agua y libre comercio en inglÉs 2.pdf
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Guide
n2
International Conventions
Incompatibilities between Free Trade Treaties,ncompatibilities between Free Trade Treaties,Bilateral Investment Treaties and relevantilateral Investment Treaties and relevant
WAT
ERAND
FREETRADE
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INTRODUCTION Pg. 3
WHAT ARE THE LEGAL FRAMEWORKS AND
INTERNATIONAL PRINCIPLES THAT REGULATE
WATER RIGHTS AND THE INTERNATIONAL
TRADE OF WATER AND THE PROTECTION OF
INVESTMENT? Pg. 5
WHAT IS THE STRUCTURE OF THE SYSTEM TO
RESOLVE INTERNATIONAL BUSINESS
CONFLICTS AND WHAT IS ITS IMPACT ON
COUNTRIES WATER MANAGEMENT? Pg. 8
WHAT ARE THE SOURCES OF INTERNATIONAL
LAW THAT CONFER THE REGULATORY
FRAMEWORK FOR THE PROTECTION OF
WATER AND WATER SERVICES?
Pg. 9
WHAT ARE THE LEGAL INSTRUMENTS OF
INTERNATIONAL LAW THAT RECOGNIZE THE
RIGHT TO WATER FROM A PERSPECTIVE OF
HUMAN RIGHTS AND WHAT IS THEIR
REGULATORY REACH?
Pg. 17
WHAT ARE THE LEGAL IMPLICATIONS OF
HUMAN RIGHTS AGREEMENTS WITH RESPECTTO THE CLAUSES INCORPORATED IN FREE
TRADE TREATIES AND BILATERAL INVESTMENT
TREATIES THAT COMMIT TO THE TRADE OF
WATER?
Pg. 19
Glossary of Terms and Acronyms Pg. 22
G U I D E
1
2
3
4
5
6
Incompatibilities between Free Trade Treaties, Bilateral Investment Treaties and relevant International Conventions
Incompatibilitiesbetween Free Trade
Treaties, BilateralInvestment Treaties and
relevant InternationalConventions
2
Water and Free Trade
I N D E X
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Incompatibilities between Free Trade Treaties, Bilateral Investment Treaties and relevant International Conventions2
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The Social Vision of Water, a project led by
the Institution AGUA SUSTENTABLE
(SUSTAINABLE WATER) with the help of
the International Development Research
Centre (IDRC) has developed variousguides on the theme of Water and Free
Trade based on diverse investigations
carried out primarily in Andean countries
between 2004 and 2007. The objective of
these investigations was to determine how
water and drinking water services are
impacted by Free Trade Agreements and
Treaties. The results of this research
permitted the design of a series of didactic
documents written principally for publicoperators, government negotiators of free
trade agreements, national and interna-
tional public authorities with decision-
making power pertaining to water, academ-
ics and consultants, and representatives or
leaders of civil society.
This Guide has been prepared primarily as
a synthesis of the introduction to the bookWater and Free Trade. Impact and implica-
tions of Free Trade Agreements on Water
and its Services by Miguel Solanes.
In addition, the guide incorporates reflec-
tions found in various investigations carried
out with trusted consultancies with different
analysts such as Howard Mann and
Michael Hantke - Domas and Jorge Barra-
guirre. The texts of these documents,including the introduction by M. Solanes
are available at
http://www.aguavisionsocial.org/
lineasDocs.html.
The supporting documents used to prepare
this guide have been systematized into a
summary, and complemented and
illustrated with facts, analysis and addi-
tional information by Nacy Yaez, with the
help of a team from SUSTAINABLE
WATER.
The central objective of the present Guide
called Incompatabilities between Free
Trade Treaties and Bilateral Investment
Treaties and Relevant International
Conventions, is to open of debate around
the following themes: i) points of interaction
between international law and water; ii)
legal principles that apply to the protection
of investment; iii) the impact of the systemof resolving international comercial
disputes on countries ability to govern
water resources and the exercise of water
rights; iv) sources of international law that
confer a regulatory framework for water
and its associated services, and v) interna-
tional legal rules that protect the right to
water from a perspective of human rights.
The proposed conclusions put forth in the
documents that comprise this guide, firstly,
emphasize the imperative need to modify
the decisions of the international arbitration
tribunals the principle mechanism for the
resolution of commercial disputes in the
international arena with relevant national
precedents that consider the nature of the
facts upon which the conflicts were submit-
ted for resolution and the context in whichthey take place, urging the international
trade community to change the mode of
designation, operation and procedure of
international arbitration. Secondly,
although it is affirmed that Free Trade Trea-
ties and other investment agreements open
the market for trade in water as a natural
resource and as services and establish
INTRODUCTION1
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a legal commercial regime at the interna-
tional level that tends to override the
current international order, it is clear that
this market is not free of responsibilities.
