The Effectiveness of TCL

Abstract

The challenge for TCL lies in balancing the five interests associated with commodity activity—control, participation, preservation, development, and economic gain. Whereas our account of the application of TCL within the commodity governance matrix above has demonstrated which of these objectives the individual norm subsets are seeking to foster primarily, the subsequent assessment will focus on the balancing quality of TCL. Where it strikes a balance, it can be deemed to be effective in ensuring a functional commodity sector.

The challenge for TCL lies in balancing the five interests associated with commodity activity—control, participation, preservation, development, and economic gain. Whereas our account of the application of TCL within the commodity governance matrix above has demonstrated which of these objectives the individual norm subsets are seeking to foster primarily, the subsequent assessment will focus on the balancing quality of TCL. Where it strikes a balance, it can be deemed to be effective in ensuring a functional commodity sector.

4.1 The Principle of PSNR as Normative Corner Stone

As the structure of TCL reveals, the principle of permanent sovereignty over natural resources (PSNR) plays a pivotal role therein. In fact, the development of PSNR itself mirrors the evolution of international regulatory approaches towards GCG.

The PSNR principle evolved mainly as a product of discussions among member states within the UN system, particularly in the UN General Assembly (UN GA), ECOSOC, Human Rights Committee (HRC) and UNCTAD,¹ before being incorporated and eventually codified in international treaty law.² First referred to in UN GA Resolution 523 and UN GA Resolution 626 respectively,³ the principle, from the very outset, developed in the context of decolonisation.⁴ In the process of newly formed independent governments taking control over their territories from former colonisers, the ‘new nations’ were seeking international legal guarantees, which would ensure them and their peoples sovereign rights over their national resource wealth.⁵ The initial objective behind PSNR thus mainly related to gaining and maintaining control over national commodity deposits, which had formerly been controlled by colonial rulers—not least in order to prevent Western Transnational Corporations (TNCs) from gaining undue influence over extraction decisions and activities.⁶

In addition, from the outset, PSNR emerged in the context of development,⁷ which is particularly reflected in the ‘landmark’ Declaration on PSNR, UN GA Resolution 1803.⁸ Accordingly, PSNR ‘must be exercised in the interest of […] national development and of the well-being of the people of the State concerned’.⁹

Notably UNCTAD and also the UN GA later fortified this link between resource exploitation and development in the context of PSNR. The two bodies increasingly used the principle to advocate for heightened attention to the development needs and entitlements of the developing world with the ultimate goal of achieving a redistribution of wealth more favourable to the ‘Global South’.¹⁰ These desires culminated in the formulation by the G77 of a New International Economic Order (NIEO).¹¹ In the relevant Resolution 3201 of 1974, states are being accorded ‘[f]ull permanent sovereignty […] over [their] natural resources and all economic activities.’¹² PSNR is said to entail the respective state’s effective control over its natural resources as well as its right to nationalise and/or transfer any property or entitlements related to them to its nationals.¹³

The objectives of the developing world were further spelled out in the Economic Rights Charter (ERC; UN GA Resolution 3281).¹⁴ Again, a major emphasis was put on PSNR, according to Article 2(1) ERC.¹⁵ Moreover, the regulation of activities performed by transnational corporations was emphasised, according to Article 2(2)(b) ERC.¹⁶ In fact, the Charter demonstrates a strong focus on national law and regulatory powers of the nation state respectively—Schrijver thus describes the period as one of ‘resource confrontationism’.¹⁷

This stance, however, in turn gave way to a more cooperative approach, notably in the context of environmental protection.¹⁸ Especially the Stockholm (1972) and Rio (1992) Declarations called for international cooperation for the sake of protecting the planet and ultimately SD.¹⁹ Principle 21 Stockholm, which has been repeated in Principle 2 of the Rio Declaration, places PSNR in the context of environmental protection, notably as provided for in the applicable national legislation as well as the obligation not to cause transboundary harm.²⁰ Most importantly, it postulates that PSNR shall only be exercised ‘in accordance with the [UN Charter] and the principles of international law’, thus implicitly referring to i.a. the principles of diligence, due care, good-neighbourliness, and state responsibility (regarding transboundary harm).²¹ This cooperative dimension of PSNR is also reflected in the UNCLOS, where it is not limited to environmental protection. According to its Article 56(1)(a) UNCLOS, in the EEZ the coastal state has

sovereign rights for the purpose of exploring and exploiting, conserving and managing the natural resources […] of the waters superjacent to the seabed and of the seabed and its subsoil…

According to Article 74(3) UNCLOS, states with opposite or adjacent coasts ‘in a spirit of understanding and cooperation, shall make every effort’ to assure smooth delimitation of their EEZs between them, and consequently also trouble-free assignment of their respective PSNR.²²

Despite the widespread scepticism within classical legal scholarship towards norms that have evolved through UN bodies as described above, PSNR by now, besides the UNCLOS, is also incorporated or reflected in various other international agreements, including the Human Rights Covenants.²³ Correspondingly, it has been proclaimed to be of customary character by the arbitral tribunal in the Texaco v. Libya case as well as most prominently by the ICJ in the Armed Activities case;²⁴ also the legal doctrine nowadays accepts its customary character.²⁵

Accordingly, states—as well as their respective people—are generally competent to control and exploit the commodities located on their territory, which includes the territorial sea according to Article 2 UNCLOS. However, over time the principle of PSNR has increasingly become associated with not only entitlements of the respective state, but also duties. In the following we shall add clarity to its normative evolution from a competence allocation norm (Sect. 4.1.1) to a comprehensive principle aimed at fostering SD by envisaging rights (Sect. 4.1.2) as well as duties, especially the sustainable use principle (Sect. 4.1.3), thus decisively underpinning GCG.

4.1.1 Competence Norm

The somewhat ‘traditional’ function of the principle of PSNR lies in its quality as an allocation norm, which confers sovereignty over natural resources onto respective legal subjects. What is less obvious, however, is what legal subject it entitles.

The perhaps most prominent provision expressing PSNR can be found in common Article 1(2) of the HR Covenants. Accordingly,

[a]ll peoples may, for their own ends, freely dispose of their natural wealth and resources without prejudice to any obligations arising out of international economic co-operation, based upon the principle of mutual benefit, and international law.

The legal subject entitled here thus are the people.²⁶ Yet, as Schrijver has repeatedly emphasised,²⁷ PSNR exhibits two distinct normative roots: the principle of self-determination of peoples and the principle of sovereign equality of states.²⁸

In the context of decolonisation, PSNR was thus intended to benefit both subjects: peoples that were seeking to free themselves from foreign rule; as well as newly formed states that were striving for economic independence from the industrialised economic ‘centre’,²⁹ i.a. their former colonisers.³⁰ This is illustrated i.a. in the 1962 Declaration on PSNR, which underlines that

the right of peoples and nations to permanent sovereignty over their natural wealth and resources must be exercised in the interest of their national development and of the wellbeing of the people of the State concerned.³¹

Whereas states’ PSNR, in light of the rather speedily emergence of the ‘new nations’, dominated respective debates for much of the 1960s and 1970s, PSNR as an aspect of the self-determination of peoples has increasingly witnessed attention particularly with regard to indigenous peoples in the past two decades.³² As Dederer highlights, this illustrates that also peoples within a state—that do not constitute the state’s people, i.e. the ‘nation’—can be the bearers of PSNR.³³ As a consequence, the exercise of PSNR and territorial sovereignty do not necessarily converge.³⁴

4.1.2 Rights Associated with PSNR

Next, naturally the question arises what rights PSNR entails. Sovereignty has been defined in the context of international law i.a. as ‘ultimate power’ or ‘supreme authority’—that is ‘alternatively or cumulatively’.³⁵ The following rights, as listed in Article 2 UNC and the Friendly Relations Declaration, are typically being associated with sovereignty:

[P]lenary territorial and personal jurisdiction within one’s territorial boundaries; the presumption of legality of one’s sovereign acts; constitutional and organizational autonomy including self-determination; and the protection of one’s domaine réservé.³⁶

With regard to PSNR, Schrijver specifies the rights that have become associated with it since its inception in the decolonisation era. He first refers to a number of ‘basic rights’, which include the ‘rights to possess, use, freely dispose of, explore, exploit, market, manage, and conserve the natural resources.’³⁷ A second category he introduces, comprises ‘related rights’, which are

the rights to regulate foreign investment, including the right to tax foreign investment and under certain specific circumstances and meeting international law requirements the right to take foreign property.³⁸

The third and last category that Schrijver alludes to, consists of rights that he describes as ‘controversial’.³⁹ It includes the right to demand ‘a share in the management of local subsidiaries of multinational companies, or to withdraw from unequal treaties or to revise unilaterally terms of agreed arrangements’;⁴⁰ as well as ‘the right to determine unilaterally the amount of compensation, and to settle international investment disputes solely upon the basis of national law.’⁴¹

4.1.3 The Sustainable Use Principle

Perhaps the most significant development in the dynamic emergence of the principle of PSNR relates to its quality as a norm conferring not only rights, but also duties upon its respective bearer.⁴² As we have seen above, already UN GA Resolution 1803 required states and/or peoples entitled to PSNR to exercise their sovereignty ‘in the interest of their national development and of the wellbeing of the people of the State concerned.’⁴³ In connection with the emergence of international environmental law, these duties were supplemented with an obligation to avoid harm to the environment.⁴⁴

An early provision on sustainable use can be found in Article 2 of the 1958 Convention on Fishing and Conservation of the Living Resources of the High Seas, according to which enabling ‘the optimum sustainable yield’ is defined as the objective of resource conservation.⁴⁵ Article 2 of the Convention on Biological Diversity defines sustainable use as

the use of components of biological diversity in a way and at a rate that does not lead to the long-term decline of biological diversity, thereby maintaining its potential to meet the needs and aspirations of present and future generations.

It has generally been said to put states

under a duty to manage natural resources, including natural resources within their own territory or jurisdiction, in a rational, sustainable and safe way so as to contribute to the development of their peoples, with particular regard for the rights of indigenous peoples, and to the conservation and sustainable use of natural resources and the protection of the environment, including ecosystems. States must take into account the needs of future generations in determining the rate of use of natural resources. All relevant actors (including States, industrial concerns and other components of civil society) are under a duty to avoid wasteful use of natural resources and promote waste minimization policies.⁴⁶

While the exact obligation it entails will typically differ depending on the concrete subject matter to which it applies, the principle has become more and more widely accepted, particularly with regard to

established treaty regimes on such matters as fisheries, marine living resources and specific ecosystems (eg wetlands), […] cooperative arrangements concerning transboundary and shared natural resources, especially watercourses, and […] the increasingly specific guidance on […] the rights of indigenous peoples and their management of local natural resources.⁴⁷

Moreover, the principle is now also rooted in target 12.2 of the SDGs (‘sustainable management and efficient use of natural resources’).⁴⁸ It has been identified as a rule of customary international law, at a minimum with regard to common or shared resources.⁴⁹ As such, it substantially qualifies the respective legal subject’s PSNR.⁵⁰

In fact, this very principle gives further pivotal indications regarding the effectiveness of TCL. That is, the sustainable use principle constitutes a balancing norm.⁵¹ Sustainable use reconciles all five commodity interests of control (1), participation (2), development (3), preservation (4), and economic gain (5) in that it obliges states

to manage natural resources in a rational [1;5], sustainable and safe [4] way so as to contribute to the development [3;5] of their peoples [2], with particular regard for the rights of indigenous peoples [2;3], and to the conservation and sustainable use of natural resources and the protection of the environment, including ecosystems [4]. States must take into account the needs of future generations in determining the rate of use of natural resources [2;3;4;5].⁵²

4.1.4 TCL Is Effective Where It Fosters Sustainable Use

This observation allows the following conclusions: The sustainable use principle exhibits the normative contents needed in order to achieve a functional commodity sector. Thus, the TCL framework would be effective where it concretises what sustainable use requires. This would involve providing balancing norms, which further detail how the commodity interests need to be balanced in respective commodity scenarios, e.g. depending on the subsector, actors, or individual commodity concerned.

4.2 The Contribution of TCL to a ‘Balanced’ Commodity Sector

To what extent the current TCL framework lives up to these requirements shall be investigated in the subsequent section. For that purpose, we are going to discuss several normative patterns, which TCL exhibits, including its largely ‘indirect’ nature (4.2.1) as well as the limited effectiveness of incidents of ‘direct’ TCL (4.2.2), which is i.a. caused by a lack of integration and ‘hard’ legal obligations respectively.

4.2.1 TCL Is Largely Indirect

In analysing the substance of TCL, one can differentiate between direct TCL, on the one hand, and indirect TCL, on the other.⁵³ Direct TCL can be described as those norms of inter- and transnational law, which ‘reflect a conscious consideration of’ commodity activities and their implications for diverging stakeholder interests and corresponding policy trade-offs.⁵⁴ Thus, direct, or intentional, TCL demonstrates commonalities of TCL relating to legal doctrine, which are distinct from other fields of law.⁵⁵ Indirect TCL consists of rules that are unintentionally regulating commodity activities, and thus without exhibiting a conscious consideration for their particularities.

The ‘indirect’ nature of a norm of TCL may not be perceived as an indication of its (in)effectiveness per se. Instead, also rules formulated for a different purpose, such as investment protection, naturally contribute to the regulatory picture. However, in most instances, those rules, which have been introduced for objectives that are distinct from the overall objective of good commodity governance or fostering the SD of the commodity sector, are not suited to specifically address the policy trade-offs that typically result from commodity activities.

As we shall see by way of example, the ‘indirect’ norm subsets of TCL addressing Human Rights (Sect. 4.2.1.1), environmental protection (Sect. 4.2.1.2), the fiscal framework applicable to commodity operations (Sect. 4.2.1.3), scenarios of armed conflict (Sect. 4.2.1.4) as well as anti-corruption (Sect. 4.2.1.5) build ‘regulatory circles’ around individual interests. Yet, they largely do not provide answers to questions that relate to the legitimacy of the decision to extract. Apart from demanding conformity with the regime protecting or fostering the individual legal good they have been designed for, they do not spell out guidelines on how commodity policy trade-offs could be remedied. As a consequence, these answers, beyond the qualification of a state’s sovereignty for the purposes of the individual regime, are left unregulated and thus widely subject to the discretion of the respective state.

4.2.1.1 Human Rights

International Human Rights (HR) are widely applicable to commodity activities.⁵⁶ In fact, the pervasiveness of HR-related scenarios is thus great that international HR law has been deemed to sufficiently regulate distribution conflicts in the commodity sector.⁵⁷ Indirect HR, which are particularly pertinent in a commodity context, are the right to life, labour rights, land rights, rights to basic needs, the right to a clean environment, rights of indigenous peoples, rights in situations of violence, the right to remedy, and the right to development.⁵⁸

The right to life is rooted in Article 6(1) ICCPR.⁵⁹ In connection with commodity activities, loss of life can naturally occur under circumstances such as the handling of toxic substances,⁶⁰ underground mining, or mudslides.⁶¹

Many HR violations in the commodity sector are occurring in a labour context.⁶² For example, the displacement of fishers, farmers or artisanal miners, e.g. due to the implementation of an industrial commodity operation, may constitute a violation of the right to work provided for in Article 6(1) ICESCR.⁶³ Another labour right that is of great significance in the commodity sector is the prohibition of forced or compulsory labour, which is primarily being regulated by ILO Convention 29 (‘Forced Labour Convention’). With regard to commodity activities, forced labour occurs most frequently in the mining or agricultural sector.⁶⁴ Sadly, it often appears in combination with child labour, particularly in small-scale mining contexts, where it is considered the ‘worst form of child labour’.⁶⁵ Children are generally protected against child labour, according to Article 32 of the Convention on the Rights of the Child (CRC). Moreover, also Article 10(3) ICESCR seeks to protect children from economic and social exploitation. Insofar as child labour causes detrimental effects to the health of a child, Article 12(2)(a) ICESCR and the obligation it entails with regard to fulfilling the preconditions for a healthy development of the child may be relevant.⁶⁶ The prohibition and elimination of the worst forms of child labour also features in the SDGs as target 8.7.

