On July 16^th in the Chinese port city of Dalian, the explosion of two oil pipelines caused thousands of barrels of oil to begin gushing into the sea. The slick has since expanded to cover hundreds of square kilometres of water and spread upwards of 90km down the coast. The spill – and China’s cack-handed response – is clearly modelled after the U.S.’s ongoing gulf coast saga – but it’s a pale imitation. Unlike the American spill, there seems to be no threat of the oil being carried to other nations’ coasts. Yet even Australia has managed to pull off a massive spill affecting its neighbours. If China wants to get into the oil spill big leagues, they’ll have to find a way to go international.

But while the international oil spill scene is characterised by intense competition, there is a notable lack of corresponding cooperation. It’s all well and good to give neighbours’ coasts an old fashioned “slicking”. But as any eighth-grader who gets caught TP-ing someone’s house because my friend Alan can’t keep his mouth shut knows, there must be a time for cleaning up as well. Unfortunately, international law provides few answers about who is responsible for cleaning up international spills.

The Convention on the Prevention of Marine Pollution by Dumping of Wastes and Other Matter explicitly excludes any “wastes derived from the exploration and exploitation of sea-bed mineral resources”. As a result, it will likely not apply to oil spills. The UN Convention on the Law of the Sea is more promising. It specifies at article 194 that “states shall take […] all measures consistent with this Convention that are necessary to prevent, reduce and control pollution of the marine environment from any source”, and specifically, “pollution from installations and devices used in exploration or exploitation of the natural resources of the seabed and subsoil”. However, for the U.S. oil spill UNCLOS is of limited value because America has not ratified the treaty. Instead President Reagan in 1983 directed government agencies to treat most parts of the treaty as customary law.

Beyond the realm of international treaties, much of the regulation of the offshore oil industry is carried out by special national regulators. These include the U.S.’s Minerals Management Service (MMS), the Norwegian Petroleum Directorate, Britain’s Health and Safety Executive, and Australia’s Department of Minerals and Petroleum Resources. In Canada the Canada-Newfoundland Labrador Offshore Petroleum Board (CNLOPB) regulates the industry, since Newfoundland-Labrador is the only province where offshore drilling currently occurs.

National offshore oil regulators do little to coordinate standards with one another. They lack even uniform sex and drugs corruption standards. A prominent example is the absence of coordinated regulations requiring the presence of an “acoustic switch” on offshore rigs. This is a failsafe device which can be remotely (and reliably) used to close off a gushing well on the sea floor in the event of an accident – such as that on the Deepwater Horizon rig. Acoustic switches are required on rigs in Norway, Brazil, and Canada, and they are present in British operations in the North Sea. Yet in a 2003 report to the MMS, requiring acoustic switches was not recommended because “they tend to be very costly”. As a result, acoustic systems are not present on American rigs.

The lack of coordination between oil regulators stands in stark contrast to the kind of international cooperation seen in other industries. IOSCO, the International Organization of Securities Committees, allows national (and provincial) securities regulators to unify policy approaches, while central banks are currently negotiating their third set of global banking standards through the Switzerland-based Basel Committee.

With the ever-increasing global demand for oil, offshore spills affecting multiple countries will likely be inevitable. Some day China will catch up with the pros in this respect, leaving behind their current small-town spills. But if oil-producing countries and their national regulators don’t do more to agree on standards for preventing and cleaning up international spills, then the international dimension of spills will remain one-sided. In that respect, perhaps all of the offshore oil producers will remain amateurs.

BUSH LEAGUE

The conceptual change that international investment law seems to have gone  through has not however reached one very fundamental point. To my great surprise, speakers continually repeated the same old mantra concerning the main objective of investment treaties: the objective of investment treaties, so it was argued, is the protection of investors. This, I would argue, carries the same amount of logic as claiming that the objective of preparing a salad is cutting tomatoes. While it is true that Bilateral Investment Treaties (BITs) are designed to provide a protective and stabile environment for investors, it is also clear that such protection is a tool and not an end in itself.