Finally it establishes that these responsibili-ties are regulated by the rules established
by international law that protect water and
its related services through a regulatory
framework: principles that come from inter-
national agreements, international practice,
general principles of law applied by
relevant national systems in the regulation
of water resources (with an emphasis on
the contractors obligation of efficiency),
whose legal rulings allow challenges to
contracts when it suffers defects or if
current circumstances differ from the time
of its signing; international environmentallaw and standards of sustainability in the
planning and execution of development
policies; human rights; and international
water agreements.
4 Incompatibilities between Free Trade Treaties, Bilateral Investment Treaties and relevant International Conventions
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The World Trade Organization (WTO),
the General Agreement on Tariffs and
Trade (GATT), and the General Agree-
ment on Trade in Services (GATS) are
well-known instruments that regulatecommerce and incorporate water in the
market of goods and services. Other
agreements with provisions similar to
GATT and GATS and which have simi-
lar impacts in relation to water, also
exist. One example is the Central
American Free Trade Agreement,
known as CAFTA, where water has not
been specifically excluded from the
trade rules. Furthermore, the agree-
ments with the United States of
America, in the services sector, only
exclude services when they have been
explicitly excluded, which differs from
GATS, where it is understood that only
listed services are included (through
the so-called positive lists, lists wherestates have committed services whose
inclusion of offers has been explicitly
accepted).
In the Central American Free Trade
Agreement (CAFTA), only Costa Rica
has excluded water services, which
means that if one of the other countries
party to the agreement permits a waterprivatization, the entire sector would be
opened to private investment. The
United States, by comparison, is not
subject to the same rule, given that the
commercial areas of jurisdiction of
each of the states of the Union have
been excluded from the agreement;
and because water is subject to the
regulation of each of the member
states of the Union, which means the
decision regarding its commercialisa-
tion remains subject to the sover-eignty of each federal state.
WHAT ARE THE LEGAL REGIMES AND PRINCIPLES OF INTERNATIONAL
LAW THAT REGULATE THE INTERNATIONAL TRADE OF WATER AND THE
PROTECION OF INVESTMENTS?
2
WATER AND THE RIGHTS OF U.S.
INVESTORS IN CAFTA
If there were already private water
services in the region of the Central
American Free Trade Agreement
(CAFTA), then the entire sector wouldbe open to U.S. investment.
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Interaction between Interna-
tional Investment Law and WaterThe interaction between investment
and water can be illustrated in the
following areas: a) direct investment inthe water sector; b) investment in other
sectors that consume water in their
production processes; and c) the
impact of legal rules that include provi-
sions for investor protection after the
investment has been made.
Water is an important part of all invest-ment agreements that open up sectors
such as agriculture, energy and indus-
try, and foreign investment.
After an investment is made, the
foreign investor acquires certain rights.
The investment implies a situation of
permanency in the country that results
in relations between the investor andauthorities and regulatory entities of all
levels, and as a result in international
responsibilities for the State.
The principles of protection that
support an investor in this context are
the following:
1. National treatment: an investor
can not be treated in a less favor-
able manner than nationals, except
in the case of exceptions expressed
in the treaty;
2. Most Favored Nation: an investor
can take advantage of more benefi-
cial agreements signed by other
countries, except where explicitly
excluded in the treaty.
3. Standard of international mini-mum treatment, fair and equal treat-
ment: is a principle of absolute inter-
national law that is not linked to a
comparative like the two previous
principles. Its content is still in
formation, and includes transpar-
ency, due process, right to
defense, and day in justice (da
en justicia as it is defined in Span-
ish), as well as that of fair and equal
treatment. This is related to a
subjective standard based on the
legitimate expectations of the inves-
tors. Conforming to this principle
and in relation to the regulation of
the water sector, whichever modifi-
cation of the conditions of the rights,including tariffs not forseen at the
time of the investment, could be
seen as a violation of this standard.
4. Protection with respect to uncom-
pensated expropriation: This notion
is an absolute standard like that of
fair treatment. The problem it pres-
ents is not in its traditional applica-tion that requires the compensation
of expropriative actions, rather that
its expanded definition attempts to
block regulatory activities under the
rubric of indirect or regulatory
expropriation.
