Context: The UN working group on ‘human rights, transnational corporations (TNCs) and other businesses’ has published a new report on human rights-compatible international investment agreements. 

• As per the report published by the UN working group on ‘human rights, transnational corporations (TNCs) and other businesses’, it is important for states to ensure that their bilateral investment treaties (BITs) are compatible with international human rights obligations. 
• It emphasizes the accountability of TNCs in international law. Many a times questions about the TNCs accountability have arisen.  

What are the past efforts? 

• In 2014, the UN Human Rights Council established an open-ended working group with the mandate to elaborate on an international legally binding instrument on TNCs and other businesses concerning human rights. 
• Since then, efforts are being made towards developing a treaty and finding ways to make foreign corporations accountable.
• The latest UN report is a step in that direction. 

How we can hold the TNCs accountable?  

• Case study of Argentina: Bilateral Investment Treaties (BITs) can be harnessed to hold TNCs accountable under international law.
• The issue of fixing accountability of foreign investors came up in an international law case, Urbaser v. Argentina (2016).
• The tribunal held that corporations can be subjects of international law and are under a duty not to engage in activities that harm or destroy human rights.
• However, on question of whether the foreign investor was under an international law obligation to provide drinking water and sanitation, the tribunal held that only states have a positive obligation to meet the human right to water; corporations only have a negative obligation in this regard unless specific human rights obligations are imposed on the foreign investor as part of the BIT. 

Significance: The case played an important role in bringing human rights norms to the forefront in BIT disputes. It also opened up the possibility of using BITs to hold TNCs accountable, provided the treaty imposes positive obligations on foreign investors.

• In the last few years, states have started reshaping their BITs by inserting provisions on investor accountability. Being a soft law language, they do not impose positive and binding obligations on foreign investors. They fall short of creating a framework to hold TNCs accountable under international law. 

What lessons India needs to learn? 

• The recent UN report has important takeaways for India’s ongoing reforms in BITs.
• India’s new Model BIT of 2016 contains provisions on investor obligations. However, they do not impose a binding obligation on the TNC.
• India should impose positive and binding obligations on foreign investors, not just for protecting human rights but also for imperative issues such as promoting public health.  
• Role model: The Nigeria-Morocco BIT, which imposes binding obligations on foreign investors is a good example. These reforms would help in harnessing BITs to ensure the answerability of foreign investors and creating a binding international legal framework to hold TNCs to account. 

About bilateral investment treaty (BIT) 

• A stable political and legal environment, assurances against taking away of the investment value through legislative or administrative acts, transparent public policy measures, and speedy access to justice are strong guarantees for foreign investors.
• A bilateral investment treaty (BIT) between two countries plays a key role in offering these guarantees on an international plane. 
• In 2015, India replaced the investor-centric 2003 Model BIT with a State-centric model. India terminated BITs with 58 countries in 2017.
• The Model BIT stipulates that the aggrieved investor should use all local remedies as well as negotiations and consultations initiating arbitrations against the host State. 
• Investors can use outside remedies only five years after resorting to all domestic arrangements.