Further specific protection to vulnerable groups in labour contexts typically applies to women, indigenous peoples, migrants as well as disabled and older people. Ending the discrimination of women is enshrined in SDG target 8.5. In the commodity sector, women are still said to frequently ‘hold little power, [be] ill-informed, and earn less than men’—a situation, which creates major obstacles in the pursuit of sustainability.⁶⁷

Further HR violations in the commodity sector can occur with regard to land tenure, which is defined as ‘the relationship, whether legally or customarily defined, among people, as individuals or groups, with respect to land.’⁶⁸ In a commodity context, land rights are typically concerned whenever a certain local or indigenous population needs to be relocated in connection with the creation of e.g. a plantation or mining site.⁶⁹ The granting of respective licenses by the state can constitute a breach of land tenure rights, whenever the acting authorities do not sufficiently respect existing land titles, including ones of customary nature. However, even forced evictions and resettlements can theoretically be justified under specific circumstances.⁷⁰ Such generally requires, i.a., ‘appropriate resettlement’ to areas, which provide adequate housing as well as access to water, food and work.⁷¹

Tenure rights are particularly recognised under international law with regard to indigenous peoples, such as by Articles 11, 12 ILO Convention 107 (Protection and Integration of Indigenous and other Tribal and Semi-Tribal Populations in Independent Countries), the preamble to the 1992 Convention on Biological Diversity as well as Articles 13 (general provision) and 14 (informal tenure rights) ILO convention 169. Article 15(1) ILO Convention 169 insofar constitutes an exception to the ‘indirect’ nature of HR, as it sets out that ‘[t]he rights of the peoples concerned to the natural resources pertaining to their lands shall be specially safeguarded. These rights include the right of these peoples to participate in the use, management and conservation of these resources.’⁷²

Given the great meaning that the natural environment can bear upon the cultural identities of indigenous peoples, issues relating to tenure have repeatedly been treated by the Human Rights Committee as a matter of Article 27 ICCPR.⁷³ Also Article 13(1) ILO convention 169 expressly provides that ‘governments shall respect the special importance for the cultures and spiritual values of the peoples concerned of their relationship with the lands or territories, […] which they occupy or otherwise use…’

Rights to basic needs can be concerned also where commodity activities negatively impact the environment, such as contaminations of groundwater or soil, water depletion, air pollution, devastation of the environment due to tailings dam failures or mudslides, acid mine drainage etc.⁷⁴ The right to an adequate standard of living, which includes the right to water, food and adequate housing is provided for in Article 11(1) ICESCR;⁷⁵ Article 12(1) ICESCR protects the physical and mental health. The latter provisions are frequently also employed in the context of environmental quality.⁷⁶ Thus, Article 12(1) ICESCR has been raised also regarding issues such as adequate supply of safe and potable water, basic sanitation, prevention and reduction of exposure to harmful substances ‘or other detrimental environmental conditions that directly or indirectly impact upon human health.’⁷⁷

Moreover, Articles 11(1) and 12(1) ICESCR respectively have repeatedly been interpreted so as to include a right to access to basic energy given that access to energy will typically be a precondition to the fulfilment of many socioeconomic HR.⁷⁸ SDG 7 aims ‘to ensure access to affordable, reliable, sustainable and modern energy for all’. In a commodity context, this right can be relevant with regard to the sourcing of energy commodities, which needs to be conducted in the most sustainable way possible. Also, commencing commodity activities, particularly in the extractive industries, can create opportunities to at the same time e.g. electrify adjacent local communities.⁷⁹ Furthermore, it may have implications for the ‘energy mix’—of renewable and non-renewable sources—that a government chooses and thus for the types of commodities that the state is deciding to grant exploitation rights for.⁸⁰

Given the great impact commodity activities can have on local populations, participatory rights are crucial to ensure their interests are being adequately represented in corresponding governmental decisions.⁸¹ Three components of public participation law are typically being distinguished: access to information, public participation in decision-making, and access to justice.⁸² While the law of public participation has primarily evolved in the context of international environmental law, and is most notably enshrined in principle 10 Rio Declaration as well as the Aarhus Convention,⁸³ it is also partly rooted in international HR law. The right to information is based on Article 19 ICCPR as a part of the freedom to expression as well as Article 25(b) ICCPR, which entails the right to participate in public affairs.⁸⁴ Article 19(2) ICCPR provides for the right to access to information, thus ‘the freedom to seek, receive and impart information and ideas of all kinds’, which encompasses public interest information as well as information that is relevant for potential violations of individual rights.⁸⁵ Moreover, Article 1(2) ICESCR comprises the continued obligation of a state to ensure transparency when it regulates or administers public resources.⁸⁶

Failure to adequately respect participatory—or other—HR can result in particularly infamous HR violations, which exhibit a rather indirect connection to commodity activities. The talk is of situations of violence, such as armed conflict or violent clashes over distribution of benefits, tenure rights, or cultural impact.⁸⁷ Both resource dependence and abundance, particularly of precious minerals, have been found to conduce violence, armed conflict and, at times, civil war.⁸⁸ The state’s obligation to refrain from encroachments on HR here relates to its own duty to respect HR as well as to protect everyone under its jurisdiction against HR violations, e.g. committed by security forces employed by private commodity companies.⁸⁹ Relevant rights that may be harmed in situations of violence include Articles 6 (right to life), 7 (freedom from torture or cruel, inhuman or degrading treatment or punishment), 9(1) (right to security of the person), and 21 (freedom of assembly) ICCPR as well as the prohibition of torture contained in Articles 1(1), 2(1) Convention Against Torture.⁹⁰

Furthermore, the right to remedy, which is set out in Article 8 UDHR, Article 2(3) ICCPR as well as Article 6 CERD and Article 2(c) CEDAW, ensures adequate enforcement of states’ HR obligations. It is composed of the two duties to provide access to justice as well as to take substantive measures to prevent or redress rights violations.⁹¹

An HR that is relevant for GCG rather from a ‘big picture’ perspective, which has not yet been legally codified as such, is the right to development as defined in Article 1 of the Declaration on the Right to Development.⁹² Given the great economic significance of the commodity sector for many developing countries, particularly CDDCs, the right to development oftentimes features in policy debates on terms of trade, technology transfer, or detrimental effects of commodity activities on development.⁹³

4.2.1.2 Environmental Protection Norms

Commodity activities can have major impacts on the natural environment. For instance, the conversion of primary forests into plantations may have problematic effects for soil fertility, biodiversity, water quality and availability as well as the existence of organic carbon stocks.⁹⁴ Timber logging may have similar effects and, by reducing carbon stocks, may accelerate climate change.⁹⁵ The mining of commodities frequently causes water pollution or contamination, for instance from mine tailings, which result from copper, iron, coal, or gold production.⁹⁶ Moreover, surface contaminants may be spread by water and wind, which can lead to increased concentration of metal sediments that can damage aquifers and other water ecosystems.⁹⁷ A particular environmental problem, which occurs in connection with gold extraction, is the contamination of soils and waters with mercury.⁹⁸ Surface mining of commodities such as copper, iron, coal and gold particularly causes air pollution, with coal extraction exhibiting detrimental effects on biodiversity regeneration.⁹⁹ As Bürgi Bonanomi and others point out, particularly on the African continent, mining appears to elicit extensive deforestation of rainforests.¹⁰⁰

These environmental effects need to be taken into account whenever a government considers extracting commodities. They are being addressed by today’s international environmental protection regime, which began to emerge in the 1970s. Notably the 1972 Stockholm Declaration represents the first document addressing environmental protection, which witnessed quasi-universal support from the international community.¹⁰¹ From the beginning, safeguarding natural resources for present and future generations constituted one of the central objectives of the environmental protection regime.¹⁰²

However, international environmental law as an established branch of international law, including its somewhat coherent doctrine and substance,¹⁰³ only in some incidents reflects a conscious consideration of the particularities of commodity activity. It is characterised by a set of central rules and principles,¹⁰⁴ which have been concretised in the context of specific protection regimes provided for in various international legal instruments,¹⁰⁵ which are undeniably again quite close to commodity activities, such as the ones regulating the protection of the atmosphere,¹⁰⁶ air,¹⁰⁷ freshwater,¹⁰⁸ wetlands,¹⁰⁹ oceans, seas and marine living resources,¹¹⁰ flora and fauna,¹¹¹ forests and soils,¹¹² biological diversity,¹¹³ and the Polar regions.¹¹⁴ Further regimes address climate change¹¹⁵ as well as wastes and hazardous substances.¹¹⁶ Yet, most rules and principles do not reflect a conscious consideration of commodity policy trade-offs.

The obligation not to cause transboundary harm, in short ‘no harm’ rule, had first been pronounced by the arbitral tribunal in the Trail Smelter case in 1941. It features in Principle 21 of the Stockholm Declaration and has been recognised as a rule of customary international law by the ICJ in its advisory opinion on the Legality of the Threat or Use of Nuclear Weapons.¹¹⁷ In the commodity context, the no harm rule can be particularly significant with regard to dispersion of contaminants resulting from commodity activities via air or water to areas under the sovereignty of another nation state or constituting the common concern of humankind.¹¹⁸

According to Principle 15 Rio Declaration, states shall apply the precautionary approach in order to protect the environment.¹¹⁹ In scenarios, in which the precautionary principle applies, states are obliged to take adequate measures to prevent the respective potential harm; however, the choice of what kind of measures exactly they are taking, remains their own.¹²⁰ The precautionary approach also applies to the sustainable utilisation of natural resources.¹²¹ It is said to belong to the category of emerging customary international law, with some authors arguing that this status has already been consolidated.¹²²

The duty to carry out Environmental Impact Assessments (EIAs), contained in Principle 17 Rio Declaration, relates to the concept of precaution.¹²³ It is further specified by the Convention on Environmental Impact Assessment in a Transboundary Context (‘Espoo Convention’), particularly its Article 2(3). The provision is somewhat directly applicable to commodity activities given that appendix I, which it refers to, lists several commodity scenarios, such as crude oil refineries, major installations for the initial smelting of cast iron and steel and for the production of nonferrous metals, installations for the extraction of asbestos, large-diameter pipelines for the transport of oil, gas or chemicals, major quarries, mining, on-site extraction and processing of metal ores or coal or deforestation of large areas. This provision thus displays the particular significance in the context of commodity activities of the obligation to carry out an EIA.¹²⁴

Further guidance on how to conduct environmental—but also cultural and social—impact assessments is provided by the Akwé: Kon Voluntary Guidelines for the Conduct of Cultural, Environmental and Social Impact Assessment, which have been adopted by the Conference of the Parties of the CBD in May 2000.

Moreover, the principle of preventive action constitutes a key element of international environmental law (IEL). While it is frequently referred to in the context of precaution, the principle of prevention needs to be differentiated from the former.¹²⁵ While the precautionary approach is relevant, whenever the risks of environmental damage are uncertain, the prevention principle applies for risks, which are certain.¹²⁶ Given that many commodity activities entail risks, which are certain, the principle of prevention needs to be observed during the planning and implementation of such activities whenever a transboundary context is concerned. The arbitral tribunal in the proceedings between the Philippines and China regarding the South China Sea held China’s obligation to prevent damage to the marine environment, as rooted in Articles 192 and 194 UNCLOS, to be breached given that it had not prevented i.a., the harvesting of endangered sea turtles.¹²⁷

Furthermore, the polluter pays principle (PPP) as enshrined in Principle 16 Rio Declaration numbers among the central elements of IEL. The same holds true for the principle of common but differentiated responsibility (CBDR), which may at times conflict with the PPP. The CBDR principle is closely linked to the concepts of SD as well as intra-generational equity.¹²⁸ In a commodity context, CBDR can play a role particularly when it comes to the protection of shared resources.¹²⁹

The CBDR principle also relates to the last principle of IEL, which shall be touched upon here: the duty to cooperate.¹³⁰ As already stated above, it is likewise expressly contained in Principle 7 Rio Declaration.¹³¹ It moreover features in a series of international environmental agreements, including the UNFCCC as well as Articles 11.3 and 12 of the Paris Agreement.¹³² Regarding commodity activities, the duty to cooperate is again of particular relevance when it comes to administering shared resources or also remedying transboundary harm. Apart from the duty to cooperate with one another, IEL also calls for public participation.¹³³ Besides the participation of a broad range of actors based on multi-stakeholder approaches on the global level, principle 10 of the Rio Declaration explicitly emphasises the obligation for states to provide appropriate access to environmental information also on the national level.¹³⁴ In addition, effective access to justice shall be provided. With regard to Europe, these obligations are further spelled out in the 1998 UNECE Convention on Access to Information, Public Participation in Decision-Making and Access to Justice in Environmental Matters (‘Aarhus Convention’).

4.2.1.3 Fiscal Framework

The degree to which a commodity-endowed state benefits from extraction depends substantially on its fiscal law framework. This relates not only to its interest of economic gain, but also the one of development—as an objective ideally shared between state and population. International instruments and standards provide some guidance on how to design the fiscal conditions under which commodity operations are taking place, such as double taxation agreements (DTAs). The general challenge for the host state of commodity activity consists of finding the right balance between capturing sufficient resource rents while maintaining an attractive business and investment environment.¹³⁵ Again, most guidance provided in international standards and instruments does not consciously consider commodity policy trade-offs.

The Model United Nations Double Taxation Convention between Developed and Developing Nations (UNDTC) and the OECD Model Tax Convention (OECDMTC) on Income and on Capital constitute two central instruments of transnational fiscal law.¹³⁶ Both conventions are primarily concerned with preventing double taxation (DT).¹³⁷ They have found wide acceptance today, with many states having effectively translated particularly the OECDMTC into their national tax laws.¹³⁸ In addition, both conventions have inspired the conclusion of more than 3000 bilateral DTAs.¹³⁹

In the context of commodity operations, both conventions are relevant particularly with regard to corporate income taxation. According to Article 7 of the OECDMTC, corporate profits shall generally only be taxable in the state of corporate residency.¹⁴⁰ However, where the company maintains business through a so-called permanent establishment (PE) in another contracting state, the profits that are attributable to the PE may be taxed in that state—the state of source. Article 5(1) OECDMTC generally defines a PE as ‘a fixed place of business through which the business of an enterprise is wholly or partly carried on.’ According to Article 5(2)(f) OECDMTC, the term PE includes especially ‘a mine, an oil or gas well, a quarry or any other place of extraction of natural resources.’ The UNDTC contains identical provisions. Consequently, the host state to a multinational commodity enterprise, which is headquartered elsewhere, may generally tax those profits of the corporation that have been generated through a commodity extraction site on its territory. However, Article 5(2)(f) OECDMTC is only indicative of the existence of a PE. As the commentary to the UNDTC with regard to the identical provision contained in the latter states, ‘it does not provide that [a PE] necessarily does exist.’¹⁴¹

Despite this explicit reference to commodity activity in Article 5(2)(f) OECDMTC, some authors have highlighted that the PE clauses provided by the model conventions do not sufficiently cover the specificities of extractive industries.¹⁴² Apart from the physical presence of the corporation, DTAs typically require business operations to be carried out for a certain period of time and to be of a particular character, especially not to be merely auxiliary activities.¹⁴³ In this respect, what can cause difficulties for source states is the intricate net of contracts, joint ventures, subcontractors, and consortia frequently surrounding commodity operations—particularly given that they may each be considered separately for tax purposes.¹⁴⁴ Especially operations carried out by subcontractors may be structured in a way so as to avoid the thresholds regarding time and type of activity under the applicable DTA.¹⁴⁵ As a result, the state concerned may be unable to tax the commodity activity.¹⁴⁶ In order to counter such trends and therefore increase the tax revenue of the respective source states, Almeida and Toledano i.a. propose a specific PE clause for resource-rich countries.¹⁴⁷

Apart from the issue of what constitutes a PE—i.e. under what conditions the state in which the commodity activity occurs may levy a respective source tax –, both model conventions also set forth rules on how profits, which are attributable to a PE, shall be calculated. According to Article 7(2) OECDMTC, profits attributable to a PE

…are the profits it might be expected to make, in particular in its dealings with other parts of the enterprise, if it were a separate and independent enterprise engaged in the same or similar activities under the same or similar conditions …

This provision, which is contained with similar wording also in Article 7(2) UNDTC, is being generally referred to as the arm’s length principle.¹⁴⁸ The main objective of this principle is to prevent the practice of so-called transfer pricing, which has been deemed to be ‘one of the most important issues’ in international taxation.¹⁴⁹ The arm’s length principle counters this practice by allowing tax administrations to adjust the prices of intra-group transactions to usual market prices. Corresponding methods to approximate the ‘arm’s length price’ are the Comparable Uncontrolled Price Method, the Cost Plus Method, the Resale Price Method, the Transactional Net Margin Method, as well as the Profit Split Method.¹⁵⁰ Not least given that a large share of commodity transactions is being conducted by TNCs,¹⁵¹ transfer pricing constitutes a major issue also in our sector under investigation.¹⁵²

Fiscal transparency and exchange of information between tax authorities are playing a key role in financial regulation. When it comes to cross-border collaboration of tax administrations and respective exchange of information, particularly the OECD Model Agreement on Exchange of Information on Tax Matters is providing important guidance. Pivotal international standards are so-called exchange of information requests (EOIR) as well as the automatic exchange of financial account information (AEOI), which feature in Articles 5 and 6 of the authoritative Convention on Mutual Administrative Assistance in Tax Matters respectively.¹⁵³

4.2.1.4 Armed Conflict

Commodity activities in scenarios of armed conflict are particularly sensitive. Resource dependencies have proven to correlate with an increased risk of armed conflict.¹⁵⁴ Commodity deposits can i.a. play key roles in (attempted) coups d’état, the financing of warlordism, secession movements, mass rebellions, and foreign interventions in armed conflicts.¹⁵⁵ Generally speaking, one can distinguish between three core issues that are associated with armed conflicts, which occur in connection with natural resources: ‘resource supply conflicts’, ‘conflict resources’, and ‘community-level resource conflicts’.¹⁵⁶ However, most of the applicable rules still constitute indirect TCL.

First and foremost international humanitarian law (IHL) qualifies a state’s sovereignty in armed conflict.¹⁵⁷ With regard to the protection of commodities, one can roughly distinguish three ‘indirect’ legal avenues, which serve this very purpose and shall be considered subsequently: commodities can be protected as civilian objects, via environmental protection provisions, and through the prohibition to destroy or seize property, which includes the prohibition to pillage.

According to Article 52(1) of Additional Protocol I (AP-I),¹⁵⁸ civilian objects shall not be the object of attack or reprisals. They are being defined as all objects, which are not subject to military objectives, according to Article 52(1) AP-I. Article 52(2) AP-I specifies these objects to ones, which i.a. ‘make an effective contribution to military action’ and ‘offer[] a definite military advantage.’¹⁵⁹ While the threshold of ‘military advantage’ set here does not seem to be very hard to overcome,¹⁶⁰ Article 54(2) AP-I provides specific protection for objects that are ‘indispensable to the survival of the civilian population’, including i.a. foodstuffs, crops, and livestock.

According to Article 54(2) AP-I, such objects may not be attacked, destroyed, removed, or rendered useless, thus not be damaged in any way.¹⁶¹ The same obligation exists with regard to NIACs, according to Article 14 of Additional Protocol II (AP-II).¹⁶² As Dam-de Jong points out, the list of indispensable objects provided by Articles 54(2) AP-I and 14 (AP-II) is not meant to be exhaustive, but rather may also include forests, lakes and rivers, and even mineral oil.¹⁶³

Commodities may also fall under the general protection, which is being accorded to the environment.¹⁶⁴ Articles 35(3) and 55 AP-I set forth a prohibition to cause widespread, long-term, and severe damage to the environment. They entail a precautionary approach and may thus serve to prevent environmental damage resulting from the exploitation of commodity deposits, i.a. through impact assessments.¹⁶⁵ This basic protection of the overall environment however only applies during international armed conflict.¹⁶⁶ However, again the threshold of these protection provisions is set at a very high level, which as a consequence grants wide margins of discretion to states performing military operations.¹⁶⁷ Incidental damage resulting from commodity exploitation or plundering alone arguably does not suffice to constitute a violation of Articles 35(3), 55 AP-I since the damage generally must last several decades.¹⁶⁸

In terms of soft law instruments, principle 24 Rio Declaration recognises that ‘[w]arfare is inherently destructive of sustainable development.’ As a consequence, states are held to ‘respect international law providing protection for the environment in times of armed conflict and cooperate in its further development, as necessary.’