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5. Prohibition of Performance
Requirements: Investment agree-ments prohibit performance require-
ments that investors must meet as a
condition for doing business in a
country. Nevertheless, water is
plainly an area where performance
requierements will continue to
increase given the nature of the
water problem.
RIGHTS OF INVESTORS
Versus
RESPONSIBILITES OF INVESTORS
TOWARDS STATES
The rights of investors are broad and
expansively interpreted, and the tendency
imposed by the new international
commercial order vis a vis Free Trade and
Investment Agreements is that investors do
not have a corresponding set of obligations
with respect to the states where they
operate.
INDIRECT OR REGULATORY
EXPROPRIATION
The doctrine of indirect expropriationconsiders that government measures are
undue interference on private activity. This
issue is particularly serious considering
that water will be subject to increasingly
severe regulations, in terms of quality,
environmental balance, and scarcity; and
therefore a broad conceptualization of
expropriation would translate into serious
social, environmental and sustainability
problems. It should be noted that the
United States has apparently never paidcompensation for measures resulting from
the application of environmental
legislation by the State even though
investors acquired rights may have been
restricted.
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Investment agreements signed after1980 establish special mechanisms toresolve conflicts.
These mechanisms are based inprivate arbitrations between privatefirms, but in practice they have becomeactions taken by private investorsagainst States.
The majority of the cases submitted tointernational arbitration in the Americashave to do with important questions ofpublic interest, including the environ-ment, land use planning, the use andprotection of soil, and social questions.These issues are illustrated in thefollowing emblematic cases: a) in thecase of the La Villa wetlands in Lima,
Peru; and b) public service companies,in the cases pertaining to Aguas Argen-tinas y Aguas del Illimani (in Argentinaand Bolivia, respectively).
In spite of the importance of their deci-sions, the arbitration tribunals do notcomply with the basic rules of dueprocess: i) they are not independent; ii)its members are selected by the partiesand act indistinguishably as arbitrationjudges and litigant attorneys; iii) theproceedings are held in secret; iv) thereare no means to appeal decisions; andv) only one of the parties, in this casethe investors, have the active legiti-macy to initiate proceedings againstgovernments.
HOW IS THE SYSTEM OF INTERNATIONAL COMMERCIAL DISPUTE
RESOLUTION STRUCTURED AND WHAT IS ITS IMPACT ON COUNTRIES
WATER MANAGEMENT?
3
COMMERCIAL LAW TRUMPING
PUBLIC INTEREST
The international arbitration carried out inthe cases that involve Investor-to-Statehas been a frustrating imposition ofinternational commercial law over ques-tions of public interest, as demonstratedby 1) the nature of the questions submit-ted for arbitration: public services,environment, social questions; 2) theeconomic magnitude of the demandedreparations ($20 million only in Argen-tina); and 3) the tendency of arbitrationtribunals to undermine national judicialsystems by employing a pro-investor,supra-state jurisdiction.
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I. Trade and Investment Law in the
context of other sources of Interna-
tional law, with special emphasis on
water and its services
Until the 1990s, the decisions of com-
mercial tribunals operating under GATT
applied to rules/ or applied rules that
were strictly linked to GATT itself, with-
out taking into account other sources of
international law. Nevertheless, after
the 1990s, the Tribunal of Appeals of
the World Trade Organisation com-
pletely reverted this jurisprudence and
decided that the Organisation would
exist as part of a much broader body of
international law, that should be consid-
ered when it was deemed relevant by a
panel or appeals.
The arbitration tribunals set up by
investment agreements have followedthe original restrictive tendency of
GATS, in terms of applicable law as
well as the consideration of the protec-
tion of interests, concentrating its
action in the protection of investors,
conforming to the purpose of the agree-
ments. In this way, the arbitration tribu-
nals have created a new constitutional-
ity, with principles, proceedings, andunique uses of exorbitant power.
The international arbitration tribunals
have taken no notice of either the exis-
tence of principles of common law or
regulatory law that are important to
arrive at balanced solutions that guar-
antee the sustainability of the global
institutional system.
In this scenario, it is important to note
that there are a wide range of prin-ciples, notions and concepts that are
extremely relevant for guaranteeing the
equity and the sustainability of the
international order and that provide a
dimension of balance and neutrality in
the system of international law.
II. International customary or
common law, source of interna-
tional law resulting from conduct
or repeated behaviour of States
Customary law or practice can be
applied as a tool for interpreting
contractual obligations, or as a source
of rights and obligations in and of itself.
