FDI, BITS and the Marginalization of Labour Standards

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The primary aim of this paper would be to establish whether the international investment treaty regime can, at all, exert an influence on international labour standards. The researcher shall first examine the impact that foreign direct investment may have on labour standards. Authors have directly linked foreign direct investment to a lowering of labour standards, by stating that higher labour standards lead to greater labour costs, which could discourage foreign direct investment, as, all things being equal, investors would prefer the country with lower labour costs. However, empirical evidence has suggested that this linkage may be exaggerated, and that in many cases, the positive influence of higher labour standards may offset the negative (if any) influence that they may create through higher costs. This brings us to the second leg of the argument, namely, how labour regulations can possibly be challenged in investment disputes. The paucity of direct jurisprudence on the interface between IIAs and labour standards means that the researcher shall examine the stand of arbitral tribunals in cases which have referred to anti-corruption provisions and environmental rights, in order to estimate the possible position of labour rights vis-a-vis investor protection. There have been cases with respect to denial of permits on alleged environmental grounds. Subsequently, the researcher would also examine labour standards as human rights obligations. The human rights obligations of a state may require that states regulate the activities of non-state actors, so as to ensure that their citizens enjoy their rights.