International arbitration in 2025

International treaties, such as the International Covenant on Civil and Political Rights, the American Convention on Human Rights, the African Charter on Human and Peoples’ Rights and the Indigenous and Tribal Peoples Convention, require states to protect human rights. Additionally, international business and human rights standards, such as the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises, call upon investors to respect human rights and to exercise due diligence to safeguard human rights. Against this backdrop, multinational corporations develop their own policy commitments, codes of conduct and sustainability policies reflecting these standards.

Alongside international requirements, there has been a proliferation of domestic regulation to protect human rights, including legislation relating to supply chains as well as the protection of indigenous rights. Such developments can arise from new legislation, as seen in Canada, but often stem from court rulings, as in South Africa and Ecuador.

Financial institutions, including the International Finance Corporation, may also condition the provision of project finance on compliance with human rights-related requirements.

This growing mix of hard- and soft-law requirements are a key consideration when developing projects. Mining companies, for example, rank community impact and indigenous trust among their top five considerations and risk factors in 2025. States have invoked community consultation requirements to annul or terminate concessions and land titles. For instance, citing non-compliance with consultation requirements, Mexico terminated a contract for a major wind farm and revoked gold and silver mining concessions. Similarly, in Kenya, courts invalidated land titles for wind farm projects.

Investors and states must navigate these international and domestic frameworks in the context of operating and overseeing major projects. Increasingly, human rights and social issues are being raised in the context of investment disputes.

The growing importance of social issues in major investments is reshaping investment treaty practice.

Some treaties, such as the 2023 Investment Protocol to the Agreement establishing the African Continental Free Trade Area (which is not yet in force), expressly require investors to comply with laws, policies and standards aimed at protecting human rights and indigenous peoples. More commonly, investment treaties affirm the state parties’ resolve to encourage investors to voluntarily adhere to corporate social responsibility (CSR) standards. An example of this is the 2024 Australia–UAE bilateral investment treaty which specifically states that the state parties should encourage investors to meaningfully engage with indigenous peoples in accordance with the standards and principles endorsed by those states.

More generally, new generation investment treaties increasingly reference the states’ freedom to pursue legitimate policy objectives. In some cases, this is achieved through "right to regulate" provisions, which reaffirm states’ rights to adopt measures in the public interest, including those that protect social interests. The 2023 Canada–Ukraine modernized free trade agreement, for instance, highlights that protecting indigenous peoples' rights falls within the state's right to regulate. Some investment treaties rely on "exceptions" designed to preserve the policy space for states by clarifying that their investment obligations do not prevent the adoption of measures necessary to safeguard certain social interests. Notably, the Agreement between the US, Mexico and Canada includes exceptions specifically aimed at the protection of indigenous peoples' rights.

The interplay between state liability, the state’s right to act on indigenous rights, and investor protection remains complex and unclear. This will evolve as protections under these treaties are litigated in the context of the growing focus on social issues and foreign investment.

The evolving international discourse on human rights is reshaping the investment arbitration landscape. Human rights and social issues are increasingly being invoked in disputes and influencing the analysis of several admissibility and merits issues that arise in investment arbitration proceedings.

• States have sought to have claims declared inadmissible based on human rights issues. For instance, in the Copper Mesa v. Ecuador case, Ecuador argued that the investor’s claim was not admissible under the “clean hands doctrine” on the basis of alleged human rights violations. That argument was rejected, amongst other reasons, because the government had not previously made any complaints about the investor’s conduct, which had taken place in Ecuador, openly and in view of government authorities. The tribunal considered that, given the state’s obligation of good faith, it was precluded from raising the admissibility objection.

• States have attempted to justify their adverse measures impairing foreign investment based on community protests. For instance, in the pending case Lupaka v. Peru, the investor claims that Peru breached its international obligation to protect its investment by failing to address blockades and protests that halted operations in Lupaka’s gold, silver and copper mine in the Andes. Peru argues in defense that the company allegedly failed to obtain a social license from the local communities. In Bear Creek v. Peru, similar arguments were rejected by the majority of the tribunal. After careful consideration and balancing of the conflicting interests, the tribunal found that the investor’s mining operations did not lack a “social license” and that Peru’s actions were not necessary to protect public well-being.

• States have argued that social issues affecting investments should lead to a reduction in damages. Such arguments have so far been unsuccessful. For instance, in Abengoa v. Mexico, the investor brought claims against the State for preventing their operation of a waste disposal plant. Mexico countered that the investor’s failure to communicate with the community and address social opposition constituted “contributory fault,” which should reduce the damages. Having analysed Abengoa’s community outreach, the tribunal found that it had complied with all federal, provincial and municipal requirements to obtain approvals and, therefore, damages should not be reduced. A similar defense was also rejected by the majority of the tribunal in Bear Creek v. Peru.

• States are also filing counterclaims based on alleged violation of environmental and human rights by investors. Such counterclaims based on alleged international obligations of investors have thus far been unsuccessful. For instance, in Urbaser v. Argentina, Argentina brought a counterclaim arguing that the investor’s mismanagement of its water concession violated the international human right to water. The tribunal acknowledged that such a counterclaim was admissible under the Spain-Argentina BIT, but ultimately rejected the counterclaim because Argentina conflated the concessionaire’s provision of water and sewage services with a human rights obligation to provide water – a positive obligation of the state.