The UN General Assembly Resolution on the Protection of the Environment in Times of Armed Conflict i.a., ‘[u]rges States to take all measures to ensure compliance with the existing international law applicable to the protection of the environment in times of armed conflict.’¹⁶⁹ The fact that depletion of natural resources can cause the liability of the acting state, is being demonstrated by UN SC Resolution 687, which

reaffirms that Iraq […] is liable under international law for any direct loss, damage – including environmental damage and the depletion of natural resources – or injury to foreign Governments, nationals and corporations as a result of its unlawful invasion and occupation of Kuwait.¹⁷⁰

Within the realms of classical IHL, finally also the so-called ‘Martens clause’ has been said to provide environmental protection.¹⁷¹ The clause was first incorporated in the 1899 Hague Convention (II) With Respect to the Laws and Customs of War on Land, and also features in the 1949 Geneva Conventions and the two 1977 additional protocols thereto.¹⁷²

Moreover, the environment is also protected under international criminal law. According to Article 8(2)(b)(iv) Rome Statute, knowingly launching an attack that brings about ‘damage to civilian objects or widespread, long-term and severe damage to the natural environment’ that is disproportionate ‘to the concrete and direct overall military advantage anticipated’ constitutes a war crime.¹⁷³

Apart from these rules, natural resources are also protected by the prohibition to destroy or seize property.¹⁷⁴ According to Article 23(g) of the 1907 Hague Regulations, it is ‘forbidden [t]o destroy or seize the enemy’s property, unless such destruction or seizure be imperatively demanded by the necessities of war[.]’ According to Article 53 of Geneva Convention IV Relative to the Protection of Civilian Persons in Time of War, in times of occupation any destruction of private or public property is prohibited, unless it is absolutely necessary for military operations.¹⁷⁵ In addition, Article 28 Hague Regulations prohibits pillaging a village or town, ‘even when taken by assault’; Article 33(2) Geneva Convention IV prohibits pillage altogether.¹⁷⁶ Pillage is likewise illegal in times of occupation according to Article 47 of the Hague Regulations, as well as in a NIAC, according to Article 4(2)(g) AP-II.¹⁷⁷

Again, the unnecessary destruction or seizure of property, according to Articles 8(2)(b)(xiii) and 8(2)(e)(xii) Rome Statute,¹⁷⁸ as well as ‘pillaging a town or place, even when taken by assault’, according to Articles 8(2)(b)(xvi) and 8(2)(e)(v) Rome Statute constitute a war crime in both IACs and NIACs.¹⁷⁹ Furthermore, Article 147 Geneva Convention IV defines the ‘extensive destruction and appropriation of property, not justified by military necessity and carried out unlawfully and wantonly’ as a grave breach under the Convention; such act constitutes a war crime according to Article 8(2)(a)(iv) Rome Statute.¹⁸⁰ The term ‘property’ within the relevant IHL conventions was always meant to include the natural environment, and thus with it the commodities, which form part of it.¹⁸¹

4.2.1.5 Anti-corruption

Despite the fact that corruption still constitutes a major impediment to harnessing the full potential of the commodity sector,¹⁸² most of the rules addressing issues of corruption are ‘indirect’. Corruption constitutes the ‘abuse of public or private office for personal gain.’¹⁸³

Corrupt practices may occur at every stage of the commodity value chain and are particularly proliferate when it comes to the award of mineral rights as well as the regulation of commodity operations.¹⁸⁴ Frequently, corruption in the commodity sector occurs due to wide discretionary powers and inadequate governance mechanisms, which result from the high politicisation of the sector and lead to clientelism and favouritism.¹⁸⁵ It may also be caused by gaps in the anti-corruption legal and judicial system.¹⁸⁶ Large-scale corruption has been observed particularly also in the ‘procurement of goods and services, commodity trading, revenue management through natural resource funds, and public spending.’¹⁸⁷ Local actors as well as transnational corporations may ‘act indistinctly as instigators or beneficiaries of the corruptive behaviour.’¹⁸⁸ State-owned enterprises (SOEs) seem to be particularly prone to corruption when it comes to awarding of rights, procurement, trading, and social expenditures.¹⁸⁹ This risk arises in particular, where SOEs function as both administrators and regulators of the commodity sector.¹⁹⁰ Typical offences include

bribery of foreign officials, embezzlement, misappropriation and diversion of public funds, abuse of office, trading in influence, favouritism and extortion, bribery of domestic officials and facilitation payments.¹⁹¹

Bribery, trading in influence and collusion are used for instance in order to manipulate a state’s decision to extract. These corrupt practices may lead to environmental law or HR being ignored in favour of allowing commodity extraction. They may occur within administrative, e.g. licensing procedures, on national as well as local levels or be applied to influence policies and legislation in the corporate interest or interests of the private elite. Oftentimes, the practices involve high-level public officials, such as parliamentarians or ministers.¹⁹² What contributes significantly to such corruption, is a lack of information and resources on the part of the host state of the commodity activity, which is thus unable to adequately assess its own resource wealth.¹⁹³ As a consequence, states often rely on research reports, which have been elaborated and paid for by extractive companies.¹⁹⁴

Furthermore, specific risks occur with regard to social and environmental impact assessments, which are often subject to a highly politicised approval process and lack adequate participation of local communities. Also, ‘ambiguous, outdated or unenforced legislation on the protection of socio-environmental rights’ may increase the risk of corruption during the decision to extract, particularly where ‘unclear and opaque land tenure systems’, e.g. based on local customs, exist.¹⁹⁵

After somewhat ignoring corruption-related issues until the 1970s, the international community in the past three decades has adopted several legal instruments dealing specifically with corruption. Typically, international anti-corruption agreements contain provisions regarding the scope of offences they are applicable to, preventive measures, law enforcement issues, international cooperation, and implementation mechanisms.¹⁹⁶ None of them, however, are directly aimed at tackling corruption in the commodity sector.

The arguably most prominent, almost universally ratified international agreement is the 2003 UN Convention Against Corruption (CAC).¹⁹⁷ The CAC in its preamble explicitly recognises that corruption constitutes ‘no longer a local matter but a transnational phenomenon that affects all societies and economies, making international cooperation to prevent and control it essential’. According to Article 5(1) CAC,

[e]ach State Party shall, in accordance with the fundamental principles of its legal system, develop and implement or maintain effective, coordinated anti-corruption policies that promote the participation of society and reflect the principles of the rule of law, proper management of public affairs and public property, integrity, transparency and accountability.

Article 5(2) CAC mandates states to take preventive measures for this purpose, while Article 5(3) CAC postulates that states ‘shall endeavour’ to evaluate the adequacy of their legal instruments and administrative measures on a regular basis. According to Article 5(4) CAC states are held to collaborate with one another as well as international organisations in their fight against corruption. Article 6 CAC requires states to establish and maintain independent anti-corruption bodies, which ensure the implementation of policies pursuant to Article 5 CAC. According to Article 7(1)(a) CAC civil servants as well as non-elected public officials shall be recruited, hired and promoted ‘based on principles of efficiency, transparency and objective criteria such as merit, equity and aptitude.’ Furthermore, states shall provide them with adequate remuneration and equitable pay and offer training programmes, which promote awareness of the risks of corruption, according to Article 7(1) (c) and (d) CAC respectively. Article 8(3) CAC specifically refers to the International Code of Conduct for Public Officials, which may provide guidance for the elaboration of further national standards.

According to Article 9(1) CAC states shall ‘establish appropriate systems of procurement, based on transparency, competition and objective criteria’ in order to effectively prevent corruption. These systems shall address, i.a., the public distribution of information, conditions for participation in a tender, ‘objective and predetermined criteria for public procurement decisions’, an effective mechanism of domestic review, as well as measures addressing the behaviour of personnel, such as screening procedures and trainings. Article 12 CAC addresses prevention of corruption with regard to the private sector and i.a. sets forth that states ‘shall provide effective, proportionate and dissuasive civil, administrative or criminal penalties’ for violations of accounting and auditing standards. Article 12(2) CAC suggests specific measures, which states may take to achieve these ends, including the promotion of cooperation between law enforcement authorities and private actors, business standards and codes of conduct, transparency between private entities particularly regarding the ‘identity of legal and natural persons involved in the establishment and management of corporate entities’, the prevention of misuse of procedural rules with regard to subsidies and licences, as well as of conflicts of interest, i.a. by restricting the professional activities of former public officials, and ensuring sufficient auditing of private entities.¹⁹⁸

According to Article 13 CAC, states shall ‘promote the active participation of individuals and groups outside the public sector’, particularly of NGOs and local communities, i.a. by ensuring effective access to information by the public, as well as ‘[r]especting, promoting and protecting the freedom to seek, receive, publish and disseminate information concerning corruption.’ Article 14 sets forth specific measures to prevent money laundering.¹⁹⁹ Bribery of national and foreign public officials, embezzlement, trading in influence, and other abuses shall all be established as criminal offences, according to Articles 15–25 CAC. Article 26 CAC postulates that the liability of legal persons for the participation in these offences be established. According to Article 40 CAC bank secrecy laws must not hinder criminal investigations into potential corruption offences. Articles 43–50 CAC set forth several forms of international cooperation in order to tackle the increasingly transnational phenomenon of corruption, including extraditions, transfer of sentenced persons, mutual legal assistance, law enforcement cooperation and joint investigations.

Further regulatory instruments in the fight against corruption include the International Code of Conduct for Public Officials, the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions,²⁰⁰ as well as, on the regional level, respective anti-corruption Conventions in the Americas, Africa as well as Europe.²⁰¹

The CoE Civil Law Convention on Corruption (ECLC) has been described as an ‘innovative’ instrument in the fight against corruption in that it,²⁰² according to its Article 1, mandates every state party to

provide in its internal law for effective remedies for persons who have suffered damage as a result of acts of corruption, to enable them to defend their rights and interests, including the possibility of obtaining compensation for damage.

Article 3(1) ECLC further spells out that states shall adopt legislation, which grants all persons that have suffered damage from corruption ‘the right to initiate an action in order to obtain full compensation for such damage.’ According to Article 4(1) ECLC domestic legislation shall generally entitle victims of corruption to compensation if certain criteria are fulfilled. Article 5 ECLC requires states to establish respective procedures also in cases, in which the damage resulted from acts of corruption committed by public officials, thus directed against the state itself. Article 13 ECLC mandates states to ‘co-operate effectively in matters relating to civil proceedings in cases of corruption’.

4.2.1.6 Interim Conclusion

As our brief examination has indicated, indirect TCL generally does not provide guidelines on how potential conflicts between e.g., social development and environmental protection imperatives should be remedied. Thus, the current ‘hard law’ framework largely falls short of effectively tackling the factual problem at hand—which in the case of commodity activities typically lies in the value decision, which is to be translated into law, what commodity-related interest should prevail. This is the result of a legal framework, which gives effect to several, yet isolated individual interests instead of creating a coherent regulatory picture.²⁰³

With Meessen,²⁰⁴ one therefore can contend that the current framework is not sufficiently close to reality. It is remote from the factual reality that the relevant human activity lies in handling commodities—which only secondarily may or may not constitute a corrupt practice, harm the environment or violate Human Rights. The latter categories are more abstract, theoretical legal ‘boxes’, which appear to serve the principal purpose of dogmatically clustering legal norms. The ‘isolation’ of the subsets of indirect TCL, which they bring about, however i.a. does not live up to the fact ‘that the commodity sector’s social and environmental impacts are inextricably intertwined.’²⁰⁵ As a consequence, indirect TCL is little effective in creating the equilibrium necessary for a functional commodity sector.

4.2.2 The Limited Effectiveness of Incidents of Direct TCL

While not all of TCL qualifies as ‘indirect’, those incidents, which exhibit a conscious consideration of commodity policy trade-offs, are limited in their effectiveness due to various normative patterns. First, current examples of ‘hard’, direct TCL are not designed to comprehensively balance commodity interests (Sect. 4.2.2.1). Second, most of direct TCL constitutes soft law and/or is of private normative nature (Sect. 4.2.2.2). Third, whereas large parts of TCL spell out rather abstract rules and guidelines, those incidents of direct TCL, which exhibit a sufficient degree of specificity, largely address private actors (Sect. 4.2.2.3).

4.2.2.1 Hard, Direct TCL Does Not Balance Commodity Interests Comprehensively

Where rules have been created with a conscious consideration of commodity-related scenarios, they are typically not comprehensively addressing corresponding policy trade-offs. The respective rules generally foster individual commodity interests and at a maximum seek to strike a balance between two of them—economic gain and development (Sect. 4.2.2.1.1); economic gain and participation (Sect. 4.2.2.1.2); economic gain and environmental protection (Sect. 4.2.2.1.3); or between the economic interests of states (Sect. 4.2.2.1.4) respectively. Whereas integrating respective norm sets with one another may bring about legal rules that are more comprehensively balancing commodity interests, the current degree of integration in the TCL framework falls short of achieving this aim (Sect. 4.2.2.1.5).

4.2.2.1.1 Norms Balancing Economic Gain and Development

The right to freely dispose over natural resources (RFD) as provided for in common Articles 1(2) of the ICCPR and the ICESCR, seeks to strike a balance between the state’s interest in exploiting natural resources, which will mostly consist of its endeavour to reap economic benefits, and development objectives, which local communities carry. It has been operationalized mainly in two contexts: regarding the RFD of indigenous peoples over their lands and territories and in situations where a people’s right to subsistence is threatened.²⁰⁶ With regard to the latter, common Article 1(2) Human Rights Covenants has been interpreted so as to oblige states

to take measures to ensure that its own people are not in any case deprived of its own means of subsistence, including food [and water] […] and to investigate any situation where such deprivation is alleged to be occurring.²⁰⁷

Article 21(2) AfCHR applies specifically to commodity scenarios and sets out that, ‘[i]n case of spoliation, the dispossessed people shall have the right to the lawful recovery of its property as well as to an adequate compensation.’ Article 15(2) ILO Convention 169 obliges states to pay fair compensation to indigenous peoples for damages resulting from commodity activities. For cases, in which relocations cannot be prevented, Article 16(5) ILO Convention 169 equally requires the full compensation for any loss or injury. Article 8(2)(b) UNDRIP obliges states to provide effective mechanisms for prevention and redress of ‘[a]ny action which has the aim or effect of dispossessing [indigenous people] of their lands, territories or resources’. Article 40 UNDRIP lays down a general right ‘to effective remedies for all infringements of their individual and collective rights.’²⁰⁸

In the context of armed conflict, the PSNR principle seeks to balance the occupant’s interest of economic gain with the respective people’s interest of development.²⁰⁹ It has been repeatedly emphasised with regard restitution rights of the respective states and peoples under occupation. UN GA Resolution 3336 (XXIX)

reaffirms the right […] to the restitution of and full compensation for the exploitation, depletion and loss of, and damages to, the natural and all other resources and wealth of [occupied] States, territories and peoples[.]²¹⁰

Likewise, according to Resolution 62/181, the UN GA

[r]ecognizes the right […] to claim restitution as a result of any exploitation, damage, loss or depletion, or endangerment of […] natural resources resulting from illegal measures taken by […] the occupying Power…²¹¹

This claim has been repeated constantly since in the ensuing UN GA resolutions,²¹² with the most recent one explicitly reaffirming

the inalienable rights of the Palestinian people and of the population of the occupied Syrian Golan over their natural resources, including land, water and energy resources.²¹³

Generally, under international humanitarian law, the occupying state acts as administrator of immovable public property, according to Article 55 Hague Regulations.²¹⁴ The provision moreover establishes that the occupant must administer natural resources in accordance with the rules of usufruct²¹⁵—it thus constitutes a ‘direct’ normative element. At the same time, the occupant notably is required to ‘safeguard the capital of these properties.’²¹⁶ As Schrijver notes, this raises the question, what constitutes a violation of this obligation—particularly with regard to non-renewable resources.²¹⁷ Thus, every extraction of non-renewable commodities could be classified as a form of reducing their capital.²¹⁸ However, others contend that only ‘wanton dissipation or destruction or abusive exploitation of public resources’ constitutes a violation of Article 55 Hague Regulations.²¹⁹

4.2.2.1.2 Norms Balancing Economic Gain and Participation

The right to free, prior and informed consent (FPIC) addresses the participation of indigenous peoples in particular.²²⁰ The general right is rooted in Article 6 ILO Convention 169. Articles 15(2) and 16(2) ILO Convention 169 deal specifically with FPIC in scenarios of commodity activities, and corresponding relocations respectively. Moreover, Article 19 UNDRIP borrows the wording of the general FPIC right in Article 6 ILO Convention 169; Article 32 UNDRIP draws on Article 15(2) ILO Convention 169 and sets out that

States shall consult and cooperate in good faith with the indigenous peoples concerned through their own representative institutions in order to obtain their free and informed consent prior to the approval of any project affecting their lands or territories and other resources, particularly in connection with the development, utilization or exploitation of mineral, water or other resources.²²¹

While ILO Convention 169 has thus far only been ratified by 22 countries and the UNDRIP constitutes a soft law instrument,²²² FPIC rights have also been recognised in the jurisprudence of human rights bodies, i.a. based on Article 27 ICCPR, Articles 1(2) and 15(1) ICESCR respectively as well as Article 5(d)(v), (e)(vi) ICERD.²²³ Thus, FPIC does not (yet) possess the status of ‘hard’ law, yet it certainly creates a ‘strong political obligation’ at least for those 144 states, which voted in favour of the UNDRIP.²²⁴ This perception corresponds to the general observation that there is a ‘clear trend […] toward increased public participation in laws and practice’, particularly with regard to commodity activities.²²⁵ Here, FPIC is frequently concerned throughout the entire life cycle of commodity operations and should generally be sought already during the pre-removal/exploration phase.²²⁶

Besides, the right to economic self-determination has been interpreted by the CESCR to require states to seek free and informed consent of the people concerned prior to concluding contracts with foreign mining companies.²²⁷ A right to participate in development decisions, which concern respective local communities, has also been seen as enshrined in Article 24 AfCHR.²²⁸

4.2.2.1.3 Norms Balancing Economic Gain and Environmental Protection

Article 4(2) Convention on the Regulation of Antarctic Mineral Resource Activities (CRAMRA) aims to ensure that mineral resource activities are conducted in a manner that does not significantly harm the environment—thus giving effect to the general no harm rule with regard to the Antarctic.²²⁹ The CRAMRA, however, lacking the required number of ratifications never entered into force.²³⁰

Moreover, environmental norms dealing with mineral commodities in particular can be found in the special regimes regulating international wastes and recycling, such as the Basel Convention or the Minamata Convention on Mercury. The latter aims to reduce releases, usage and emissions of mercury, which is particularly used in gold production.²³¹ Also the International Maritime Organisation (IMO) Guidelines and Standards for the Removal of Offshore Installations and Structures on the Continental Shelf and in the Exclusive Economic Zone emphasise the objective of preventing and controlling marine pollution.²³²

4.2.2.1.4 Norms Balancing Economic Interests of States

Lastly, we shall discuss two additional normative patterns, which limit the balancing effect of direct TCL addressing states. As the example of the norms covering shared resource use illustrate, where hard, direct TCL ‘bites’, it will frequently concern an inter-state balance rather than being aimed at equilibrium within the commodity governance matrix (Sect. 4.2.2.1.4.1). Moreover, the commodity-directed norms within the liberalised trade regime despite their ‘hard’ law nature are rather ‘declaratory’ than legally binding (Sect. 4.2.2.1.4.2).