When raising this point with one of the other conference participants, she simply answered: “it all makes sense, but none of it is written in BITs”. Technically at least, she was right. Most BITs do not specifically approach public interests and focus almost exclusively on the protection of investors. This narrow view has also led arbitrators to ignore public interests in many arbitral awards. Investment arbitrators, after all, are authorised to decide only in accordance with BITs. Referring to public interests when these are absent from BITs may therefore be considered as unlawfully exceeding the arbitrators’ powers.

The reason for the exclusion of public interests from BITs could be the “race to the bottom” phenomenon, in which states try to be as attractive as possible to foreign investors and therefore cannot afford to insist on maintaining large policing powers in BITs. I also heard others claim that the truth is far simpler: that BIT negotiators do not think about the problems that may result from such exclusion and thus neglect to include public considerations in BITs.

To return to the issue with which I started, none of the above can change the fact that BITs’ main objective is not the protection of investors. There is no benefit in the protection of investors just for the sake of protecting them. The protection of foreign investors is merely a tool, used in order to generate benefits, namely jobs, technology transfer, improvement of infrastructure or in short – development. In one of the first attempts to regulate the field of international investment law, The Havana Charter dictated over more than sixty years ago that: “international investment, both public and private, can be of great value in promoting economic development and reconstruction, and consequent social progress”. The Abs-Shawcross Draft Convention from 1959 adopted similar narrative as it envisaged foreign investments as a tool for the promotion of development. This simple essential truth has been forgotten over the years.

I started this post with the presentation of a certain dichotomy: on the one hand, it seems that some level of recognition of the public role of international investment law has been achieved, but on the other hand, people still claim that the main objective of BITs is the protection of investors. I believe that by acknowledging the inherent mistake which lies at the heart of the latter belief, both objectives and recent developments can be reconciled. Indeed lately, a new generation of BITs specifically acknowledge the true objective of BITs and “developmental language” is brought once again to the fore.[2] The Canadian Model FIPA for instance states:

“Recognizing that the promotion and the protection of investments of investors of one Party in the territory of the other Party will be conducive to the stimulation of mutually beneficial business activity, to the development of economic cooperation between them and to the promotion of sustainable development”

By acknowledging the true objective of BITs, arbitrators could include public considerations within their interpretation of investment treaties and thus achieve a more balanced approach, one that cohabits with states’ needs and reflects the recognition that foreign investment effects public interests, alongside those of private investors. Acknowledging development as the true objective of BITs, so I claim, is obvious and should be better reflected within any debate over the field of international investment law.

[1] International Investment Treaty Law and Arbitration: Evolution and Revolution in Substance and Process, Sydney University Faculty of Law, 19-20 February 2010. “

[2] See recent Canadian Model FIPA, Norwegian Model BIT, IISD Model BIT.

One of the greatest problems in South Africa is that outside of major urban centres the population has only limited access to reliable energy sources. This flies in the face of South Africa’s international energy commitments because ESKOM, which nearly holds a complete monopoly in South African energy production, also provides 45% of the entire continent’s electricity. Of course, this is ‘the dark continent’[1], but South Africans are feeling a power pinch as export demands have been met at the expense of domestic power shortages.

After hosting the World Summit on Sustainable Development in 2002, South Africa made strong legal commitments to reduce its carbon footprint via the United Nations Framework Convention on Climate Change (UNFCCC). The Kyoto Protocol entered into force here in 2005. Despite a rocky start, the South African government recently announced major plans to reduce emissions.

Interestingly, Article 24 of the South African Constitution seems to give strong support to this policy direction:

24. Everyone has the right -

(a) to an environment that is not harmful to their health or well-being; and

(b) to have the environment protected, for the benefit of present and future generations, through reasonable legislative and other measures that -

(i) prevent pollution and ecological degradation;

(ii) promote conservation; and

(iii) secure ecologically sustainable development and use of natural resources while promoting justifiable economic and social development

The Energy Problem

The International Energy Agency (IEA) holds that South Africa is the world’s thirteenth largest carbon emitter. Ninety-four percent of the country’s electricity is derived from coal-power plants. Rural dwellers living off the grid can actually consume more energy than urban dwellers because they use large quantities of biomass for their energy needs (using coal, paraffin and wood for heating and cooking).[2] Demand for electricity is only rising as the national energy grid is strengthened and household incomes increase, bringing more consumer electronics and appliances to the masses. President Zuma announced in last week’s address that ESKOM will lose its place as the sole distributor of energy to commercial and residential purchasers. It will recess into the role of an energy supplier to a future distribution agency. But how level will the new playing field be for other power generating consortiums? And what types of power generating operations will be competitive?