Interpretive Practice
As a source of interpretation, in accor-
dance with the Vienna Convention,
customary law has negative and posi-
tive elements.
The negative is that it conditions theinterpretation of treaties on its object
and purpose. This has resulted in a
broad interpretation of the rights of
investors and has constrained the role
of the arbitration tribunals pushing
them to protect the private interests
stipulated in the contract.
WHAT ARE THE SOURCES OF INTERNATIONAL LAW THAT CONFER A
PROTECTIVE REGULATORY FRAMEWORK FOR WATER AND ITS RELATED
SERVICES?
4
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The negative impacts of the system
have been ignored and have put into
question the States function to guaran-
tee the public interest. As a safeguard,
it has been argued that the agreementshave other explicit purposes, such as
the right to development and to regula-
tion, whose consideration will broaden
the range of interpretive criteria that the
clauses of the contract should be
subjected to and the balance of the the
arbitration decisions.
Another safeguard that emanates from
interpretive practice has been to estab-
lish provisions over specific institutions.
Here it is considered that the principle
of fair and equal treatment is evolving,
conforming to common law, in a type of
international administrative law, which,according to some arbitrations, could
be adjusted and applied to conform to
the level of development of the country
in question. It is argued that this differ-
entiation could be part of international
customary law as it is not realistic to
think that the same standard can be
applied to all the countries in the world,
regardless of conditions of economic,
social and institutional development.
The importance of interpretive common
law can be substantiated in the fact that
countries, such as the United States,
make an effort to ensure that their
domestic interpretation, related to
processes and/or legal expropriativeacts, is binding. This validates interna-
tional customary practice and gener-
ates legal certainty. Nevertheless, it is
important to note that this is only valid if
both or all of the parties on signing the
treaty agreed to apply this legal regime.
Custom as a Source of Law
Customary practice can be an autono-
mous source of laws; many interna-
tional agreements have broad clauses
about international law that permit refer-
ence to customary practice as a source
of international law. This permits prac-
tice to be invoked when a reasonable
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EXPROPRIATION UNDER INVESTMENT
AGREEMENTS
The other institution whose normative reach
could be detemined by international
customary law is expropriation underinvestment agreements. This includes the
determination of when there is expropriation
and how much should be paid in the name of
indemnification. The claims of expropriation
can be based on administrative measures
that are based on: the loss of property rights
and the decrease of all or most of the value
of the goods and capital invested.
Nevertheless, there are cases in which the
demand is founded on indirect expropriationresulting from regulatory measures. It
should be noted that normal regulatory
measures of government are not
expropriation under international law if they
are not discriminatory, conform to due
process and have been adopted for public
purpose.
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linkage exists between customary law,
general principles of international law,
and trade conflict generated in the
frame of an international agreement.
The expressed contents of applied law
vary with case to case, but use of
customary practice helps to mitigate
the impacts of an interpretation that
advocates for the breach or state
responsibility founded only in the text of
the agreements.
The crucial point is to determine if other
sources of international law are appli-
cable, from the moment that the
process of negotiating international
commercial agreements is initiated,
and to determine which is the relevant
applicable content.
General Principles of Law
The general principles of law are the
source of international law. These can
be used to fill gaps in agreements and
international customary law and also to
consolidate principles of international
law that have been broadly accepted in
domestic law.
The General Principles of law can be a
source for interpretation, or also of
contextualization and balance between
States and investors in the area of
rights and obligations derived from
investment agreements.
When these principles are found to be
sufficiently embedded in legal systems
that are stable and based on developed
institutions, they will apply to similar
situations or goals, and can be consid-ered as general principles of law and
applied in the international arena.
Specific principles exist that guide the
formation of consent and honouring of
investment contracts, their execution
and therefore the regulatory measures
by which governments, eventually, can
alter the contractual clauses or the
economic and institutional setting
where they are executed. Its applica-
tion will depend on the context and
whats done and the capacity to dem-
onstrate that it relates to a general prin-
ciple of law relevant to the concrete
case.
In terms of regulation of public
services, an examination of law in the
European Union, the United States,
England and Chile, suggests that a
general regulatory principle exists that
requires an obligation of efficency from
service providers, imposed in favor of
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the users and which justifies the regula-
tory action of the state aimed to prevent
undue profits, externalities and other
affects which are contrary to efficiency.
General principles applied to the forma-
tion and honouring of contracts
Acts contrary to public order, a domes-
tic notion held in civil courts, can not be
bases for legal actions. This has been
recognized in doctrines over arbitra-
tion, linked to the public international
order.