4.2.2.1.4.1 Aiming at Inter-State Balance: Shared Resources

Commodity deposits can stretch across national boundaries and thus fall under the sovereignty of more than one state.²³³ For such scenarios, a distinct set of rules has evolved over time, mostly originating from bi- and at times plurilateral treaty law.²³⁴ While some regimes are covering specific resources, such as water, migratory species, transboundary ecosystems or oil and gas deposits,²³⁵ some general rules and principles are applicable to the exploitation of shared resources in general. Whereas the terminology in use here refers to ‘resources’—and not ‘commodities’, the respective rules can still be deemed to constitute ‘direct’ TCL in the sense that they reflect a conscious consideration of the particularities of commodity exploitation.²³⁶

Shared resources law is aimed at balancing the interests of the respective states involved in the exploitation of the shared deposit. Two general rules, which are at the heart of this field of law, are the duty to co-operate on the one hand and the principle of equitable utilisation on the other.

The former is provided for in Article 3 of the Charter of Economic Rights and Duties of States. The cooperation of states when it comes to making use of a shared resource constitutes a major prerequisite towards achieving this aim.²³⁷ The principle of equitable utilisation of shared resources has evolved from the general rule of equity and encompasses equitable principles such as good faith and good neighbourliness.²³⁸ Although like the term cooperation, the principle of equitable utilisation has so far not yet been defined uniformly by international law, it can be identified as obliging states to manage shared resources equitably ‘in order to balance the different demands of States’.²³⁹ In addition, the result produced by this process must be equitable in itself.²⁴⁰ Equitable utilisation is thus ‘both the target and the process of its implementation’ and rather a result to be achieved in view of the specific circumstances of the case at hand than an abstract rule.²⁴¹

With regard to those shared resources that are located in or under the sea, the UNCLOS provides specific rules.²⁴² When it comes to living resources, particularly fisheries, Articles 61–64 UNCLOS set forth the principle of optimum utilisation as well as the duty to cooperate for this end. The latter applies according to Article 61(2) UNCLOS to measures meant to prevent the risk of over-exploitation in a coastal state’s Exclusive Economic Zone (EEZ), which shall be taken in cooperation with international organisations ‘as appropriate’. Article 64(1) UNCLOS mandates coastal states to cooperate with states whose nationals fish the highly migratory species contained in Annex I either directly or through IOs in order to ensure conservation and promote ‘the objective optimum utilization’. Further UNCLOS provisions touching upon shared resources address the specific scenarios of enclosed or semi-enclosed seas (Article 123 UNCLOS) and resource deposits in the Area, which stretch across national boundaries (Article 142 UNCLOS).

Whereas the general rules applicable to shared resource use do not extend to shared management, ‘but rather end[] at the threshold of co-operation for the implementation of equitable utilization’,²⁴³ more intensified forms of cooperation are generally implemented through bilateral instruments.²⁴⁴

One area in which such joint management systems are quite prevalent is the joint development of hydrocarbon fields.²⁴⁵ In this connection, the general principles of cooperation and equitable utilisation establish the framework for individual state parties to seek a negotiated solution on a (mostly) bilateral basis.²⁴⁶ Ong insofar differentiates between three models of intergovernmental joint development agreements:²⁴⁷ ‘Model I’ agreements provide for the exploitation right of one state as well as a corresponding duty to transfer an agreed upon share of the revenues to the other state; ‘Model II’ agreements arrange the establishment of a legal framework for a system of joint ventures; and ‘Model III’ agreements require the creation of a common agency that grants licences for exploitation and creates regulatory norms.²⁴⁸

More recent ‘model III’-type agreements exhibit a ‘clear trend’ of including environmental protection provisions.²⁴⁹ According to Article 10(a) of the 2001 Timor Sea Arrangement, East Timor and Australia were obliged to cooperate in order to ‘prevent and minimise pollution and other environmental harm.’²⁵⁰ The most recent successor of this agreement, the 2018 Australia–Timor Leste Maritime Boundary Treaty,²⁵¹ requires parties, through a ‘designated authority’ to ‘regulate the [Greater Sunrise] Special Regime Area according to Good Oilfield Practice’, according to Article 6(2)(b) of Annex B, which includes ‘environmental protection’ and ‘calls for the adoption of methods and processes that minimise the impact of the Petroleum operations on the environment’. These clauses put the shared economic endeavour of the exploiting states in context with a joint objective of protecting the environment. Therefore, they are balancing two commodity interests, yet without providing any more concrete guidance on how to achieve this balance.

4.2.2.1.4.2 Commodity Trade and Development: Hard, Yet ‘Declaratory’ Provisions

The rules of Part IV of the GATT addressing the particularities of commodity trade are intended to balance the economic interests of developing states on the one hand and developed states on the other. As such, they are seeking to strike a balance also between development interests on both sides and to reconcile them with the liberalised trade regime.

The provisions rooted in Articles XXXVI-XXXVIII GATT have been included in the GATT only subsequently by amendment.²⁵² Article XXXVI:4 GATT pursues the overall aim of fostering the economic development of those less-developed contracting parties that continue to depend ‘on the exportation of a limited range of primary products.’ It basically lays out a roadmap with three causal conditions, which need to be fulfilled in order for commodity-dependent states to attain this goal: access to world markets for commodities; stabilized, improved conditions in world commodity markets, including ‘stable, equitable and remunerative prices’; as well as ‘steady growth of the real export earnings of these countries’.²⁵³ However, measures designed to stabilise world commodity markets, shall be taken ‘wherever appropriate’. Historically, ICAs were designed to pursue these exact objectives, with Article XX:h GATT granting justification for their implementation. Yet, as will be discussed in more detail below,²⁵⁴ ICAs have been largely abandoned, and consequently Article XXXVI:4 GATT has been said to have become ‘a dead letter’ following the ‘ideological shift’ in the late 1980s.²⁵⁵

Article XXXVI:5 GATT further highlights that diversification of the economies of less-developed contracting parties—and thus ‘avoidance of an excessive dependence on the export of primary products’—will facilitate the ‘rapid expansion’ of their economies. As a consequence, it recognises the ‘need for increased access in the largest possible measure to markets under favourable conditions for processed and manufactured products currently or potentially of particular export interest to less-developed contracting parties.’²⁵⁶ While Article XXXVI:7 GATT calls for collaboration between the contracting parties, intergovernmental bodies and relevant UN organisations in order to foster the development benefits of international trade, Article XXXVI:8 GATT clarifies that

developed contracting parties do not expect reciprocity for commitments made by them in trade negotiations to reduce or remove tariffs and other barriers to the trade of less-developed contracting parties.²⁵⁷

Article XXXVII GATT spells out concrete commitments for developed countries in the context of trade and development, which include efforts in reducing and eliminating trade barriers to products, which are particularly important to developing country members; refraining from introducing customs duties or non-tariff barriers on such products; or maintaining ‘trade margins at equitable levels’. Article XXXVIII GATT provides for joint action and collaboration between the contracting parties within the GATT framework as well as in other fora. Article XXXVIII:2:a GATT corresponds to the objective set forth in Article XXXVI:4 GATT and calls for corresponding international arrangements, which stabilise market conditions.

The trade and development provisions of the GATT have been criticized as being ‘declaratory rather than obligatory’ given the lack of effective sanctions.²⁵⁸ Article XXXVII:1 GATT explicitly frees developed countries from their commitments if and where ‘compelling reasons’ make it impossible for them to implement the provisions of Article XXXVII GATT. These compelling reasons may—contrary to the general rule contained in Article 27 VCLT according to which a party may not invoke the provisions of its internal law as justification for its failure to perform a treaty—include domestic legal reasons.²⁵⁹ Consequently, states seeking to justify deviation from their obligations under Part IV of the GATT may simply legislate against them.²⁶⁰

As such, the trade and development provisions of the GATT illustrate what holds true for much of hard law directly addressing commodity activity: It is of little binding effect for states and thus of little significance when it comes to the balancing of the interests associated with commodity activity.

4.2.2.1.5 Integration Between Norm Subsets of TCL

As the sustainable use principle reflects, integration can create balancing norms, which cover more than two commodity interests.

Integration can also be observed between different norm subsets, which have brought about incidents of direct TCL. For instance, as far as commodity-related violations result from environmental causes, the UN Human Rights Committee (HRC) has held that duties of states under international environmental law inform the contents of Article 6(1) ICCPR and vice versa.²⁶¹ Thus, in these scenarios the implementation of the right to life will depend on the actions that states are taking with regard to the protection of the environment, such as protecting it against harm or pollution as well as ensuring sustainable use of natural resources or carrying out EIAs.²⁶² In order to fulfil their obligation of implementing the right of life, states should therefore act in conformity with applicable international environmental law.²⁶³ In Portillo Caceres v. Paraguay a state violating its duty to protect the environment has been said to also be in violation of its duty to protect citizens against human rights violations.²⁶⁴

This form of integration thus combines two protection mechanisms: international environmental law (IEL) and Human Rights (HR) respectively are being used as benchmarks to assess whether or not a rule of IEL or international HR has been breached. From the perspective of the commodity matrix, the interests of environmental protection and of development are being combined into one clearer, perhaps more effective protection mechanism. Therefore, one can argue that it will contain objectives of economic gain and control more vigorously. What it does not achieve, however, is to provide more concrete guidelines how all five commodity interests should be brought into a state of equilibrium.

A further prominent example of integration is provided by the WTO Appellate Body’s interpretation in US–Shrimp of the notion ‘natural resources’ in Article XX(g) GATT in light of IEL, particularly SD.²⁶⁵ Taking this observation several steps further, this form of integration can be interpreted as an attempt to essentially limit the reach of trade liberalisation measures to the boundaries of IEL. By ways of oversimplification, one could argue that where they interfere with environmental protection, they should be held to be unlawful. However, despite the integration of the fields of IEL and world trade law, we are again left without guidelines how we should balance all interests associated with commodity activity.

It seems natural that these guidelines could only be brought about by a norm set—or legal field—which is being created in order to integrate norms fostering all commodity interests. The level of integration that the legal order currently exhibits is insufficient to achieve this aim.

4.2.2.2 Direct TCL Is Largely of ‘Soft’ or Private Nature

Another pattern, which can be discerned within the body of TCL is that commodity-directed rules, i.e. direct TCL tends to be either of soft law character, thus primarily addressing states (Sect. 4.2.2.2.1); or to consist of standards that apply to private actors (Sect. 4.2.2.2.2).

4.2.2.2.1 Incidents of Soft, Direct TCL

Examples of soft, direct TCL are provided within the norm subsets covering good governance (Sect. 4.2.2.2.1.1) as well as the fiscal framework applicable to commodity activities (Sect. 4.2.2.2.1.2).

4.2.2.2.1.1 Good Governance

Good governance here is understood as a classificatory category, which comprises those rules that are primarily aiming to ensure smooth functioning of governance systems, thus especially rules addressing accountability, transparency and public participation.²⁶⁶

Increasing transparency is particularly important in a sector, which historically has often remained in great secrecy and still today is frequently being described as ‘opaque’.²⁶⁷ Against the backdrop of this lack of information, which has long been available on the commodity sector, its actors, financial flows and governance mechanisms, several international organisations, instruments and initiatives have evolved over the past decade, which seek to increase transparency, i.e. ‘the flow of relevant, timely and reliable economic, financial, social, institutional and political information, which is accessible to all relevant stakeholders.’²⁶⁸

Presumably the most prominent international effort in this respect with regard to oil, gas and mineral resources is the Extractive Industries Transparency Initiative (EITI). Being of the view ‘that a public understanding of government revenues and expenditure over time could help public debate and inform choice of appropriate and realistic options for sustainable development’, the multi-stakeholder participants of the founding 2003 Lancaster House conference ‘underline[d] the importance of transparency by governments and companies in the extractive industries and the need to enhance public financial management and accountability.’²⁶⁹ According to EITI principle 6, the ‘achievement of greater transparency must be set in the context of respect for contracts and laws.’²⁷⁰

In Article 2(1) of its Articles of Association (AoA), EITI describes itself as

an international multi-stakeholder initiative with participation of representatives from governments and their agencies; oil, gas and mining companies; asset management companies and pension funds […] [;] and local civil society groups and international non-governmental organisations.²⁷¹

As of this writing, 51 countries were implementing the 2019 EITI standard.²⁷² In order to be recognised as ‘implementing country’, so-called ‘candidate countries’ need to demonstrate that they meet the eight EITI requirements, which i.a. include effective oversight by a national multi-stakeholder group, disclosure of the legal and institutional framework applicable to commodity activities as well as compiling and reconciling company payments and government revenues. In this way, missing payments and corresponding corruption can be detected, as has been the case for instance with regard to Nigeria’s national oil company in 2012.²⁷³ Therefore, states are obliged to comprehensively disclose their taxes and revenues, including production entitlements, profits taxes, royalties, dividends, bonuses and licensing fees, their sale of potential shares of production or other revenues collected in kind, eventual infrastructure provisions and barter arrangements, particularly resource-for-infrastructure (RFI) programmes,²⁷⁴ transportation revenues, transactions related to SOEs, and subnational payments.²⁷⁵ The data provided must be sufficiently disaggregated, timely, and of adequate quality.²⁷⁶

Despite its considerable success in attracting implementing countries over the past decade,²⁷⁷ EITI has also been criticised for various shortcomings. One point of criticism relates to the EITI’s focus on transparency. While the latter may have improved in many implementing countries, this is not the case with regard to accountability of relevant actors. As the EITI’s official evaluators concluded in 2011,

[t]here are thus few indications that EITI programmes are so far having impact on dimensions such as governance, corruption, poverty reduction or other objectives stated in EITI’s Articles of Association.²⁷⁸

However, as the EITI’s chairman Frederik Reinfeldt, points out, the initiative should not be misunderstood ‘as the one-stop-shop for reversing the resource curse.’ Instead, he argues that EITI ‘must be mainstreamed and combined with other tools to ensure that natural resources are more prudently managed and better deployed towards both economic growth and sustainable human development.’²⁷⁹

Further transparency initiatives that are explicitly directed at the commodity sector, include the Publish What You Pay (PWYP) coalition, which consists of over 800 members worldwide, some of them NGOs that were created particularly for the purpose of addressing commodity governance issues, such as Global Witness or Revenue Watch, others long standing NGOs that increasingly devote resources to commodity governance-related programmes, such as Oxfam or Transparency International.²⁸⁰ The Natural Resource Governance Institute (NRGI) seeks to foster ‘the governance of natural resources to promote sustainable and inclusive development’,²⁸¹ by providing ‘policy advice, advocacy, and capacity development’—all based on ‘[o]riginal data, analysis, and applied research’.²⁸² The Africa Mining Vision, an intergovernmental effort, which emerged within the framework of the United Nations Economic Commission for Africa (ECA) and the African Union (AU) respectively, seeks to foster i.a. contract transparency, accession to transparency initiatives, such as EITI, as well as transparency in the overall ‘management of revenue paid to various governmental authorities’, which it recognises as ‘an important part of the mineral policy agenda.’²⁸³ Other players and initiatives e.g. include the Open Government Partnership, programmes launched within the framework of the G7 and G20, the World Bank, or the IMF.²⁸⁴

Some incidents of soft, direct TCL are covering commodity activities in a particularly comprehensive manner. For instance, the FAO Voluntary Guidelines on the Responsible Governance on Tenure of Land, Fisheries and Forests in the Context of National Food Security (VGGT) provide specific guidance on how to improve the governance of tenure.²⁸⁵ Their general principles require states to

[r]ecognize and respect all legitimate tenure right holders and their rights […,] [s]afeguard legitimate tenure rights against threats and infringements […,] [p]romote and facilitate the enjoyment of legitimate tenure rights […,] [p]rovide access to justice to deal with infringements of legitimate tenure rights […, and] [p]revent tenure disputes, violent conflicts and corruption.²⁸⁶

The VGGT moreover set forth ten principles, which shall guide the implementation of the guidelines: human dignity, non-discrimination, equity and justice, gender equality, holistic and sustainable approach, consultation and participation, rule of law, transparency, accountability, and continuous improvement.²⁸⁷

Specifically addressing governance challenges that occur in the context of mining, the 2002 Berlin Guidelines II for Mining and Sustainable Development are ‘intended to provide general guidance for sound and sustainable management’ of mining(-related) activities.²⁸⁸ Based on their 1991 predecessors, the Berlin Guidelines stipulate 15 ‘Fundamental Principles for the Mining Sector’.²⁸⁹