The proposed solutions

Windfarm in Darling, South Africa

The South African Department of Mines and Energy held a renewable energy summit in 2009, and it aims to produce 10,000GWh of new electricity capacity by 2013. It also wishes to create universal grid access by 2014. Their ambitious integrated energy plan seems to hit all the standard points. The Western Cape Province in particular has a strong potential for wind energy development. Regional natural gas pipeline projects will take on an increasing importance in the coming decade. According to the plan, energy efficiency programs will be mainstreamed throughout the economy. South Africa has two nuclear power plants and there is speculation that the growing energy relationship between France and South Africa means some form of assistance will come in developing more modern nuclear power facilities.

This high level policymaking is all very important, and South Africa is on track – at least on paper – to make major cuts in its greenhouse gas emissions. It will miss the targets it set under the Kyoto Protocol, but outside of Europe this is a nearly ubiquitous trend. South Africa could help socialize green energy policy via an implementation of a targeted rural energy policy. While one does not yet exist, South Africans (although not necessarily through government intervention) have made great strides in getting energy efficient stoves, wind-water pumps and small-scale wind generators into rural areas.[3]

A Foreign Policy article from earlier this month noted that the recent climate talks in Copenhagen were not a complete failure, because clearer and more uniform monitoring mechanisms had been agreed to by the delegations – even though they could agree on little else. Author David Roberts noted that the Copenhagen Accord could expose “countries’ efforts to public scrutiny and motivat[e] them to follow through.” Despite South Africa’s various handicaps, it has brought its domestic legislation and energy policy in line with the lowest common denominator of international dialogue. The private sector seems to be keying into the commercial opportunities. There currently seems to be a plethora of companies working on green energy and energy efficiency projects in South Africa. Two major energy conferences and trade shows are coming shortly.

[Disclosure: The author will be a research intern at the African Wind Energy Association in Darling, South Africa through July 2010.]

[2] Mapako, Maxwell & Abel Mbewe, (eds.). Renewables and Energy for Rural Development in sub-Saharan Africa (New York: Zed Books, 2004) at 17-25.

[3] Ibid at 27 and 41.

McKay has brought the bill forward in the hopes that it will alter what he sees as an inexcusable state of affairs concerning the global mining industry’s effects on the populations of developing nations.[1] Detractors of the bill note that the extractive sector of Canada has already enacted very stringent Corporate Social Responsibility (CSR) guidelines after the National Roundtables on Corporate Social Responsibility of 2006. For them, more regulation simply re-invents the wheel.[2]

Bill C-300 takes both a ‘reflexive’ and ‘de-centred’ approach to international law. David Doorey describes the role of reflexive law:

“The theory is that a state can influence through indirect means the practices of multinational private actors beyond the borders of the regulating state. The principal regulatory tool to accomplish this task is mandatory disclosure of information about the foreign practices of the multinational actor. … This has implications for the multinational actor, which must reflect upon how the information will be received by actors across the planet and how it may be used by antagonistic forces to harm or impede its own internal goals and objectives. In theory, requiring transparency about global labour practices could contribute to a climate in which the worst employers are punished, and the best rewarded.”[3]

Reflexive law also exists in other regions of Canadian legislation. While it is not entirely similar, the new Crimes Against Humanity and War Crimes Act allowed a Canadian criminal court to try and convict Désiré Munyaneza, a foreign national, for crimes committed overseas. In that vein, our national criminal code has ripple effects overseas. A national law has a foreign deterrent effect.

Doorey goes on to describe the role of de-centred industry regulation:

“The notion of a decentred state supports a pluralist vision of regulation. Regulation that is decentred, or responsive, or reflexive, perceives for the state an indirect role in the governance of complex social and economic matters, a role as facilitator and motivator of the norm-producing potential of non-state actors. Decentred law involves, then, the regulation of the “contextual conditions” of self-regulation, or the “regulation of self-regulation,” but with the instrumental intent of achieving state objectives.”[4]

This type of “de-centred” regulation is far from new in Canadian lawmaking. For example, the Canadian Radio-television Telecommunications Commission has a quasi-appellate oversight power over the Canadian Broadcast Standards Council, which is a privately operated group who supervise and self-impose content regulations on the vast majority of private broadcasters in Canada. Mining companies have begun to collectively self-regulate since the National Roundtables on CSR, but without the government oversight mechanisms Bill C-300 requires.