Corruption is one act considered
contrary to prescribed public order.
There are processes for signing agree-
ments outlined within the United
Nations and the Organization for Eco-
nomic Cooperation and Development
(OECD). Contracts affected by corrup-tion can not be taken to arbitration. But
while in some cases it has been
suggested that the state that invokes
corruption should have initiated
proceedings to the effect, in others
solid circumstancial evidence has been
admitted. In other cases, when it has
been invoked by a country, corruption
has served to get investors to drop theirdemands and pay costs. When there is
corruption, the investors can not argue
legitimate expectations.
Other principles to consider in the
writing of a contract, received in almost
all of the systems of the world, are: i)
physical or moral violence; ii) intimida-
tion; iii) undue influence; iv) falsifying
and hiding of material information; v)
abuse of law; vi) error or moral viola-
tions vii) good conduct and basicdecency. To summarise, the lack of
moral conscience.
Of course in all cases the factual base
should be clear and well founded. It has
been argued in cases linked to water
that one could investigate, for example,
if financing organisations, companies
and other possible beneficiaries of
privatisation actively promoted privati-
sations, that led to banks not financing
public enterprises, conditioning financ-
ing on privatisation.
Another argument that has been
suggested is that privatised companies
should have been aware, given theirworldwide experience, that the condi-
tions of the privatisation were not
sustainable, and therefore entered the
contracts knowing they would be rene-
gotiated. The reality is that the majority
of concessions have been renegoti-
ated, particularly in water and tranpor-
tation, which has had an impact on the
credibility of the country and sector inquestion, and which indicates both
poor design of contracts and exces-
sive opportunistic behavior. This
suggests that regulation, particularly in
poor countries, should consider the
imbalance of information and difficulties
of enforcing laws.
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The limited frameworks for competi-
tion which have led to the capture of
markets also could give rise to the
invocation of the principles noted
above.
What should be made clear, is that in all
cases, proof of facts and determination
of applicability and procedure of the
principles invoked under international
law, will be fundamental. Subsequently,
it will be relevant to determine the civil
sanction in the event that the facts and
the legal jurisdiction of the principles
are applied, for example: annulment,
payment for damages, or adjustment
and compensation for shared faults, in
other words of mutual services.
Principles generally applied in the
execution of contracts
In the context of monopoly services such
as water, with sensitive imbalances of
information, and with problems and
costs for the associated government in
the disruption of the contract, the poten-
tial for abuse of law is significant, in the
same way as abuses of market power,
strategic behavior and the hiding of
information.
In this case, failure to complete obliga-
tions and violations of good faith can be
argued. This is linked to the specific
non-completion of the obligation of
efficiency for the benefit of users, which
is the basis for the decisin to open the
national market to the private foreign
investor.
Another possible defense is change of
circumstances. This principle, neverthe-
less, presents problems linked to the
unforseen nature of determining facts of
the situation. Not withstanding, if the
facts were forseen, whether serious or of
daily occurence, other elements enter
into play. These include ineptitude, bad
faith, lack of due diligence, ignorance,
whether culpable or intentional, of actsor information, formal or informal, that a
prudent and normal person should have
taken into account to determine if a com-
mercial operation in its context is viable
or not.
In this case the adherence to the obliga-
tion of diligence could vary related to the
degree of knowledge with respect to anactivity, its performance conditions, risks
or limitations. In American regulatory
law the term constructive notice has
been created to refer generically to the
situations in which it is considered if a
person has information sufficient to be
prudent.
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General Regulatory Principles
The most important general principle is
that States, in the exercise of their
sovereignity, have the right to dictateregulatory rules in their territory. This
principle can only be limited in function
by expressed contractual rules.
In the area of water and its related
services the question can be better
understood if it is thought of as a com-
bination of the basic right to regulate
and an understanding of good practice
in the referred sector. In this respect it
would be unreasonable for an investor
to assume a permanent unchanging
regulatory universe if the local prac-
tices had not been developed to the
necessary level, or to a comparable
standard. This argument can be
strengthened if it can be demonstratedthat certain practices have elevated the
level of general principles to compa-
rable law.
In this sense there are principles in
water resources and in water services
that can be considered general.