Accordingly, states and mining corporations shall i.a. recognise environmental management, including impact assessments, as a ‘high priority’; equally recognise ‘the importance of socio-economic impact assessments and social planning’; ‘[e]stablish environmental accountability […] at the highest levels of management and policy-making’; ensure participation of affected communities, including full participation of women and other marginalised groups; ‘[a]dopt risk analysis and risk management in the regulation, ‘design, operation and decommissioning of mining activities’; avoid environmental regulation, which may have the effect to unnecessarily restrict trade and investment; ‘[r]ecognize the linkages between ecology, socio-cultural conditions and human health and safety, the local community and the natural environment’; ‘[e]valuate and adopt […] economic and administrative instruments’, which ‘encourage the reduction of pollutant emissions and the introduction of innovative technology’; as well as ‘[e]ncourage long-term mining investment [through] environmental standard with stable and predictable environmental criteria and procedures’.²⁹⁰

Moreover, the Berlin II Guidelines provide suggestions for the design of domestic legal frameworks, which apply to mining activities and thus seek to support governments in their task ‘to provide a well-designed legislative framework for the mining industry that includes all aspects of the environment, both physical and social.’²⁹¹ In terms of instruments for the implementation of mining-related rules, the guidelines advocate for a ‘mixture of regulatory instruments’, which, apart from prescriptive systems, may also include ‘performance targets’, ‘economic instruments’, ‘negotiated or voluntary agreements’, or ‘environmental management systems’.²⁹²

The Intergovernmental Forum on Mining, Minerals, Metals and Sustainable Development (IGF) is a voluntary initiative of over 60 states that are ‘committed to leveraging mining for [SD]’.²⁹³ Its Mining Policy Framework (MPF) provides comprehensive policy guidance that, if ‘progressively implemented, will allow mining to make its maximum contribution to the sustainable development of developing countries.’²⁹⁴ The MPF provides guidance on how to implement a legal and policy environment conducive to sustainable mining; how to optimise financial as well as socio-economic benefits arising from mining; how to sustainably manage the natural resource base; how to manage post-mining transition; and how to foster the SD benefits of artisanal and small-scale mining (ASM).²⁹⁵

Pursuing a regional approach, the Africa Mining Vision (AMV) provides comprehensive guidance on how to harness Africa’s resource endowments as a ‘key’ to the continent’s development.²⁹⁶ It identifies ‘the formulation and implementation of workable [resource-based] industrialisation strategies’ as the central issue.²⁹⁷ Looking at the respective success stories from Nordic countries, the AMV recognises that, instead of relying on ‘foreign inputs’, ‘proactive and deliberate actions from key stakeholders, particularly governments’ are an important prerequisite for achieving this aim.²⁹⁸ With its ambition ‘to transform mineral sectors in an inclusive, sustainable way’, the AMV correlates with ‘other Pan-African development initiatives, such as the AU Agenda 2063.’²⁹⁹ It is based on seven tenets³⁰⁰ and six major intervention areas.³⁰¹

Recalling the example of the Lagos Plan of Action, which is said to have remained ‘part of the rhetoric of official declarations, dissociated from real policy’, the 2011 International Study Group Report on Africa’s Mineral Regimes called for concrete instruments for the implementation of the AMV.³⁰² Against this backdrop, the AU’s 2011 Draft Action Plan for Implementing the AMV grouped respective measures and activities into nine ‘clusters’: mining revenues and mineral rents management; geological and mining information systems; building human and institutional capacities; artisanal and small-scale mining; mineral sector governance; research and development; environmental and social issues; linkages and diversification; mobilising mining and infrastructure investment.³⁰³ In December 2013, the AU established the African Minerals Development Centre (AMDC), which has the mandate ‘to provide strategic operational support for the [AMV] and i.a. to elaborate so-called ‘Country Mining Visions’.³⁰⁴

4.2.2.2.1.2 Fiscal Framework

Within the guidance regarding the fiscal framework for commodity activities, examples of soft, direct TCL include the UN Handbook on Extractive Industries Taxation, which is providing guidance on how extractive industry activities should be taxed.³⁰⁵ The handbook provides elaborate commodity-directed guidance on tax treaty issues; permanent establishment issues; transfer pricing issues; tax treatment of decommissioning; the overall government’s fiscal take; tax aspects of negotiating and renegotiating contracts; and value added tax.

Furthermore, the Base Erosion and Profit Shifting (BEPS) process under action 10 has brought about specific guidance on the analysis of transfer pricing in ‘cross-border commodity transactions between associated enterprises’ (commodity transactions). Particularly relevant to commodity transactions is also the new guidance on applying the arm’s length principle, which was developed under action 9, as well as the new standards for transfer pricing documentation, which have been developed as part of action 13.³⁰⁶ The joint IGF-OECD Program on Tax Base Erosion and Profit Shifting in the Mining Sector is providing further commodity-specific guidance i.a. on issues such as the undervaluation of mineral exports, indirect transfer of mining assets, and a practice called metals streaming.³⁰⁷

Besides, the IMF has developed a draft Natural Resources Fiscal Transparency Code (NRFTC),³⁰⁸ which builds on its general Fiscal Transparency Code.³⁰⁹ It requires states to establish a comprehensive legal framework and fiscal regime and to maintain ‘open and transparent procedures for granting rights for resource extraction, and clear rules governing resource revenue collection and verification.’³¹⁰

4.2.2.2.2 Incidents of Private, Direct TCL

Incidents of private, direct TCL concern corporate responsibility (Sect. 4.2.2.2.2.2). These rules need to be understood in the context of the general international standards applicable to corporations (Sect. 4.2.2.2.2.1).

4.2.2.2.2.1 General System of Corporate Responsibility

The general system of corporate responsibility naturally largely qualifies as indirect TCL. The UN Guiding Principles for Business and Human Rights (UN GP) currently constitute one of its pivotal instruments.³¹¹ Principles #11–15 specify businesses’ responsibility to respect (R2R).³¹² According to UN GP #11, business enterprises should not infringe HR themselves and address HR violations ‘with which they are involved’.³¹³ R2R requires businesses first to ‘[a]void causing or contributing to adverse [HR] impacts through their own activities, and address such impacts when they occur’;³¹⁴ secondly, they need to ‘[s]eek to prevent or mitigate adverse [HR] impacts that are directly linked to their operations, products or services by their business relationships.’³¹⁵ This obligation applies also where they did not contribute to those impacts.

The UN GP also touch upon remediation and set forth that corporations should provide legitimate remediation processes wherever ‘they have caused or contributed to’ HR violations, according to UN GP #22.³¹⁶ Such shall be done ideally through ‘operational-level grievance mechanisms’, according to UN GP #29.³¹⁷ These mechanisms should be legitimate, accessible, predictable, equitable, transparent, rights-compatible, ‘[a] source of continuous learning’, and ‘[b]ased on engagement and dialogue’, according to UN GP #31.³¹⁸

Apart from the fact that commodity corporations often operate in conflict-affected areas,³¹⁹ what makes them particularly prone to be concerned with negative HR impacts, is the complexity of their supply chains, respective local content requirements and thus the need to enter numerous contractual relations with third parties.³²⁰ Where local capacities are underdeveloped, businesses aiming to uphold HR standards may even be required to proactively implement educational and other capacity-building measures.³²¹ The framework of the UN GP suggests that these challenges can best be met by the concept of leverage.³²² The latter in this context is being defined as the ‘ability to effect change in the wrongful practices of an entity that causes a harm.’³²³ In general, wherever a corporation is able to control the outcome of an activity potentially infringing upon HR, ‘it should seek to prevent or mitigate [this] impact.’³²⁴ Wherever it does not dispose of direct control, the company ‘should seek to use leverage to secure outcomes which avoid or mitigate any adverse human rights impacts.’³²⁵ One way to create leverage would be to ‘secure significant and substantive commitments from a counterparty with respect to human rights’, which, however, again may require the corporation to provide support to the contractual partner in order for it to meet its HR commitments, e.g. through capacity-building.³²⁶

Apart from using leverage in their contractual relations in order to ensure HR compliance within their supply chain, commodity companies may also ‘be on the receiving end of leverage from external sources.’³²⁷ Especially the IFC Performance Standards on Environmental and Social Sustainability (IFCPS)—as well as the banks abiding by the so-called Equator principles –, are said to be ‘a key driver for improvements in the performance of [commodity companies] in relation to [environmental and social] issues.’³²⁸

The IFC Performance Standards on Environmental and Social Sustainability (IFCPS)

are directed towards clients, providing guidance on how to identify risks and impacts, and are designed to help avoid, mitigate, and manage risks and impacts as a way of doing business in a sustainable way, including stakeholder engagement and disclosure obligations of the client in relation to project-level activities.³²⁹

Wherever IFC provides direct investments, it requires its clients to implement the eight individual standards that make up the IFCPS in order to foster the development benefits of the respective operation.³³⁰

The Equator principles (EP) are

a risk management framework, adopted by financial institutions, for determining, assessing and managing environmental and social risk in projects and is primarily intended to provide a minimum standard for due diligence and monitoring to support responsible risk decision-making.³³¹

The general idea is that the 94 so-called Equator Principles Financial Institutions (EPFIs) financing or advising business operations are responsible to ensure that these operations are being conducted in a socially responsible way and in a manner, which respects ‘sound environmental management practices’.³³²

Another prominent ‘indirect’ standard, which addresses issues of corporate governance, are the OECD Guidelines for Multinational Enterprises (OECDG).³³³ The OECDG are said to be ‘recommendations addressed by governments to multinational enterprises’, which

aim to ensure that the operations of these enterprises are in harmony with government policies, to strengthen the basis of mutual confidence between enterprises and the societies in which they operate, to help improve the foreign investment climate and to enhance the contribution to sustainable development made by multinational enterprises.³³⁴

The OECDG generally provide voluntary good practice standards, which are consistent with international standards and typically also domestic laws.³³⁵ According to their general policies, enterprises should i.a. contribute to SD; respect Human Rights (HR); ‘encourage local capacity building’ and ‘human capital formation’; refrain from accepting exemptions, which are not provided for in the applicable regulatory framework; ‘uphold good corporate governance principles’; ‘[a]void causing or contributing to adverse impacts’, as well as seek to prevent impacts ‘directly linked to their operations, products or services’; encourage business partners and suppliers ‘to apply principles of responsible business conduct’; engage with local stakeholders; and abstain from ‘improper involvement’ in local politics.³³⁶ The HR chapter of the OECDG draws upon the UN GP and largely reflects the core responsibilities of enterprises contained therein.³³⁷ Regarding the objective of environmental protection, the OECDG draw largely on the principles and objectives provided for by the Rio Declaration, as well as the Aarhus Convention and such standards as the ISO Standard on Environmental Management Systems.³³⁸

In addition to these substantive responsibilities, the OECDG also provide specific implementation procedures, most notably so-called National Contact Points (NCPs). Countries adhering to the OECDG are obliged to establish these NCPs, which shall ‘operate in accordance with core criteria of visibility, accessibility, transparency and accountability.’³³⁹ Moreover, NCPs are supposed to operate in an impartial manner, yet to still maintain an ‘adequate level of accountability to the adhering government.’³⁴⁰

The UN Global Compact (UN GC) provides further general guidance on responsible business conduct in line with accepted international standards.³⁴¹ It constitutes ‘both a policy platform and a practical framework for companies that are committed to sustainability and responsible business practices.’³⁴² The latter is composed of i.a. ten principles stemming from four different issue areas: HR; labour; environment; and anti-corruption.³⁴³ Accordingly, companies should for instance support and respect the protection of HR (principle #1); make sure not to become complicit in HR abuses (principle #2); uphold the freedom of association as well as the right to collective bargaining (principle #3), the elimination of all forms of forced or compulsory labour (principle #4), the effective abolition of child labour (principle #5), and the elimination of employment- or occupation-related discrimination (principle #6); and promote greater environmental sustainability (principle #8).³⁴⁴ The UN GC i.a. aims to mainstream its ten principles into business operations worldwide, as well as catalyse actions, particularly through public-private partnerships in support of broader UN targets, especially the SDGs.³⁴⁵ In this context, it is also providing elaborate guidance on how to effectively embed SDGs into Corporate Reporting, thus seeking to further ‘operationalise’ SDGs in business contexts.³⁴⁶ The same holds true for the so-called action platforms the UN GC has created, which expressly relate to specific SDGs.³⁴⁷

A variety of standards elaborated i.a. by chambers of commerce, NGOs, and standard-setting organisations provide further ‘indirect’ guidance on corporate best practices. They include the ICC Business Charter for Sustainable Development, which provides further guidelines seeking to streamline sustainability in global business conduct;³⁴⁸ the CERES roadmap for sustainability, which formulates 20 expectations for companies ‘in order to transform into truly sustainable enterprises’;³⁴⁹ the Business Principles for Countering Bribery, which are meant ‘to assist companies in the design and implementation of effective anti-bribery policies’;³⁵⁰ the ICC Rules of Conduct and Recommendations on Combating Extortion and Bribery, which ‘are intended as a method of self-regulation by business against the background of applicable national laws’;³⁵¹ and the OECD Transfer Pricing Guidelines for Multinational Corporations and Tax Administration, which provide specific guidance on how to avoid transfer-pricing disputes and i.a. guide the implementation of the arm’s length principle.³⁵²

4.2.2.2.2.2 Private, Direct TCL

Incidents of private, direct TCL are mostly embedded in this general system of corporate responsibility.

One field, which poses a particular issue for companies operating in the commodity sector, is the one of security. Mines, refineries or farms generally need to be protected from trespassers. Where commodity operations have elicited opposition from local communities or indigenous peoples, violent clashes between security personnel acting on behalf of the private corporation and protesters may cause serious HR violations—the situation being even more intricate when public security forces or military intervenes on behalf of the private company.³⁵³

The latter for instance were the facts that gave rise to the proceedings in the notorious Kiobel case, which even reached the US Supreme Court in 2013.³⁵⁴ In Kiobel, the petitioners alleged that Royal Dutch Petroleum aided and abetted the Nigerian government in stopping protests against its oil operations in the Ogoni delta.³⁵⁵ They claimed that Nigerian military forces committed a series of HR violations against the Ogoni people, including rape, torture, and extrajudicial killings and that Royal Dutch Petroleum provided them ‘with food, transportation, and compensation, as well as […] allowing the Nigerian military to use respondents’ property as a staging ground for attacks.’³⁵⁶

‘Direct’ guidelines on how to handle these situations for corporations are provided particularly by the Voluntary Principles on Security and Human Rights for the Extractive and Energy Sectors (VPSHR), which allegedly constitute ‘the only human rights guidelines designed specifically for extractive sector companies.’³⁵⁷ Having been elaborated based on a multi-stakeholder approach involving i.a. governments and commodity companies, some of the largest commodity TNCs number among its participants.³⁵⁸ The VPSHR are divided up into three categories: risk assessment, as well as relations with public security and relations with private security.³⁵⁹

Not least in order to prevent violent clashes in tense environments, the Conflict–Sensitive Business Practice: Guidance for Extractive Industries provides comprehensive guidance and best practices on how to adopt ‘conflict-sensitive’ approaches in commodity operations.³⁶⁰ For that purpose, the publication provides operational guidance charts, as well as screening tools for both macro- and project level conflict risk and impact assessment.³⁶¹

Regarding transparency, we have seen that the EITI constitutes a standard, which is primarily aimed at governments. The latter are the ones signing up to the EITI and consequently charged with implementing it.³⁶² As a consequence, corporations are concerned by the EITI standard rather indirectly—for instance whenever a state, in which a company is active or domiciled, decides to incorporate disclosure requirements under the EITI in its domestic legal system. However, companies can acquire the status of so-called EITI supporting companies,³⁶³ which requires corporations to officially sign up to the EITI, issue a public statement of their support for the EITI, including its ten principles.³⁶⁴ In addition, the status also entails disclosure obligations regarding payments to EITI implementing countries, taxes, and beneficial ownership.³⁶⁵ Also, supporting companies are held to support the disclosure of commodity contracts, including licenses, by governments and to ‘deliver natural resources in a manner that benefits societies and communities.’³⁶⁶ Today, various commodity TNCs are listed as EITI supporting companies.³⁶⁷

Moreover, private, direct TCL often approaches commodity activities from a ‘shared value’ perspective. Employing the latter, the UN GC for instance compiled the SDG Natural Resource industry matrix, which sets forth ‘industry specific ideas for action and industry specific practical examples for each relevant SDG.’³⁶⁸ As such, it for instance spells out detailed measures on how to foster ‘sustainable production’ through the elimination of routine flaring during oil production, the reduction of methane emissions in the gas value chain, waste minimisation, and the developing and sharing of scalable sustainability systems.³⁶⁹ An OECD Framework for Extractive Projects titled Collaborative Strategies for In-Country Shared Value Creation provides guidance on how extractive corporations can work together with other stakeholders of GCG to foster shared value creation.³⁷⁰

Also for investors seeking to become active in the commodity sector, specific guidelines have been elaborated, i.a. by the UN Principles for Responsible Investment (UN PRI) initiative as well as the UN GC.³⁷¹ In its publication ‘Human Rights and the Extractive Industry’, the UN PRI identified six ‘areas of engagement’ for investors in the extractive sector to engage their investee companies regarding their HR performance.³⁷² Moreover, the UN GC, in collaboration with the Swiss government, the UN PRI, and an NGO, has developed ‘The Responsible Investor’s Guide to Commodities’.³⁷³

4.2.2.2.3 Interim Conclusion

In view of the rather sparse hard law instruments in direct TCL, it is not surprising that most of those policy responses, which are specifically designed to address issues in the commodity sector, are often the result of initiatives driven by NGOs, international organisations or the private sector. These policies frequently correspond with soft standards that have been elaborated by multi-stakeholder institutions or fora. Where, for instance, systemic mapping of licenses, concessions, and customary land rights in protected areas constitutes a specific response to corruption that has occurred due to opaque land tenure systems, such policies are on the transnational level rarely accompanied by a binding legal framework—but rather left to voluntary commitments on the part of IOs, private actors and host governments.