At its heart, this type of law is not at all ‘international’ in scope. This law would never apply in any international court setting, or affect private arbitration efforts. Yet, all companies drawing finance from Canadian institutions must submit the information requested. In the information age, this could lead to global consequences for companies and the populations they influence and employ. Human rights campaigners often engage in the “politics of shame” to mobilize public sentiment and drive international law forward, and shame actors into more acceptable boundaries of public opinion (and in some cases the law, although the two are not always synonymous). It seems that, in a way, similar motives are behind this piece of legislation.

John McKay noted that Bill C-300 would put only a “teeny-tiny little break” on “some mining companies” in what is undoubtedly a hugely profitable sector. Robert Wisner, a partner at the McMillan law firm in Toronto with a practice in mining and natural resource law, thinks otherwise. He believes that the law would interfere with the jurisdictions of foreign countries. He also believes the bill would regulate extra-territorial affairs, and affects companies disproportionately to their potential relationship with Canadian markets and Canadian pension plan dollars. The bill would make even “good companies” re-think investing in developing countries, something that would hurt their economies through job losses, lack of infrastructure development, and other mining related activities. Wisner contends that this law would function in a punitive fashion for companies, and would not allow foreign legal jurisdictions the time and power they need to develop their own mechanisms for coping with extraction sector malfeasance.  David Doorey agrees with this final sentiment, when he explains that “the most effective way to improve labour practices is to empower local workers and local states to build countervailing powers to that of global and domestic capital … [one must] measure the potential contribution of disclosure regulation by its ability to advance this agenda.”[5]

According to John McKay, this bill will have a very hard time emerging from committee, and even then it stands to have a very difficult time passing through both the floor of the House and the Senate. Professor Richard Janda of the McGill University Faculty of Law, believes that if passed, the law will “send a clear signal that CSR is not simply in the domain of public relations or corporate largesse, but it is in fact part of the framework of norms and rules that can reinforce the social license to operate on which our companies rely, particularly as they operate abroad.”[6]

Policymakers must ask themselves, are they happy with the status quo? If not, such reflexive law might provide a unilateral and domestic avenue for affecting the global operations of mining companies. This non-spending private members bill also allows the opposition parties great say in an international CSR matter without having control over the various ministries involved in its implementation. However, the potential negative impacts are many and must be weighed accordingly. Allowing mining businesses to totally self-regulate does not seem like a feasible way to monitor the concerns of those negatively affected by mining activities in developing nations, or the minders of Canadian public pension dollars. Yet, the law could potentially be stymied by a less-than-enthusiastic Conservative Party administration, and might become the mere window-dressing it claims to be able to replace. In any case, reflexive and de-centred law serve as examples of innovative Canadian legal structures that if properly implemented can add to our rich sense of legal pluralism in Canada.

[Disclosure: As a research assistant for Professor Richard Janda (Faculty of Law, McGill University), the author is a collaborator with the Ecology of Collapse Working Group, an interdisciplinary team of researchers seeking policy solutions to current economic, social, and environmental issues. Professor Janda submitted a brief and testified in support of Bill C-300 to the Parliamentary Standing Committee on Foreign Affairs and International Development on 8 October 2009.]

[2] Interview of Robert Wisner [Partner, McMillan Toronto] by Philip Duguay (5 November 2009) at CKUT 90.3FM studios, Montreal.

[3] David J. Doorey, “Who Made That?: Influencing Foreign Labour Practices through Reflexive Domestic Disclosure Regulation” 43 OSGHLG 353 at 357-8.

[4] Ibid at 366.

[5] Ibid at 400.

[6] Brief submitted by Richard Janda to the House of Commons Standing Committee on Foreign Affairs and International Development (8 October 2009) on behalf of the Canadian Network on Corporate Accountability. For a copy of this brief contact Richard Janda.