The principles that are enumeratedinclude but are not limited to:
Water Resource
Among the most relevant water
resource principles are i) public domin-
ion; ii) assignation to and control by the
State; iii) control of monopolies; iv)
effective use; iv) prohibition of contami-
nation and risk creation; v) manage-
ment of sustainable use; vi) priority
assigned to potable water or water forhumans; vii) environmental discharges;
vii) respect for established and custom-
ary rights; and in certain conditions-
viii) charges for the water
Water Services
With respect to practices and regula-
tions in the field of services, there exist
relevant rules and practices that are
upheld in the principle of efficiency of
endeavour and that manifests in: i)
supply to the poor; ii) reasonable rates
levels; iii) sustainability; iv) quality of
services; iv) information; v) transfer
prices/pricing; vi) levels of corporate
debt; vii) capital structures; viii) usefuland usable property; ix) regulatory
organization; x) levels of reinvestment;
y xi) tariff/rate adjustments in times of
crisis.
In terms of regulation of water services,
it would be inappropriate to assume
that low levels of regulation, resulting
from ignorance or lack of information ina country, should remain indefinitely
simply because this was the state at
the time of the investment. In the expe-
rience of countries such as England,
the United States and Chile, to mention
a few, regulatory rules have been
adjusted and perfected progressively
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over time. Therefore, as regulation and
the art of providing a service is devel-
oped, necessary regulation should not
be blocked by service providers via
undue influence, abuse of a dominantposition, misrepresentation of facts or
hiding of information.
III. Potential application of
international law unlinked to
international investment law
The principles of international invest-
ment law are not or should not be
considered in a context that does not
include other rules of international law.
For the reality is that they operate
within a complex set of norms that in its
entirety makes up the international
public order. As such we can observe
that the rules established by the World
Trade Organization, in setting legalprecedence, exist within a body of gen-
eral international law and are not
isolated in and of themselves.
From this perspective, international
law, in its entire legal complexity, deter-
mines the parameters of the legitimate
expectations of investors in the context
of the principle pacta sunt servanda(principle of international law and civl
law that means that the covenant
should be respected by all parties) and
also the principle of good faith.
The principles of international law can
refer to sustainable development,
which can include not only the environ-
ment, but also equitative development
in economic and social terms.
There is consensus that meeting envi-ronmental obligations constitutes a
justification for the exercise of environ-
mental regulatory authority, a principle
which the World Trade Organization
(WTO) accepts in practice. The same
principle exists in the obligation to not
cause cross-border harm.
The sustainable development compo-
nent of development can generally be
understood in terms of social and
economic equity, based on the need to
respect policies of distributive equity,
with particular reference to historically
mistreated minorities.
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International Water Agreements
International rules pertaining to shared
water resources include causing no
harm, reasonable and equitativeallocation; and the priority of basic
human needs. The existence of treaties
to this effect condition the legitimate
expectations of the investor.
Human Rights
The water sector is particularly relevant
to the area of human rights, and the
growing recognition that international
corporations are obliged to meet basic
human rights standards. There is a
human right to secure drinking water.
Another area of human rights looks at
the protection of indigenous rights
which incorporates a collective dimen-
sion within the field of rights to water.
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The discussion with regards to the right
to water dates to 1972, at the United
Nations Conference on Human Envi-
ronment which took place in Stock-
holm, Sweden, where it was estab-lished that water should be an object of
special protection by the legal system,
to guarantee its sustainable use by
current and future generations.
This same point was also asserted in
1977, in the United Nations Conference
on Water in Mar del Plata, Argentina
and, afterwards, in 1992 in the Interna-
tional Conference on Water and the
Environment in Dublin. In the same
year, the Rio Conference on Develop-
ment and the Environment established
the so-called Agenda 21, paragraph 18,
with a preferential right to the use of
water resources for the satisfaction of
basic needs and the protection ofecosystems. From a social perspec-
tive, paragraph 18 conceptualises that
the right to water is both a social good
and an economic good, and attempts to
harmonise this dual condition. The
mechanisms by which attempts to arbi-
trate these interests are: demand man-
agement, the conservation and reuse
of water, the evaluation of availableresources and financing instruments.
The implications that emanate from the
recognition of the fact that water is an
economic and social good are found in
pronouncements of the need to regu-
larize rate structures taking into consid-
eration opportunity costs, environmen-
tal impacts and ability to pay. On the
other hand, given the shortage and
vulnerability of the resource, the inves-
tor is obliged to recognize, in all plan-
ning and use of water, the full costs, thebenefits of investment and the costs of
environmental protection and exploita-
tion, as well as the opportunity costs in
terms of the most valuable alternative
use of the water.
In the institutional arena, there is a
need to adapt the institutional system
to new perspectives that require
integrated management of water reser-
voirs and local development. As well, it
is recommended that institutional
changes should be adapted to the
needs of intergrating water manage-
ment with land use.