The interaction of binding hard law frameworks and voluntary, e.g. certification schemes is displayed by FAO for aquaculture products as follows:³⁷⁴

There is an extensive national and international legal framework in place for various aspects of aquaculture and its value chain, covering such issues as aquatic animal disease control, food safety and conservation of biodiversity. Legislation is particularly strong for processing, export and import of aquatic products. Recognized competent authorities are normally empowered to verify compliance with mandatory national and international legislation. Other issues such as environmental sustainability and socio-economic aspects may not be covered in such a binding manner and open the opportunity for voluntary certification as a means to demonstrate that a particular aquaculture system is managed responsibly.³⁷⁵

While FAO puts this status quo in a positive light and speaks of an ‘opportunity for voluntary’ standards that it may leave behind, one risk that corresponds with this kind of guidance, particularly those instruments that have been elaborated under the stewardship of businesses and their associations, is that they may be driven by corporate self-interest rather than a sense for the common good.³⁷⁶ Indeed, CSR measures—which frequently include pursuit of or adherence to standard-setting initiatives—may in the most extreme case be used as a means to mitigate the ‘threat’ of government regulation.³⁷⁷

Another observation insofar is noteworthy. During those times of regulatory action in the commodity sector, which were dominated by the doctrine of state intervention—that sought to obtain regulatory control over commodity subsectors, which were deemed to play key roles in the development of especially CDDCs—direct TCL in the form of hard law was a lot more proliferate, especially in the form of ICAs.³⁷⁸ Evidently, with the advent of the neoliberal doctrine in global trade law certain regulatory endeavours were cut back or even entirely abandoned. Insofar, the emergence of more and more standard-setting initiatives led by private sector organizations could be seen as not simply the filling of a regulatory gap through alternative means, but rather as a somewhat causal effect: In a domain where the public institutions have decided to abandon their regulatory task, the influence of well-resourced private actors increased. As a consequence, a large share of direct TCL today consists of private standards that have been elaborated by corporates and their associations.

4.2.2.3 Specific, Direct TCL Is Largely Private

This is also reflected in our analysis when we are approaching TCL from yet another angle: the one of specificity. Whereas we have already discussed the distinction between direct and indirect TCL, specificity here refers to the nature of individual norms regulating commodity activities—whether they provide guidance of a rather abstract, general nature or spell out detailed, concrete imperatives, which the addressee must follow. Direct TCL, which reflects a conscious consideration of commodity activities and related stakeholder interests, can be both: rather abstract or rather specific in nature. The same holds true for indirect TCL. As will become clear subsequently, most of direct, specific TCL addresses private actors.

An example for an abstract rule of direct TCL is the one of sustainable use. The norm requires states to balance socio-economic development and environmental protection when exploiting natural resources yet does not provide strict guidance on how this balancing exercise should be performed.

A specific example of direct TCL, to the contrary, is clause 4.6.4.4.b of the Initiative for Responsible Mining Assurance (IRMA) Standard for Responsible Mining IRMA-STD-001, which obliges the operating company of a mine site when implementing and developing a biodiversity management plan to outline i.a. measurable conservation outcomes, timelines and locations.

Further examples are provided i.a. by the ISO Standards 73, which address specific technical issues of mining activity, such as the method of determining coalbed methane content (ISO 18871:2015) or creating structures for mine shafts (ISO 19426-5:2018).³⁷⁹ They also provide specific guidance regarding different ores, such as iron, manganese, chromium or aluminium,³⁸⁰ and e.g. set the standard for determining the total iron content of iron ore (ISO 2597-1:2006) or for sampling and sample preparation procedures (ISO 3082:2017).³⁸¹ The same holds true for other commodity sectors, such as farming and forestry,³⁸² as well as fisheries.³⁸³

With regard to the oil and gas sector, the standards maintained by the International Association of Oil and Gas Producers (IOGP) and the International Petroleum Industry Environmental Conservation Association (IPIECA) exhibit a comparable degree of specificity.³⁸⁴ In fact, many examples of specific, direct TCL are provided by standards addressing technical matters of commodity operations carried out by corporations. The ‘direct’ norms, which presumably are most specific, target either individual commodities or commodity-subsectors, such as mining, oil and gas, forestry, farming, or fisheries. While it lies beyond the scope of this book to portray these subsector- and commodity-specific standards in greater detail, the TCL outline contained in the annex provides a respective overview.

These observations demonstrate that while international commodity law will typically be of quite abstract nature, the more specific rules addressing commodity activities usually feature in those standards and guidelines of transnational commodity law, which have been elaborated by multi-stakeholder or private sector organisations.³⁸⁵

Evidently, it lies in the nature of international law that it will often provide rather broad legal concepts, which will then have to be interpreted and concretised by states and/or courts and tribunals implementing them. This generally ensures that sufficient policy space remains with states—and respective discretion for the courts and tribunals whose jurisdiction they have subjected themselves to—in translating the content of the rather general concept into concrete rules for the case at hand. Whereas the imperative of generally respecting this policy space of national legislators is clear,³⁸⁶ the question arises to what degree international rules can serve to provide more concrete guidelines on how states—and potentially other stakeholders—should apply and interpret the principle of sustainable use, i.a. in their domestic legal acts. Chapter 5 is going to reflect on this question and will, moreover, discuss other potential avenues for rendering TCL more effective.

4.2.2.4 Interim Conclusion

Our analysis has brought about that direct TCL is limited in its effectiveness. This is due, first, to the fact that where it constitutes ‘hard’ law, it mostly serves to balance a maximum of two commodity interests with one another; to address issues of inter-state balance alone; or to ultimately be ‘declaratory’ rather than requiring concrete actions.

Second, direct TCL is largely of ‘soft’ normative character and therefore already exhibits no formal binding force for states. Moreover, these incidents of soft, direct TCL rarely exhibit balancing elements. By way of example, the Extractive Industries Transparency Initiative (EITI) is focused on transparency, the FAO Voluntary Guidelines on the Responsible Governance on Tenure of Land Fisheries and Forests (VGGT) cover land tenure, and the base erosion and profit shifting (BEPS) initiative as well as the fiscal transparency handbook both tackle specific fiscal challenges. Where soft, direct TCL is more comprehensive and seeks to address commodity policy trade-offs, it does so mostly in sector-specific contexts, as reflected for instance in the Berlin II Guidelines, the Intergovernmental Forum on Mining, Minerals, Metals and Sustainable Development (IGF), or the regional Africa Mining Vision (AMV). These standards and fora, however, constitute rather minor fora compared to the central global governance mechanisms maintained by e.g., the UN or WTO. Insofar, it is quite paradigmatic that the most comprehensive, coherent guidance for states in their decision to extract appears to the Natural Resource Charter, which notably constitutes an NGO publication. Thus, despite its wide recognition among the stakeholders of GCG its reach is likewise very limited when it comes to disciplining states’ actions.

Third, apart from the incidents of hard as well as soft direct TCL addressing states, the probably greatest volume of commodity-directed standards is intended to provide guidance for corporations operating in the commodity sector. Examples include a diverse range of instruments, such as the Voluntary Principles on Security and Human Rights for the Extractive and Energy Sectors (VPSHR), the International Responsible Mining Assurance (IRMA) Standard for Responsible Mining, various ISO standards, as well as the guidance elaborated by the International Association of Oil and Gas Producers (IOGP) and the International Petroleum Industry Environmental Conservation Association (IPIECA) for the oil and gas sector. An overview of further private commodity standards can be found in the TCL outline in the annex. These instruments addressing private actors at times provide highly detailed, specific guidance.

To conclude, under the current framework states, to the contrary, are largely left without specific guidance on how to take a decision to extract, i.e. how to balance commodity interests and what governance scheme to establish for that purpose. The most obvious obligation they are faced with in this context as of now is to make sustainable use of their commodity deposits.³⁸⁷

4.2.3 The Standards of TCL Are Hardly Integrated

Achieving equilibrium between the interests associated with commodity activity requires not only commodity-directed, specific norms, but also an overall coherent framework. What prevents TCL from being more coherent—and thus effective—is the limited degree of integration it displays.

Throughout the substance of TCL, one can witness international agreements, standards and other guidance documents cross-referencing one another. For instance, the OECD Guidelines for MNEs (OECDG) refer to several international standards, which can roughly be grouped according to their issuing organisations as UN, OECD and private instruments.³⁸⁸ The OECD recognizes that ‘[m]any international instruments provide useful guidance for evaluating risks and identifying appropriate business conduct’, and in this connection for instance in their OECD Risk Awareness Tool for MNEs in Weak Governance Zones allude to the example that the Convention on Combating Bribery requires states to ‘mak[e] bribery a criminal offence for companies and individuals.’³⁸⁹

Also the International Responsible Mining Assurance (IRMA) explicitly acknowledges the existence of a ‘number of standards and schemes’ that address specific materials, processes, product sectors, or supply chains.³⁹⁰ As reflected in the glossary of terms annexed to the IRMA Standard, it has been developed based on many different transnational guidelines and international conventions, including the UN Guiding Principles on Business and Human Rights (UN GP), OECD Due Diligence Guidance for Responsible Supply Chains (DDG), IFC Performance Standards, Convention on Biological Diversity (CBD) and others.³⁹¹

When it comes to the integration of one regulatory instrument with another, one can distinguish between two techniques: Either the integrated standard is merely referred to in the integrating instrument in the sense that its addressees are held to also comply with it (formal integration); or the integrated standard is being fully integrated in the sense that it is defined as a benchmark, (non-)compliance with which will entail concrete legal consequences within the integrating instrument (full integration).

4.2.3.1 Formal Integration

The OECD Guidelines for Multinational Enterprises (OECDG) largely integrate a variety of international standards and best practices. While some of these standards were already originally intended to govern corporate behaviour, such as the UN GP, other standards like the International Bill of HR or the Rio Principles are being translated from an intergovernmental into a private sector context.³⁹² The latter is also reflected in the environmental chapter of the OECDG, which i.a. draws on the Rio Principles and the Aarhus convention. For instance, it particularly emphasises the precautionary principle and translates it into a corporate context.³⁹³ This corresponds to the express nature of the OECDG as ‘recommendations addressed by governments to [MNEs]’, which consist of ‘voluntary principles and standards for responsible business conduct consistent with applicable laws and internationally recognised standards.’³⁹⁴

The OECDG therefore represent an example of formal integration in international standard-setting: by reconciling norms from different ‘branches’ of international law in one instrument, they contribute to cohering the (voluntary) norms that corporations should respect during their business activities.

Another example for this type of integrative function is provided by the Voluntary Principles on Security and Human Rights for the Extractive and Energy Sectors (VPSHR). Accordingly, companies are held to promote several principles regarding public security, including the principle that

(c) the rights of individuals should not be violated while exercising the right to exercise freedom of association and peaceful assembly, the right to engage in collective bargaining, or other related rights of Company employees as recognized by the Universal Declaration of Human Rights and the ILO Declaration on Fundamental Principles and Rights at Work.³⁹⁵

In addition, they spell out that companies should promote ‘applicable international law enforcement principles’, especially the ones provided for in the UN Code of Conduct for Law Enforcement Officials as well as the UN Basic Principles on the Use of Force and Firearms.³⁹⁶ The VPSHR for their part are being integrated by the OECD Due Diligence Guidance for Responsible Supply Chains (DDG). According to their model supply chain policy, the respective corporation needs to commit neither to benefit from nor to get involved in any way in serious abuses of HR.³⁹⁷ In that connection, companies should i.a. commit to engagement of public or private security forces exclusively in accordance with the VPSHR.³⁹⁸

Further formal integration can be observed in the environmental protection clauses of recent joint development agreements already touched upon above.³⁹⁹

4.2.3.2 The Normative Deficits of Formal Integration

What makes the regulatory picture so complex, however, is the fact that several instruments of TCL have been designed based on the same principle. They choose from the ‘menu’—presented in those international agreements and standards that are most established—what appears suitable for the given context, potentially modifying the norms in a way that they fit the concrete scenarios and addressees for which they are henceforth being employed. Consequently, several standards have emerged that each present a different, yet similar ‘order of courses’. What is more, also the ‘restaurants’, i.e. the regulatory environment in which these courses are offered, likewise greatly resemble one another, often simply diverging in terms of the regulatory angle that the instrument at hand employs—e.g. from a corporate responsibility, anti-corruption, sustainable development, transparency, or security and Human Rights (HR) angle.

This paints a regulatory picture, in which several ‘neighbouring’ international instruments contain similar provisions for a similar purpose. Typically, they are being drafted and administered by different organisations and are accompanied by separate implementation mechanisms. From the perspective of a stakeholder, particularly from the private sector, trying to navigate through this regulatory field is quite challenging to say the least. From a dogmatic point of view, identifying overlaps between the different instruments frequently only leads back to the original, usually highly authoritative, established text—such as the International Bill of HR or the Rio Principles. This raises the question what the benefit is of drafting such instruments then in the first place? Instead of merely translating existing established international agreements into domestic law, which is also binding for private actors?

Evidently, the objective here is to specify the (voluntary) principles that addressees should observe for a concrete factual scenario, which again can differ in terms of the degree of its specificity—e.g. Multinational Enterprises (MNEs) operating in weak governance zones, or sustainability reporting of oil and gas producers. Against that backdrop, it appears natural that only instruments, which successfully deduce from rather abstract, general rules originating from internationally accepted instruments sufficiently specific guidance for the respective scenario, contribute to the development of the legal framework. Those instruments, to the contrary, which simply repeat already existing norms and portray them in a (slightly) different setting and context, may serve to further underline how coherent a field of law has already become.

Yet, if they fail to emerge to a proper field of law, they will simply ‘co-exist’ in a relationship that resembles a form of ‘splendid isolation’. As such, the references in various instruments to those agreements and standards, which had been utilised during the elaboration of the instrument often appears as the expression of a ‘struggle’ to understand what exactly one should do with these similar texts. Simply citing or referring to these ‘other’ standards has no real integrative or cohering effect.⁴⁰⁰ In that connection, the ICC’s Commission on Anti-Corruption for instance is held to urge international organisations responsible for individual anti-corruption conventions, such as the OECD convention prohibiting bribery of foreign public officials and the UNCAC,⁴⁰¹ to coordinate their anti-corruption efforts.⁴⁰² It stresses that from a ‘business standpoint’ the proliferation of such conventions raises concerns about inconsistencies and overall about an incoherent approach to battling corruption.⁴⁰³

4.2.3.3 Full Integration

One example to the contrary, where full integration between two legal instruments occurs, is for instance provided by section 10.2 of the Model Mine Development Agreement (MMDA), which reads as follows:

Where Applicable Law and regulations on environmental and social impact assessment and management, and pollution prevention are less stringent than the IFC Performance Standards, the Company shall undertake its activities in a manner consistent with the IFC Performance Standards.⁴⁰⁴

In this case, the IFC Performance Standards serve as the minimum benchmark for environmental and social impact assessment (ESIA) and pollution prevention under the MMDA. The MMDA here fully integrates the standard set by the IFC Performance Standard. Similarly, section 19.1 MMDA integrates the ‘arm’s length principle’ contained in the OECD Transfer Pricing Guidelines for MNEs and Tax Administrations. Instead of merely referring to e.g. companies’ duty to respect HR as in chapter IV, para. 1 of the OECDG, sections 10.2 and 19.1 MMDA explicitly integrate the specific standard contained in the IFC Performance Standards and OECD Transfer Pricing Guidelines respectively. Consequently, the instrument from which the norm/benchmark is ‘borrowed’ does not serve as simply one of the means of interpreting the clause under the newly created standard, but instead when applying the said provision, the user is referred to the original standard. In other words, the instrument from which the norm/benchmark has been seized, instead of serving as a mere tool in interpreting the respective provision, becomes an integral part of the application of the norm.⁴⁰⁵

Full integration has also been suggested with a view to filling the lacunae of the law applicable to commodities in situations of armed conflict by interpreting the terms ‘destruction’ in Article 23(g) Hague Regulations and Article 8 Rome Statute as well as ‘widespread, long-term and severe damage’ in Articles 35(3) and 55 AP-I, in a manner that ‘take[s] into account definitions from international environmental law as well as the obligations of states under relevant treaties, such as those under the CBD.’⁴⁰⁶

The technique of full integration can be observed in the current framework of TCL less frequently than those numerous incidents of cross-references and formal integration. The so-called ‘Rechtsgrundverweisungen’ can be interpreted as an indicator of a higher degree of sophistication of the legal field at hand. Simply restating existing obligations, yet in a different setting, to the contrary can be seen as a sign for a less developed, incoherent framework. In such frameworks, the drafters of new instruments may be aware of other ‘relevant’ standards in the field yet feel unable to more intensively intertwine their work with already existing instruments. Perceiving these co-existing instruments as one field of law pursuing the same overall regulatory objective may help to induce drafters to create legal instruments with a greater degree of integration—thus contributing to gradually cohering the field.⁴⁰⁷

4.2.4 Interim Conclusion

Our analysis of the current TCL framework has revealed that it provides little to no guidance on how commodity interests should be balanced with one another.

This is due first to the largely indirect nature of the norms it is composed of. Whereas norm subsets addressing for instance Human Rights, environmental protection or armed conflict are creating ‘regulatory islands’ within the field of GCG, there is no coherent system, which addresses the central issues of commodity governance—namely remedying its trade-offs.

Second, where direct TCL exists, it is rarely of ‘hard’ legal character, but rather consists of soft law or private standards. Where hard, direct TCL exists, it mostly only serves either to balance two commodity interests with one another, to address issues of inter-state balance alone, or to ultimately be ‘declaratory’ rather than requiring concrete actions. Those incidents of direct, soft TCL that exhibit a coherent approach are mostly confined to individual commodity sectors and establish rather minor fora. Most of direct, specific TCL addresses private actors and is concerned with technical aspects of commodity activities in particular subsectors or industries. As a result, in their task of balancing commodity interests, states are, apart from notably the sustainable use principle, largely left without authoritative guidance.

Third, what despite these deficits further impedes TCL from being more effective is the lack of full integration between its respective rules and standards—and thus coherence—it exhibits. As a result, GCG stakeholders are faced with a broad net of guidance documents, which creates lacunae, may be difficult to comprehend, and thus complicates implementation.

4.3 The Imbalance of TCL in Favour of Economic Objectives

These configurations are both illustrated and intensified by the imbalance in favour of economic objectives, which the current TCL framework exhibits. The rules of international investment law (Sect. 4.3.1) as well as the law of trade liberalisation (Sect. 4.3.2) currently feature the most clear-cut, ‘hard’ obligations. In addition, they display the most vigorous implementation mechanisms. As a consequence, other rules of TCL, including environmental protection norms and Human Rights can be marginalised—thus fostering the resolution of commodity policy trade-offs in favour of the interest of economic gain.

