous peoples, the government revoked a declaration of public necessity that underpinned the granting of Bear Creek’s mining concessions.

In response, Bear Creek brought a claim under the Peru-Canada Free Trade Agreement (FTA), arguing that the measures adopted by Peru breached several treaty protections, including with respect to expropriation, fair and equitable treatment, and non-discrimination. Although Bear Creek had not yet secured an exploitation permit for the project, the company seeks nearly USD 300 million in damages for, among other things, future lost profits. In addition, Bear Creek argues that it should be compensated a further USD 225 million in damages arising from an alleged reduction in the value of a separate project in Peru.

CCSI’s submission as amicus curiae

As is increasingly common in modern investment treaties, the Peru-Canada FTA recognizes that investor-state arbitrations raise fundamental issues of public interest, and expressly allows interested individuals or communities to apply to participate as amicus curiae in disputes. In light of the issues raised in Bear Creek’s arbitration claim, which raised important public interest considerations that had not been sufficiently addressed by the parties, CCSI sought to file a written submission as amicus curiae.

In its submission, CCSI argues that granting the relief requested by Bear Creek would require a de facto waiver of applicable domestic and international law. For example, accepting the company’s proposed interpretation of the definition of a covered “investment” under the Peru-Canada FTA would negate the treaty’s distinction between investments and pre-establishment activities, and would allow Bear Creek to obtain the value of a right to exploit mineral resources without having secured environmental and social approvals required under Peruvian law, and without having demonstrated compliance with its own human rights responsibilities.

With respect to fair and equitable treatment (FET), CCSI’s submission argues that protection of legitimate expectations would run counter to the wording of the Peru-Canada FTA and would again undermine domestic legal and policy frameworks established to regulate investment. Moreover, in order to be legitimate, such expectations must be contextualized by Peru’s obligations under international human rights law—which form part of the regulatory framework applicable to the extractives sector in Peru—and also by the well-known tendency for social conflict around extractive projects in Peru.

Lastly, CCSI’s submission argues that the measures adopted by Peru fall under one of the FTA’s general exceptions, which covers measures necessary to ensure compliance with laws not inconsistent with the treaty. International human rights law requires Peru to respect, protect, and fulfill the rights of indigenous peoples. This includes the obligation to respect and protect the right of the Aymara people to be meaningfully consulted and to give (or not give) their free, prior and informed consent with respect to the proposed project. The measures adopted in 2011—including the one at the center of the arbitration—established the conditions necessary to ensure that mining activity in the area would proceed only once consent was obtained from indigenous communities affected by the proposed project. Such measures were thus needed to ensure compliance with Peru’s human rights obligations.

The need for a more holistic approach

Overall, CCSI’s submission underscores the need for a holistic approach to the interpretation and application of investment treaty standards: one that recognizes the relevance of other bodies of applicable law, and seeks to find an appropriate and just balance between public interests and private gains. The Tribunal’s rejection of CCSI’s application, and the limited reasoning provided therein, constitutes a missed opportunity to elaborate on such an approach and, as suggested in CCSI’s response, runs counter to the wording of the Peru-Canada FTA. The Tribunal did, however, accept a separate amicus submission; the extent to which it ultimately addresses points raised in that submission, including consultation with Aymara communities and the responsibility of investors to respect human rights, may shed light on the willingness of other arbitrators to grapple with these issues moving forward.

In the context of ever-growing concerns regarding the impact of the international investment regime on the rights of third parties and host state regulatory space, the factual and legal matters at issue in Bear Creek v. Peru represent yet another example of the need for constructive engagement on the tensions that arise from competing (and at times conflicting) host state obligations under domestic and international law.

Lise Johnson is Head of Investment Law & Policy; Kaitlin Cordes is Head of Land, Agriculture & Human Rights; and Jesse Coleman is a Legal Researcher at CCSI. Further details regarding CCSI’s submission in Bear Creek v. Peru can be found here. The Columbia Center on Sustainable Investment, a joint center of Columbia Law School and the Earth Institute at Columbia University, is the only university-based applied research center and forum dedicated to the study, practice, and discussion of sustainable international investment worldwide.

This blog was originally posted on RightingFinance.org.