Other international foras such as theWorld Conference on Human Rights
celebrated in Vienna in 1993, Global
Water Partnership (GWP) and the
United Nations Committee on Eco-
nomic, Social and Cultural Rights have
advanced the recognition of the right to
water as a human right.
The United Nations General Assembly,in 1999, recognized that the right to
water is based in the right to develop-
ment. In this manner, the United
Nations has put forward the right to
water as an economic, social and
cultural right that should be guaranteed
under the protection of the International
WHAT ARE THE JUDICIAL INSTRUMENTS IN INTERNATIONAL LAW THAT
RECOGNISE THE RIGHT TO WATER FROM THE PERSPECTIVE OF HUMAN
RIGHTS AND WHAT IS THE EXTENT OF THEIR LEGAL APPLICATION?
5
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Covenant on Economic, Social and
Cultural Rights (ICESCR) of 1966. The
Comittee for Economic, Social and
Cultural Rights that founded the
covenant, in 2002 explicitly establishedthe relationship between human rights
and water and granted express recog-
nition of the right to water, adopting a
General Observation sindicated with
Number 15 which further uphold what
is established by Articles 11 and 12 of
ICESCR.
The General Observation Number 15
of ICESCR established as legal basis
the human right to water, the right of all
to have acess to sufficient, healthy,
acceptable and accessible water for
personal and domestic use.
The observation also linked the right towater to the obligation established in
paragraph 2 of article 1 of ICESCR,
that states that a person can not be
deprived of their own means of subsis-
tence, making the member States
responsible for guaranteeing sufficient
access to water for subsistence agricul-
ture and ensuring the survival of Indig-
enous People.
Incompatibilities between Free Trade Treaties, Bilateral Investment Treaties and relevant International Conventions
INTERNATIONAL INSTRUMENTS FOR HUMAN RIGHTS
The International Covenant on Economic, Social and Cultural Rights andits counterpart the Convenant of Civil and Political Rights are human rights
instruments that count on a significant number of State adherents. The
International Convenant on Economic, Social and Cultural Rights was
adopted on 16 December 1966, and entered into effect on 3 January 1975
(after its ratification by 35 States). Today, 141 States are adherents to the
Convention.
The International Convenant on Civil and Political Rights has established
in its articles 28 to 45, that rights related to these international treaties on
human rights are supervised in their application by the Committee for
Human Rights. However, only 45 States have adhered to the declaration
in article 41 of the Convenant, which establishes the competence of the
Committee of Human Rights (which entered into effect on 28 March 1979).
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The international community has
reached consensus on the supremacy
of human rights with respect to other
rights recognized in international law.
Human rights constitute imperativerules of jus cogens, some of which are
rules that are at the will of the States
and through which international
customary law protects the superior
interests of the international community
such as the defence and protection of
the rights of the human person. The
imperative character of the rules of jus
cogens determines that these enter
into effect without requiring the accor-
dance or the will of the States and
rejects the acts of States that try to
minimize their effectiveness.
WHAT ARE THE LEGAL IMPLICATIONS OF THE HUMAN RIGHTS AGREEMENTS
WITH RESPECT TO THE CLAUSES INCORPORATED IN FREE TRADE TREATIES AND
BILATERAL INVESTMENT TREATIES THAT COMMIT TO THE TRADE OF WATER?
6
JUS COGENS:
OBLIGATORY RULES OR HIERARCHY
OF NORMS
The rules of jus cogens are established
in Article 53 of the Vienna Convention.
These rules establish that a treaty is null
and void if it is in opposition to an
imperative rule of general international
law. For the purposes of this
Convention, an imperative rule of
general international law is a rule
accepted and recognized by the
international community of States in its
entirety as a rule that can not bechallenged and that can only be
modified by a subsequent rule of
general international law that has the
same character
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Experts from the United Nations Sub-
comission for the Protection and
Promotion of Human Rights have
specifically emphasized the supremacy
of human rights over internationalfinancial and trade rules.
The lawyers J. Oloka Onyango
(Uganda) and Deepika Udagama (a
substitute member of Sri Lanka), in a
report commissioned by the Subcomis-
son (E/CN.4/Sub.2/2000/13.) effec-
tively elaborated on the theme of
globalization and its consequences for
the full exercise of human rights. In this
document they stressed the indivisibil-
ity, interdependence, and universal
recognition of the civil, political,
economic, social and cultural rights of
the International Charter of Human
Rights. These rights, argue the experts,
were recognized as part of internationalpublic customary law and jus cogens
and also apply to the States and Inter-
national Multilateral Institutions includ-
ing the WTO and its trading system, the
World Bank and the International Mon-
etary Fund (IMF). They concluded that
human rights laws have a superior
position with respect to the charters of
the multilateral institutions which havea responsibility and obligation to
observe these laws.