4.3.1 System, Shifting Paradigms and Unbalancing Effects of International Investment Law

Many states have entered into binding obligations to accord transnational transactions specific protections, which are contained primarily in Bilateral Investment Treaties (BITs) as well as investment chapters of Free Trade Agreements (FTAs). These international investment agreements (IIAs) spell out various requirements that need to be met in order for a transaction to be protected.⁴⁰⁸ Moreover, also investor-state contracts can provide such protections.⁴⁰⁹ First and foremost, a transaction needs to constitute an ‘investment’. Absent a generally accepted definition in international investment law (IIL), most BITs introduce their own definition of an ‘investment’.⁴¹⁰ These definitions typically exhibit a broad perception of the term.⁴¹¹ While natural resource exploitation has been described as the ‘paradigmatic example’ of foreign direct investment,⁴¹² other activities include e.g. large infrastructure projects.⁴¹³ Moreover, the investment needs to be ‘made’ by a ‘foreign investor’—additional terms that are typically equally spelled out in the applicable IIA.⁴¹⁴

What makes the investment regime particularly efficacious is the fact that it gives investors the possibility to directly institute arbitral proceedings against the host state before an international ad hoc tribunal.⁴¹⁵ Ever since the award in AAPL v. Sri Lanka, this possibility does not necessarily have to arise from a contractual relationship between investor and host state—the type of claims ICSID had originally been established for –,⁴¹⁶ but can also be based on arbitration clauses contained in an IIA.⁴¹⁷ Since the 1990s the number of investment arbitration claims rose exponentially from six ICSID proceedings initiated in 1996 to 16 in 2001, 42 in 2009 and finally the record number of 80 in 2015.⁴¹⁸

4.3.1.1 Expansion of Investment Protection

From a public interest perspective, the rationale behind the investment protection regime lies in the expected development benefits that foreign investment entails. It has historically been intended to be reserved for exceptional scenarios, in which granting particular protections may be necessary in order to attract the inflow of foreign assets, which in turn foster development.⁴¹⁹ It is in such scenarios that states were willing to accept the qualifications of their permanent sovereignty over natural resources (PSNR) that follow from their obligations under the investment regime.

However, as the numbers of arbitral proceedings above indicate, over time investment protection evolved to be more than just an exceptional safeguard.⁴²⁰ Viñuales claims that this has been due largely to two processes: for one, states continuously expanded the definitions of ‘investment’ and ‘foreign investor’ that they included in IIAs; for the other, investment tribunals gradually extended their interpretations of the term, increasingly also including portfolio investments, such as commercial loans or other financial instruments.⁴²¹ The same phenomenon of expansive interpretation can be observed with regard to many of the core obligations that states typically confer upon investors under international investment law.⁴²² These primarily include protection against expropriation; fair and equitable treatment; full protection and security; and most-favoured nation as well as national treatment.⁴²³

Originally, international investment law was intended to particularly protect investors against hardships resulting from expropriation or nationalisation.⁴²⁴ While direct, i.e. formal, expropriations occurred primarily in the direct aftermath of decolonisation,⁴²⁵ particularly the interpretation of what constitutes an indirect, i.e. non-targeted, expropriation was subject to much discussion especially during the first decade of the new millennium.⁴²⁶ Yet, ever since expansive tendencies in the interpretation of the term ‘indirect’ have been contained, other standards, especially the fair and equitable treatment (FET) standard, have inherited the central role in the protection of foreign investments.⁴²⁷

The FET standard is generally not shaped by domestic laws, but constitutes a standard of international law.⁴²⁸ It represents a very flexible principle, which needs to be concretised by the respective tribunal for the case at hand.⁴²⁹ While there is no general definition of what constitutes FET or a breach thereof, the principle is typically described as a reflection of the good faith principle.⁴³⁰ It thus is concerned particularly with upholding the rule of law with regard to every aspect of the investment process and therefore has brought about several related principles, such as transparency, consistency, stability or due process.⁴³¹ Moreover, arbitral tribunals have tended to describe FET by referring to the legitimate expectations of the investor.⁴³²

Further trends in investment arbitration that led to a significant expansion of the regime and therefore the surge in the number of proceedings included the

expansive interpretation of the MFN clause for jurisdictional purposes or the dismissal of the rule – widely acknowledged in inter-State dispute settlement – that consent to jurisdiction cannot be presumed and is to be interpreted restrictively.⁴³³

These expansive tendencies in state as well as arbitral practice have led to investment protection constituting a particularly dominant paradigm in global governance. Apart from the broad scope of investment safeguards, especially the possibility for investors to depart from conventional judicial avenues and institute arbitral proceedings against the host state creates what has been perceived as an ‘imbalance’ between investment protection and states’ duty to protect the environment as well as Human Rights (HR).⁴³⁴ For instance, the right to freely dispose over natural resources (RFD) ‘has been largely forgotten in the development of areas of international law that have had a direct impact on the issue of control over natural resources.’⁴³⁵ This observation is being alluded to also in the ‘warnings’ e.g. included in principle #9 of the UN Guiding Principles on Business and Human Rights (UN GP), which calls upon states to reserve sufficient domestic policy space for the implementation of HR in spite of IIAs or investment contracts. Ruggie has described this trend as being ‘particularly problematic’ for developing countries—given their limited resources and development needs.⁴³⁶ Especially these states run the risk of allocating too much attention and resources to according safeguards to foreign investors at the expense of other policy fields.

4.3.1.2 Turn to SD

As a consequence, several important stakeholders of international investment governance have initiated steps to strengthen states’ right to regulate in the public interest in spite of their obligations under IIL. This ‘alliance’ for the ‘recalibration’ of the investor-state dispute settlement system includes i.a. the EU and UNCTAD, as well as NGOs such as the World Economic Forum or the International Institute for Sustainable Development.⁴³⁷ These ‘shifting paradigms’ in IIL in many ways describe a turn of the international investment regime towards SD.⁴³⁸ This is reflected i.a. in the UNCTAD’s Investment Policy Framework for SD, which provides guidance on how to better integrate investment protection and SD policies.⁴³⁹

Moreover, international legal scholarship in the recent years has produced both comprehensive analysis and guidance regarding innovative legal instruments that foster SD effects of foreign investment.⁴⁴⁰ Sacerdoti in this respect however first alludes to the fact that BITs should not be misunderstood as ‘development cooperation instruments’.⁴⁴¹ Their ultimate object and purpose is to protect investments. Nevertheless, investment protection provisions should be interpreted in light of SD and corresponding international standards, which are being respected by both parties, including HR, environmental and health agreements.⁴⁴² This may also open avenues towards an evolutionary interpretation of older treaties and guide the reconciliation of investment protection with other objectives of economic regulation.⁴⁴³ In general, BITs and investment chapters in FTAs should make use of innovative drafting in order to make

BITs more respectful of the policy space of host States in the pursuit of legitimate general interest, balancing these values while maintaining the essential protection from arbitrary, discriminatory conduct and outright expropriation without compensation of foreign investors by host countries.⁴⁴⁴

Concrete provisions fostering this objective are provided i.a. by UNCTAD in its Investment Policy Framework as well as by the Commonwealth Secretariat. For instance, BITs could set out a general exception modelled on Article XX GATT,⁴⁴⁵ which could also apply to measures ‘designed and applied’ to protect e.g. HR or labour rights.⁴⁴⁶ Moreover, Bilateral Investment Treaties (BITs) could include investor responsibilities and obligations. Investment protection could be made dependent upon an investor fulfilling these duties, including respecting HR and domestic host state law.⁴⁴⁷

Also, parties to an IIA could agree not to lower especially social and environmental standards in order to attract investment.⁴⁴⁸ The home state could be required to assist its less-developed contracting partner with the implementation of its obligations under the IIA.⁴⁴⁹ In addition, the parties could establish an institutional mechanism to discuss the interpretation of investment provisions on a regular basis with a view to ensuring more consistency in arbitral awards and fostering the contributions of investments to the SDGs.⁴⁵⁰ Further suggestions include special treatment provisions for Least Developed Countries (LDCs), such as replacing binding obligations with ‘best-endeavour’ clauses, or requiring sustainability assessments from the investor.⁴⁵¹ In addition, also changes to investor-state dispute settlement (ISDS) are being advised. For instance, certain claims could be excluded from ISDS, such as ones that relate to measures, which have been taken in the pursuit of key objectives of SD.⁴⁵² Also, investors could be required to first exhaust domestic remedies.⁴⁵³ Moreover, alternative dispute resolution mechanisms, as well as an appellate instance could be introduced.⁴⁵⁴

The recalibration of international investment law is now increasingly reflected also in state practice.⁴⁵⁵ Examples include the COMESA Investment Agreement, which for instance according to its Article 14.3 requires tribunals to consider the state’s level of development when examining a breach of fair and equitable treatment (FET), or the SADC Model Bilateral Investment Treaty Template, which requires investors to maintain an environmental management system according to its Article 14.1.⁴⁵⁶ Recent EU FTAs explicitly promote trade and sustainable development. For instance, according to Article 13.10 EU-Vietnam FTA,

[e]ach [p]arty affirms its commitment to enhance the contribution of trade and investment to the goal of sustainable development in its economic, social and environmental dimensions.⁴⁵⁷

As such, they i.a. seek to promote investment in environmental goods and services (EGS), as provided for e.g. in Articles 12.11 EU-Singapore FTA and 13.10.2(b) EU-Vietnam FTA.⁴⁵⁸ Also, according to Article 3(4) of the 2018 Netherlands model BIT (NLBIT) parties shall promote sustainable investments. In general, according to Article 6(1) NLBIT parties commit to promote international investment in a way conducive to SD. Moreover, recent EU FTAs generally call for ‘full implementation of MEAs as well as multilateral labour agreements.’⁴⁵⁹ Article 7(1) NLBIT explicitly requires

[i]nvestors and their investments [to] comply with domestic laws and regulations of the host state, including laws and regulations on human rights, environmental protection and labor laws.⁴⁶⁰

The Brazilian Cooperation and Facilitation Investment Agreements (CFIA) arguably stand for the most far-reaching departure from the ‘old’ investment protection system, i.a. exclusively protecting direct expropriations, introducing clauses on CSR, and particularly entirely abandoning ISDS.⁴⁶¹

4.3.1.3 Economic Imbalance: Investment Protection as a Matter of Conflict Between Host States and Foreign Investors

As mentioned above, commodity activities have been described as ‘paradigmatic example’ of an investment. Often, TNCs domiciled in industrialised states are conducting commodity operations in less developed, yet resource-rich countries.⁴⁶² The investment case law is rich in precedents, which originated from conflicts over state measures affecting investors’ control or title over commodity investments or their profitability.⁴⁶³ In fact, more than 28 % of all arbitral proceedings under the ICSID Convention to date concerned commodity operations, which is by far the largest overall share by sector.⁴⁶⁴

Correspondingly, some signature cases of international investment law, such as the arbitrations between BP, TEXACO, LIAMCO and Libya,⁴⁶⁵ the Kuwait v. Aminoil,⁴⁶⁶ or the Occidental v. Ecuador proceedings, arose in connection with commodity activities.⁴⁶⁷ These cases share that they typically represent conflicts between host state and investor over the economic benefits of a commodity operation.⁴⁶⁸ Paradigmatically, many of the historic commodity investment arbitrations originated from the termination of concessions or PSAs, direct as well as indirect expropriations, and nationalisations.⁴⁶⁹

While direct expropriations and nationalisations concerned international arbitrators especially during the NIEO era in the 1970s and 80s, they still constitute a current topic. This is particularly due to measures taken by Venezuela in 2007, which sought to nationalise oil production in the so-called Orinoco belt.⁴⁷⁰ This step impacted projects maintained by large transnational oil companies, such as Chevron, ExxonMobil and ConocoPhillips; several affected corporations initiated arbitral proceedings.⁴⁷¹ Further specific state measures that gave rise to commodity investment arbitrations and were raised as especially forms of indirect expropriations or breach of the FET standard respectively, included windfall profit taxes, export taxes, denial of the right to reimbursement of VAT, export restrictions, price regulations, and domestic market obligations (DMOs).⁴⁷²

The subject at issue in several proceedings involving Ecuador for instance was a tax that the state introduced in order to capture a share of ‘extraordinary incomes’ generated by oil corporations.⁴⁷³ The tax was set first at 50 %, later at 99 %.⁴⁷⁴ Both the Burlington and Perenco tribunals, which had to assess the identical operative facts, held that the windfall profits tax did not constitute an indirect expropriation.⁴⁷⁵ The Perenco tribunal noted that

…it would be unsurprising to an experienced oil company that given its access to the State’s exhaustible natural resources, with the substantial increase in world oil prices, there was a chance that the State would wish to revisit the economic bargain underlying the contracts.⁴⁷⁶

In 2002, 2004 and 2007 respectively, Argentina introduced export taxes on hydrocarbons, which had been ‘designed to prevent producers from receiving more than forty-two U.S. dollars per barrel of oil produced.’⁴⁷⁷ In reaction to these taxes, at least five corporations initiated arbitral proceedings against Argentina, including the French TNC Total.⁴⁷⁸ Total claimed that the export tax would constitute a breach of the FET standard. The tribunal, however, considered that the tax constituted an ordinary fiscal measure as part of the general fiscal framework therefore dismissing Total’s claim.⁴⁷⁹

Another measure taken by Ecuador involved changes in the right to be reimbursed of the value-added tax (VAT) paid when purchasing goods and services that were needed for commodity activities.⁴⁸⁰ This gave rise to two arbitrations, one involving the US corporation Occidental Exploration and Production Company (Occidental).⁴⁸¹ The tribunal in Occidental held that the changes in the VAT reimbursement scheme constituted a breach of the FET standard given that it ‘significantly changed the framework under which its investment had been made.’⁴⁸²

4.3.1.4 Societal and Environmental Imbalance

Things become even more intricate when activities associated with investments are causing negative externalities, e.g. for local populations or the environment. Recalling the organisational framework of TCL, corresponding interests are the one of development, preservation, and participation.⁴⁸³ Viñuales describes this situation, which is paradigmatic for GCG, as the ‘State–Investor–Population (SIP) triangle’.⁴⁸⁴

Within this triangle, separate bodies of international law are regulating the relationships between the different stakeholders: HR and IEL apply between host state and the population; between the latter and investors only domestic law is applicable; and the relation between host state and investors is covered by international investment law.⁴⁸⁵ This isolation of the different relationships and norm subsets that are applicable to them is particularly problematic:

Understanding international investment law as a mere “protective” framework has a particularly significant unbalancing effect if its operation is “detached” from the broader body of domestic and international law governing negative externalities, such as the adverse impact on human rights and the environment.⁴⁸⁶

Perceiving international investment law in this isolated manner has led to a situation in which—out of all the different policy fields that a state needs to cover in order to pursue and maintain good commodity governance—investment protection has been put centre stage, not least in view of the financial ramifications that may ensue from infringements upon the investment law framework. The severe consequences of this imbalanced legal framework are prominently portrayed in the arbitral proceedings that arose after the Argentinian economic depression at the beginning of the new millennium.⁴⁸⁷ Moreover, this imbalance can be particularly problematic where the interests of investors and local populations collide.⁴⁸⁸ For instance, in the Ominayak v. Canada case before the Human Rights Committee, the UN HRC considered that Canada’s authorisations of oil and gas exploration on ancestral lands could potentially constitute a breach of the community’s right to enjoy one’s culture according to Article 27 ICCPR.⁴⁸⁹ Even though no foreign investor was involved in this case, it illustrates how differently facts that from one angle may be determined to constitute a breach of investment protection provisions, may represent a violation of HR norms from the ‘prism’ of communities affected by commodity activities.⁴⁹⁰ Similarly, in the Länsman cases, mining and logging activities respectively were raised as potential violations of Article 27 ICCPR.⁴⁹¹

In the case before the IACtHR between the Sawhoyamaxa community and Paraguay, the applicants claimed that the state had breached their right to property due to failure to guarantee the community their rights over ancestral lands.⁴⁹² When the state claimed that the owner of the respective lands—a German investor—was protected under an IIA, the ‘different legal frameworks applicable to different sides of the SIP triangle were thus laid bare.’⁴⁹³ Moreover, it exhibits how the (economic) interests of host states and investors may often coincide.⁴⁹⁴

How detrimental the current configuration of investment protection may be in these situations where public and governmental interests diverge, is furthermore reflected in the Ogoni case before the African Commission on Human and Peoples’ Rights, in which the commission i.a. held that Nigeria had violated the Ogoni people’s right to freely dispose over natural resources (RFD) according to Article 21:

The Commission notes that in the present case, despite its obligation to protect persons against interferences in the enjoyment of their rights, the Government of Nigeria facilitated the destruction of the Ogoniland. Contrary to its Charter obligations and despite such internationally established principles, the Nigerian Government has given the green light to private actors, and the oil Companies in particular, to devastatingly affect the well-being of the Ogonis. By any measure of standards, its practice falls short of the minimum conduct expected of governments, and therefore, is in violation of Article 21 of the African Charter.⁴⁹⁵

These cases illustrate how substantially other legal positions than investments may be concerned by commodity activity. Once one changes the perspective on these activities—and for instance assumes the one of the affected communities or local populations—the transnational legal framework appears to be imbalanced in favour not only of investors, but in general of economic over other public interests, including HR and environmental protection.⁴⁹⁶

4.3.1.5 Integrating Investment Protection into the TCL Framework

The structure of TCL demonstrates that the norm subset addressing investment protection constitutes but one qualification of a state’s PSNR. This one objective, however, is being pursued with the most vigorous normative as well as implementation means. What can remedy this situation is a more integrated understanding of the entire field covering commodity activities. As such, investment protection could be made exclusively available to investors that comply with HR, environmental protection and other domestic laws.⁴⁹⁷ Moreover, ISDS could be turned into a reciprocal mechanism, which allows especially developing states to initiate claims against commodity corporations.⁴⁹⁸

Apart from the reform discussions within UNCITRAL as well as international legal scholarship, also investment case law exhibits signs for a greater integration of the investment discipline with other fields of international law. For instance, in the Al-Warraq case, the tribunal largely relied on international HR law to determine the scope of the FET standard, which describes ‘a major departure in the conceptualisation of the relationship between [international investment law] and [international Human Rights law].’⁴⁹⁹ Moreover, the tribunal applied the ‘clean hands’ approach and ultimately dismissed the investor’s claim on these grounds.⁵⁰⁰ However, as Cotula rightly points out, greater integration of investment law and HR as displayed in Al-Warraq may also bring about risks by e.g. opening up the opportunity for investors to claim breaches of HR law in front of arbitral tribunals—thus bypassing the domestic remedies requirements, which apply in HR law.⁵⁰¹

4.3.2 The Law of Liberalised Trade

As this book has already briefly touched upon, states’ PSNR is qualified by extensive obligations to liberalise trade.⁵⁰² Commodity trade is largely covered by WTO discipline.⁵⁰³ Whereas the GATT unlike the Havana Charter does not entail a separate chapter on commodities, it still contains some commodity-directed provisions, particularly in the trade and development context. While these provisions address many issues that appear crucial to the sustainable development of CDDCs, such as market access, price stabilisation and stable growth in export earnings, their effect has proven to be limited in the past due to their rather ‘declaratory’ nature as well as to a lack of enforcement mechanisms.⁵⁰⁴

As a result, the most contentious aspects in commodity trade, e.g. export restrictions and subsidies, were decided not on the basis of these commodity-directed, but rather based on the general rules of WTO law. Therefore, commodity-directed provisions seeking to protect the interests of commodity-dependent states can be said to have remained largely dead letters in the past. While thus the general liberalisation scheme of world trade is quite clearly spelled out in international law, many issues that arise with regard to the at times opposed interests of producers—typically seeking to raise their export earnings and maintain price stability—and consumers—generally longing for market access and corresponding supply security—are being left largely unacknowledged. This lack of effective norms addressing the balance between these interests, is what describes the internal imbalance, which the trade regime brings about.

