LSE - Laboratory for Advanced Research on the Global Economy - Investment & Human Rights Project

Provided below are key standards, guidance and training materials on the incorporation of human rights risk management into investment contracting. These resources identify how both States and investors can use the State-investor contract negotiation to facilitate the management of human rights risks throughout the life of investment projects.

While there is a trend towards transparency, State-investor contracts are often not available publicly. There are paid services that provide contracts in some industries.  However, there are several sources for finding contracts online.  Below are databases and other online resources that may assist you to access copies of State-investor contracts and standard form clauses.  Some of these resources provide direct access to sample contracts; others provide links to government websites that provide access to copies of contracts.  The resources provided below focus on extractive sector (oil, gas and mining) contracts, reflecting the focus to date on human rights issues associated with business activity in this sector.  However, human rights issues are relevant to State-investor contracts across all sectors, and the materials below will be supplemented as further resources become available.  Please let us know if there are free and reliable resources not included here.

Provided below are resources that examine investment contracting in circumstances where human rights are relevant.  These resources will be updated periodically, and will aim to highlight good practice in responsible contracting as well as cases in which human rights could have been more effectively incorporated into the negotiation process.  The case studies provided seek to promote consideration of the human rights outcomes for business, governments, local communities and other stakeholders associated with the negotiation and terms of State-investor contracts, and identify different approaches that have been taken to incorporating human rights into investment contracting.

Limited understanding of how state-investor contracts operate – including the meaning and significance of key terms and clauses – may present barriers to the public's right to know about public interest issues that impact their lives.  Below are resources that identify and discuss the key characteristics and clauses of common types of investment agreements using accessible and non-specialist language.  The resources included below focus on extractive sector (oil, gas and mining) contracts, reflecting the focus to date on human rights issues associated with business activity in this sector.  However, human rights issues are relevant to state-investor contracts across all sectors, and the resources below will be expanded as further databases and resources are identified.

The UN Principles on Responsible Contracts recommend that the parties be adequately prepared, and have the capacity to properly address the human rights implications of projects during negotiations.  This will enable the parties to seek to optimise the benefits of investment projects and manage any human rights risks from the outset.  Accordingly, State representatives should be tasked to achieve an agreement that will maximise positive human rights outcomes and effectively protect human rights throughout the project, and business representatives should seek to ensure that human rights will be respected throughout the project.  State-investor contract negotiations also present an opportunity to agree responsibilities for the prevention, mitigation and management of negative human rights risks associated with the project, as well as expectations relating to the project’s operating standards.  The resources below provide information and analysis of the challenges associated with negotiating responsible State-investor contracts, emerging good practice and the broader implications of contract terms on investment project outcomes.

Stabilisation clauses present a legitimate tool to enable investors and host governments to manage risks associated with investment.  However, if not carefully drafted, they can also prevent host States from implementing good faith measures to protect human rights.  The UN Principles for Responsible Contracts suggest that contractual stabilisation clauses, if used, should be drafted so that any protections for investors against future changes in law do not interfere with the State’s bona fide efforts to implement laws, regulations or policies in a non-discriminatory manner in order to meet its human rights obligations.  The resources provided below include a leading paper on stabilisation clauses and human rights prepared in connection with the mandate of UN Special Representative on Business and Human Rights, Professor John Ruggie; a dilemma tool to enable practitioners to better understand the ways in which stabilisation clauses may impact human rights and options for managing these risks and reports that examine the drafting of real world stabilisation clauses.

Breaches of human rights by private or state security personnel presents significant legal, financial, reputational and operational risks to State and business investors.  Accordingly, the UN Principles on Responsible Contracts suggest that physical security for the project’s facilities, installations or personnel should be provided in a manner consistent with human rights principles and standards.  It is therefore important that responsibilities and expectations regarding security arrangements for a project be discussed and agreed during negotiations.  The resources provided below identify relevant international standards and codes of conduct for security personnel as well as State and business investors, practical guidance on managing the human rights risks associated with project security, and a training tool on human rights and security issues.

Effective community engagement from the earliest stages of investment assists parties to State-investor contracts to identify and understand the potential human rights impacts of the project, to incorporate measures to manage these into the project design and to build trust with and manage the expectations of local communities.  The UN Principles on Responsible Contracts recommend that projects have an effective community engagement plan starting at the earliest stages of the project and continuing throughout their life cycle.  Although it may not be possible to incorporate detailed community engagement plans into a State-investor contract, the expectations and responsibilities of the parties in relation to community engagement can be agreed during the contract negotiations.  Importantly, where the project is likely to impact indigenous peoples, their free prior and informed consent may be required.  The resources below provides guidance on when community engagement and free, prior and informed consent may be required, information on issues and challenges associated with developing and implementing an effective community engagement plan, and also good practice case studies.

Community development agreements (‘CDAs’) – also known as benefit-sharing agreements – provide a mechanism through which the benefits of an investment project can be shared directly with local communities and other project-affected stakeholders.  Some argue that effective CDAs enable States and investors to better manage the human rights risks associated with a project, and also to maximise the project’s benefits.  However, the negotiation of CDAs is associated with a range of human rights issues and challenges which may impact the effectiveness of the CDA and, more broadly, the project.  For example, there may be challenges surrounding the identification of the community and ensuring proper  representation of community members without discrimination, effective communication with the community, and the identification of appropriate benefits.  The resources provided below provide guidance on the development, negotiation and regulation of CDAs, and also examine associated issues and challenges that may face states, investors and communities.

Even with robust and effective preparations and processes, investor projects are likely to result in some grievances and concerns from communities and other affected stakeholders.  The UN Principles on Responsible Contracts suggest that individuals and communities that are impacted by project activities, but not party to the State-investor contract, should have access to an effective non-judicial grievance mechanism.  Such mechanisms can enable investors to identify grievances and potential human rights impacts, and to address and remedy any impacts early and directly.  Access by affected stakeholders to a non-judicial grievance mechanism should be discussed during State-investor contract negotiations and, where appropriate, responsibility for the establishment of such a mechanism and expectations around its operation agreed and incorporated into the State-investor contract.  The resources below provide information regarding expected standards for grievance mechanisms (including effectiveness criteria), issues and challenges relating to their design and implementation, and current and emerging good practice.

The UN Principles for Responsible Contracting recommend that a State-investor contract’s terms should be disclosed, and that the scope and duration of exceptions to such disclosure should be based on compelling justifications.  Contract transparency may also enable investors to better communicate with stakeholders.  Indeed, contract disclosure can be regarded as, or incorporated into, a project’s community engagement strategy.  Meaningful transparency requires that information disclosed must be accessible.  In certain circumstances, this may require the translation of State-investor contracts and other information into local languages and consideration of accessibility of different mediums (for example, hard copy documents or online databases) to project stakeholders.  The resources below provide information and guidance on the importance of contract transparency and ways in which it can be achieved, and also identify governments that facilitate state-investor contract disclosure.

Provided below are reports and other materials prepared by non-governmental organisations that expose and/or examine human rights issues associated with State-investor contracts.  These reports highlight the ways in which State-investor contracts may impact human rights, areas in which better practice in contract negotiation and implementation need to be developed, and issues that influence or inhibit the incorporation of human rights into State-investor contracts.