For its part, the Meeting of High Level
Human Rights Authorities (MHLHRA)
of MERCOSUR and associated states
ruled in favor of the supremacy of
Human Rights over Free Trade Trea-
ties, a theme that has been discussed
in their past seven meetings. A consen-
sus declaration on the subject, how-
ever, has not yet been issued.
Based on these premises it can be
concluded that a State that permits
foreign investment of any kind in devel-
opment projects which are not socially
or environmentally responsible and, by
contrast, is indifferent to the negative
impacts of such projects on the funda-
Incompatibilities between Free Trade Treaties, Bilateral Investment Treaties and relevant International Conventions
PROPOSAL FOR THE
FULFILLMENT OF HUMAN RIGHTS
GOALS
In the VII/2007 Meeting of the High
Level Human Rights Authorities and
Foreign Ministeries of MERCOSURand Associated States, the
government of Brazil proposed that the
members of MERCOSUR devise a
long term plan for fulfilling international
human rights goals. The Chief Minister
of the Special Secretariat of Human
Rights, Paulo Vanuchi, signaled that he
himself would carry forward a proposal
for MERCUSOR as a whole to put into
effect a plan to convert this nice
discourse (regarding respect for
human rights) into reality in the world.
(We Are MERCUSOR Bulletin)
available at
http://www.somosmercosur.org/?q=es/
book/ export/html/153)
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mental rights of people, communities,
indigenous peoples and the environ-
ment as recognized by international
law, is failing to fulfill its obligation to
protect human rights.
The Free Trade and Bilateral Invest-
ment Treaties that commit the trade in
water violate human rights, when via
this means, they put at risk access by
all citizens to drinking water and sani-
tary services or when they take advan-
tage of sources of fresh water that
impact the hydrological sustainabilityand the normal supply of water to indig-
enous communities and farmworkers
who have used such water resources
from time immemorial.
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BIT Bilateral Investment Treaty
CAFTA Central America Free TradeAgreement
CAN Community of Andean Nations
CS Customs System
CNMCCA Common Nomenclature of theMember Countries of the Cartegena
Agreement
Dec. 291 Common Treatment Regime forForeign Capital and Copywright, Patents,
Licenses and Royalties
Dec. 292 Uniform Regime for AndeanMultinational Companies
Dec. 510 Adoption of Inventory ofRestrictive Measures of Trade in Services
Dec. 634 Modification of DeadlinesScheduled in Decision 629
Dec. 507 NANDINA Nomenclature Update
FDI Foreign Direct Investment
FTA Free Trade Agreement
GATS General Agreement on Trade inServies
GATT General Agreement on Tariffs and
Trade
GWP Global Water Partnership
HTS - Harmonized Tariff Schedule of theUnited States
ICSID International Center for theSettlement of Investment Disputes
ICWE 1992 Dublin InternationalConference on Water and the Environment
ICESCR International Covenant onEconomic, Social and Cultural Rights
IMF International Monetary Fund
MAI Multilateral Agreement on Investment
MERCOSUR Southern Common Market
MHLAHR Meeting of High LevelAuthorities of Human Rights
NAFTA North America Free TradeAgreement
OECD Organisation for EconomicCo-operation and Development
W/120 List of Sectorial Classifications ofServices
PCPC Provisional Central ProductClassification
TRIPS Agreement on Trade RelatedIntellectual Property Rights
UNCITRAL United Nations Commissionfor International Trade
WTO World Trade Organisation
GLOSSARY OF TERMS AND ACRONYMS
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Incompatibilities between Free Trade Treaties, Bilateral Investment Treaties and relevant International Conventions
WATER AND FREE TRADE Guide n2: Incompatibilities between Free Trade Treaties, Bilateral Investment Treaties and relevant
International Conventions Publisher: Agua Sustentable (www.aguasustentable.org) Translation: Nick Buxton
Cover: Pedro Guereca - Visual design: Pedro Guereca (www.taller64.com)
Fhotographs: Pedro Guereca (except: p. 1, 5 and 13 MOMOS; p. 4 Helena Cordero and p. 7 repertoire)
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It is a publication of:
with the support of:
2
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