In addition, the law of liberalised trade also contributes to an external imbalance, that is—similarly to the effects of international investment law—in relation to the other components of TCL. The dominance that WTO disciplines may unfold within the commodity sector, is displayed in the cases involving China.⁵⁰⁵ Export tariffs are only peripherally covered by the MFN rule of Article I:1 GATT.⁵⁰⁶ Article II GATT exclusively applies to import tariffs.⁵⁰⁷ The general prohibition envisaged in Article XI:1 GATT is limited to quantitative measures. Consequently, the China cases were based significantly on the Chinese Accession Protocol.

The dispute in China – Raw Materials concerned measures that China had imposed on different forms of bauxite, coke, fluorspar, magnesium, manganese, silicon metal, yellow phosphorous and zinc.⁵⁰⁸ In China – Rare Earths export restrictions had been introduced with regard to rare earth elements, tungsten and molybdenum.⁵⁰⁹ The currently pending third dispute China – Raw Materials II challenges the Chinese export duties imposed on different forms of antimony, chromium, cobalt, copper, ferro-nickel, graphite, lead, magnesia, talc, tantalum and tin, as well as the export quotas applied to antimony, indium, magnesia, talc and tin.⁵¹⁰

The export duties that China had applied were deemed to be a breach of paragraph 11.3 of China’s Accession Protocol.⁵¹¹ According to the Appellate Body’s decision, paragraph 11.3 sets forth a standalone provision, which does not exhibit an ‘objective link’ to the GATT.⁵¹² As a consequence, it held that Article XX GATT exceptions were not applicable.⁵¹³ The export quotas China had introduced constituted a violation of Article XI:1 GATT.⁵¹⁴ The Appellate Body (AB) held that they could not be justified according to the exception of Article XI:2:a GATT.⁵¹⁵ Such an exception essentially requires that two conditions are met: for one, there needs to be a ‘critical shortage’ of the commodity in question; for the other, the respective commodity needs to constitute a ‘product essential to the exporting party’.⁵¹⁶ A critical shortage needs to be ascertained based on objective parameters, i.e. the actual current need of the exporting country. The AB held that only such commodities, which are absolutely indispensable or necessary commodities could constitute ‘essential products’.⁵¹⁷ However, Article XI:2:a GATT applies exclusively to temporary restrictions.⁵¹⁸ For permanent restrictions that seek to protect exhaustible natural resources, Article XX:g GATT is applicable.⁵¹⁹

With regard to China’s Article XX GATT defences, the AB pointed to the fact that typically environmental risks do not arise from exportation, but from production—which is naturally domestic.⁵²⁰ It thus warned not to use SD and PSNR as ‘pretexts’ to justify export restrictions.⁵²¹ According to the WTO adjudicators, export restrictions cannot be justified as environmental conservation measures in the sense that they ‘allow a WTO Member to allocate the available stock of a product between foreign and domestic consumers because, once extracted and in commerce, natural resources are subject to WTO law.’⁵²² While states remain free to design environmental conservation measures according to their own policy considerations, the notion of ‘conservation’ cannot be unduly expanded so as to include objectives of supply chain management or other industrial policy goals.⁵²³ As Espa and I have put it elsewhere with regard to mineral commodities,

under WTO law Members are free to decide to which extent they want to authorize mineral exploitation (e.g. through the granting of mining concessions) within their territories but, once reserves are mined, mineral commodities (i.e. tradable mine output) are treated just like any other goods for the purpose of WTO law application.⁵²⁴

As a consequence, the Appellate Body held the Chinese measures to be illegal in both cases.

Primarily commodity exporting developing countries have criticised the AB’s decision. They consider the stance taken by the AB an undue restriction of their PSNR and of corresponding policy space when it comes to implementing resource conservation measures.⁵²⁵ Yet, the panel in China–Rare Earths emphasised that, like any other trade restriction, export quotas could well be justified as conservation measures under Article XX:g GATT. GATT conformity of export quotas for such purposes thus needs to be assessed on a case-by-case basis.⁵²⁶

From the systemic perspective approaching the overall legal framework of GCG, the decisions raise questions regarding the scope of PSNR and the policy space that should remain with states when implementing objectives of SD. If the dispute settlement mechanism of an organisation aiming to liberalise global trade is competent to adjudicate whether or not an export restriction or other limitations on domestic production actually constitutes a conservation measure or not, it at least seems questionable whether this mechanism will bring about results that appear well-founded also from the perspective of SD as the overall global agenda. Put differently, what mechanism ensures the SD of the global economy? Is it sufficient to have several mechanisms in place, which each on their own seek to implement the primary objectives that they have been implemented for? Or is it time to seek more clarity regarding how states need to balance their various obligations with regard to socio-economic development and environmental protection? Without such clarity, the imbalance between the three—economic, social and environmental—pillars of SD may persist and could in fact thwart the entire SD agenda. In order to avoid SD to become a mere scheme of ‘Mickey Mouse sustainability’⁵²⁷—and thus a ‘pretext’ for ever more economic growth—socio-environmental objectives need to be effectively integrated into the functioning of the economy.⁵²⁸

What further complicates things and what so far does not seem to have been addressed by any tribunal, court or—be it international or national—legislator, is the relationship between domestic and global dimensions of SD. What if, for instance, national SD policies, such as limitations on the extraction of Rare Earths, conflict with global initiatives that push for the production of more renewable energies, which require these commodities? As Espa has elaborated elsewhere, export restrictions and other limitations on commodity production can indeed constitute effective instruments in mitigating resource exhaustion.⁵²⁹ However, the answer that one gives regarding their legality may very well depend on the perspective that one employs—of liberalising trade, protecting the environment, or perhaps fostering SD. This raises questions regarding the relationship between national and global SD objectives: Does international law give any sort of preference to one to the disadvantage of the other? Should there be scenarios, in which a state may be mandated by international law to extract and market specific resources globally?

4.3.3 Interim Conclusion

The structure of TCL provides a clear display of the qualifications of states’ PSNR. While one could assume that each of these qualifications is held of at least equal value,⁵³⁰ the degree to which it actually succeeds in disciplining a state’s action depends on the design of the specific subset of norms pursuing that purpose. The layout of TCL thus neatly illustrates the incongruences in effectiveness between the separate sets of norms fostering the various objectives of GCG. The picture that this layout creates is one of a regulatory landscape of GCG, which is imbalanced in favour of economic objectives.

Without balancing mechanisms that remedy this status quo, states may continue what many of them have done in the past: demonstrate the greatest respect for those disciplines, which ‘bite’ the most—which dispose of the most clear-cut, compulsory rules as well as the most rigorous, effective implementation mechanisms. Such is the case for the obligation to protect investments in view of the ‘threat’ of binding arbitral awards, and for WTO proceedings due to the ‘threat’ of economic backlashes in the case of non-compliance with decisions rendered by the WTO DSB. What fights for respecting their HR obligations, in contrast, is largely a ‘naming and shaming’ mechanism based on the decisions issued by Human Rights bodies.⁵³¹ Even where HR court systems have been established, non-compliance with such judgments typically comes without greater—at least economic—repercussions.⁵³²

Overcoming this imbalance in favour of economic objectives—for instance by implementing a sophisticated regime aiming to ensure sustainable commodity use—therefore is a key challenge in fostering the effectiveness of TCL.

4.4 Regulatory Gaps Within the TCL Framework

Apart from the normative patterns of TCL discussed above, the effectiveness of TCL is also limited in view of the regulatory gaps it exhibits. In this connection, we shall distinguish between two kinds of regulatory gaps. For one, we can ascertain the fact that to date there has been no multilateral undertaking to comprehensively regulate the commodity sector on the global level.⁵³³ This could per se be seen as a regulatory gap, especially given the great economic and developmental significance of the sector. However, as this book has demonstrated, the international community has already elaborated several sets of norms, which regulate the sector—despite the fact that many of them do not reflect a conscious consideration of commodity activities. This thus brings us back to the distinction between direct and indirect TCL. These rules that are already in existence fill the gap, which originates from the inactivity of global legislators in this respect.

They do so more or less effectively. One of the underlying hypotheses of this book relates to direct TCL being the more effective tool in regulating the commodity sector as opposed to indirect norms that are somewhat ‘accidentally’ also applicable to commodity activities. What seems to confirm this hypothesis are the recent developments in the field of GCG, which exhibit intensified activities by states, IOs, NGOs, and the private sector that consciously reflect the specifics of commodity governance and introduce corresponding initiatives, such as the EITI, the Kimberley process, the EU Raw Materials Initiative or the like. All these initiatives appear to bear within them the conviction that this particular topic requires to be dealt with specifically and not simply as a subcategory to already existing transparency or development frameworks and policies. The ‘drive’ towards specifically dealing with commodity activities can therefore already be witnessed in various instances. Against this backdrop, the conceptualisation of TCL shall pave the way for a gradual evolution of the existing framework towards a more sophisticated, commodity-directed legal regime.

Based on the conceptualisation of TCL, which we have provided in Chap. 3 above, we can now turn to the second kind of regulatory gaps—those subject-matters, which are neither being addressed by rules of direct nor indirect TCL. Evidently, given the complex nature of the sets of norms that the legal framework of GCG is made up of, it would go beyond the scope of this book to claim that there would be an absolute regulatory gap, i.e. that the subject-matter is not being addressed by any rule or standard anywhere. For instance, domestic rules somewhere may very well govern a certain subject-matter, yet without this rule thus far having evolved to be of transnational scope.⁵³⁴ The claim to a regulatory gap here is thus meant to be a relative one in the sense that transnational instruments so far do not appear to cover the very subject matter. Also, the scope of this book allows covering only a selection of regulatory issues that thus far are not addressed by TCL.

Given the finding that much of TCL qualifies as indirect TCL, it is little surprising that many regulatory gaps occur where commodity activity is distinct from other activities. For instance, there is no rule in Human Rights (HR) law, which provides guidance on how responsibility chains in commodity-related HR violations should be dealt with, i.e. which of the actors involved can and should be held accountable.⁵³⁵ Given the MNE structures behind many commodity operations, as well as complex supply/value chains, it can be particularly intricate to identify what actor is accountable for what action. Commodity-directed HR law could impose specific duties in this respect onto specific actors. Likewise, TCL so far does not provide concrete guidance on how typical power asymmetries with regard to land tenure between e.g. indigenous peoples, small- and large-scale landowners or also between ethnic groups should be remedied.⁵³⁶

Generally speaking, the transnational legal framework appears to lack effective remedies against harmful conduct of transnational corporations (TNCs).⁵³⁷ Given the corporate structure especially of commodity companies, which often spans considerable parts of the entire globe,⁵³⁸ holding corporations accountable for violations of HR or environmental laws through national enforcement mechanisms has proved difficult in the past.⁵³⁹ Especially ‘lifting the corporate veil’, can constitute a significant legal obstacle in holding corporate parents accountable for rights violations committed by or attributable to their subsidiary entities.⁵⁴⁰ One prominent example of this difficulty in international case law is the Kiobel case, which involved a Nigerian applicant, who sought remedy for HR violations, and Royal Dutch Petroleum as respondent.⁵⁴¹

It appears evident that in scenarios, in which a commodity TNC headquartered in the economic ‘centre’ of the globe commits or contributes to HR violations in a host state, which is unable or unwilling to offer the respective victims effective access to justice, the home state courts of this corporation will have a role to play.⁵⁴² In this connection, it is worthy to note various incidents of case law in the EU, in which courts have assumed jurisdiction over extraterritorial claims, therefore providing victims with effective remedies.⁵⁴³

Moreover, the question may arise whether SD requires states to refrain from granting companies aiming to pursue ‘high-input agro-industrial agriculture’ respective licenses given their potential effects on agrobiodiversity.⁵⁴⁴ Again, TCL currently here may simply require the state to conduct an EIA and to balance the three pillars of SD, yet does not provide any guidance on how this balancing exercise should be carried out. The same holds true regarding best practices for government support of local SD impacts—and the overall regulation of global commodity markets for that purpose.⁵⁴⁵ Another topic may be clashes between global, national, and local SD interests.⁵⁴⁶

Furthermore, TCL provides little to no guidance on how foreign investments as well as trade need to be designed in order to foster a sustainable commodity sector.⁵⁴⁷ The UNCTAD Sustainable Investment Framework for instance, while somewhat consciously reflecting a consideration for commodity activities and thus constituting direct TCL, provides rather abstract guidance. Direct TCL could define those areas, in which respecting domestic policy space is particularly important and simultaneously spell out how such policy space should be used. It could moreover define parameters for commodity investments fostering SD—and as a result confine investment protection exclusively to those investments that meet these criteria.⁵⁴⁸

When it comes to commodity trade, similar questions ensue, such as adequate policy space for SD measures, integrating market incentives that foster sustainability in trade disciplines, or how to support states in achieving an ‘optimal degree of commodity export dependence’.⁵⁴⁹ Current trade rules largely consist of indirect TCL and therefore do not exhibit an adequate balance of trade liberalisation with the imperatives of SD, which is based on commodity trade. Given that these imperatives may differ according to the type of commodity that is being traded, a sector-specific approach to rebalancing these rules might have to be sought.⁵⁵⁰

In terms of the fight against corruption, drafting a comprehensive, multilateral civil law convention dealing with corporate liability in the commodity sector could help further narrow down loopholes in the existing transnational framework.⁵⁵¹ Moreover, a duty to cooperate exists in environmental law as an international obligation between states; however, there is no transnational norm that regulates how the stakeholders involved in commodity activities should collaborate.

In situations of armed conflict, commodity deposits can be protected as part of the environment, civilian objects or property,⁵⁵² yet there is no commodity-directed provision in place. The existing framework insofar creates several lacunae: there is no prohibition to damage the environment in a non-international armed conflict (NIAC); the prohibition to damage indispensable civilian objects only applies to natural resources, which are needed for the survival of the population; the ‘prohibition against pillage only applies to the plundering of natural resources for personal gain, thereby excluding the exploitation of natural resources by or under the authority of the government for the purpose of financing the armed conflict’;⁵⁵³ and the prohibition to cause widespread, long-term, and severe damage sets such a high threshold that it excludes most forms of damage to the environment from its scope.⁵⁵⁴

4.5 Interim Conclusion

As we have seen, TCL is effective where it fosters sustainable use. This requires specific, commodity-directed rules, which form a coherent framework and detail how equilibrium between the interests associated with commodity activity can be achieved. Our analysis has brought about that the effectiveness of TCL is limited in view of the following normative patterns:

Most of TCL is ‘indirect’, i.e. it has not been created for the purpose of regulating commodity activity. As such, it is not designed to balance commodity interests, but rather pursues distinct regulatory objectives.

The rather scarce incidents of hard, direct TCL are neither balancing commodity interests comprehensively. Instead, they typically balance a maximum of two commodity interests with one another; at times three where for instance environmental protection norms are being integrated with those protecting Human Rights. Besides, as the examples of the law applicable to shared resources as well as the norms covering trade and development within the GATT have demonstrated, those hard rules of direct TCL that address states tend to contribute little to remedying commodity policy trade-offs. They will either be aimed at achieving a mere inter-state balance or, where they could remedy for instance a trade-off between economic and development interests, are ‘declaratory’ rather than of substantial legal effect.

Moreover, direct TCL is largely of soft or private legal nature, thus unfolding little legal effect on states’ actions. The latter, however, are naturally the central actors regarding decisions to extract. Also, we noted that rules addressing private actors, especially those that are intended to cover particular commodity sectors, tend to be more specific than the rather abstract rules addressing states. Another pattern, which hinders coherence and thus limits balancing effects of TCL, are the few incidents of full integration between its rules and standards.

Apart from that, what both contributes to the limited effectiveness of TCL and illustrates this status quo, is the imbalance of the current framework in favour of economic objectives—primarily investment protection and trade liberalisation. Overcoming this imbalance constitutes a major challenge in rendering TCL more effective.

Lastly, the TCL framework exhibits regulatory gaps especially with regard to aspects of commodity activity that are distinct from other activities. It particularly lacks effective remedies against harmful conduct of transnational corporations. Also, it does not address potential clashes between global, national, and local SD objectives; provides little to no guidance on how foreign investments as well as trade need to be designed in order to foster a functional commodity sector; and does not spell out what constitutes adequate policy space for SD measures.

All in all, the current TCL framework barely contours what sustainable commodity use legally requires. It is thus little effective in ensuring a functional commodity sector.