Source: Dulana Kodithuwakku

This piece is part of the American Branch’s second blogging symposium, examining the ILW 2024 theme of ‘Powerless law or law for the powerless?’ from an International Investment Law perspective. This symposium is sponsored by the International Investment Law Committee, but published works are solely those of the authors.

Child Labor and International Law – A Clash of Conventions:  Business Obligations Regarding Child Labor Issues

Part 2: Obligations of Business Enterprises Regarding Child Labor Issues

by Alan Franklin, JD LLM*

Both the ILO Age Convention and the CRC are legally binding on the state parties; however, they do not impose direct legal obligations on non-state parties such as business enterprises (BEs).

The obligations of BEs derive primarily from the United Nations Guiding Principles on Business and Human Rights (UNGPs), which do not impose legal obligations on businesses; rather, they impose responsibility on businesses to act following human rights principles.  Thus, it is incumbent on BEs to consider the principles enunciated in the ILO Conventions, the CRC, and similar documents to determine for themselves their obligations to children and child labor. Similarly, the OECD Guidelines for Multinational Enterprises guide BEs.  Since these are set out as guidelines, they are not intended to impose legal obligations. Their guidance on child labor issues is most relevant.

In addition to these “soft law” documents, BEs are now also subject to laws on supply chain due diligence, such as:

– The German Act on Corporate Due Diligence Obligations in Supply Chains, which came into effect in 2023,
– The French Corporate Duty of Diligence Law, which came into effect in 2017,
– The European Union Directive on corporate sustainability due diligence (2024/1760) entered into force in 2024 but is under revision pursuant to the Omnibus Package,
– The Canadian Fighting Against Forced Labour and Child Labour in Supply Chains Act, which came into force in 2021,
– The UK Modern Slavery Act, which came into force in 2015.

The abovementioned laws address issues related to child labor but do not clarify whether children’s rights to make their own decisions under the CRC still apply or whether the ILO Age Convention triumphs.

Governments are legally bound to adhere to these conventions. However, to rationalize the contradictions above, BEs must understand child labor issues and consider them from a “best interests of the child” perspective. While the rules promulgated by international conventions are somewhat contradictory and, in many ways, deny the child’s best interests from being applied, BEs have no such restrictions on sources and methods of engagement with the issue of child labor. They are, therefore, obligated to consider these issues in a broader context.

BEs may thus want to focus on comments found in the open letter to the CRC Committee, which recommended the guidance regarding the Rights of Adolescents not to adopt any fixed age limits for child labor.  This letter suggested instead that reference be made only to ILO Convention 182 (The Worst Forms of Child Labour).  The letter states in part:

 “The signatories’ support for Convention 182 in this specific instance is subject to the proviso that, prior to any application, the voices of children who will be impacted are listened to and acted upon; their rights will be respected; and that their best interests (decided in conjunction with the children themselves) will be prioritised in all cases. The letter furthermore rejects the blanket application of ILO Convention No. 182 and instead suggests that its application should be guided by careful consideration of the social, cultural, and economic circumstances within which children live and labour.”

The letter references Beyond Trafficking and Slavery Supporters 2015, edited by Sam Okyere and Neil Howard.  This Volume contains articles by 18 of the foremost authors on children’s issues globally . The introduction to the Volume states: “This volume […] argues that the dominant abolitionist discourse and its associated policy directives often impede the best interests and rights of the children they purport to ‘protect’ or ‘rescue’. This largely happens because the protections […] often lack thorough understanding of the social, cultural, and economic circumstances surrounding young people’s work, mobility, and lives.”

The crucial element in Open Democracy’s letter is the statement quoted in the first blog that the ILO Age Convention is not concerned with the human rights of children.

BEs are urged to read this statement very carefully for the following reasons:

1. The CRC outlines the concept of the best interests of the child and states that children have a right to express their views (Article 12) and that their views must be taken into consideration; that concept is negated by CRC Article 32, which obligates states to institute and enforce minimum ages for work, regardless of the interests and views of the affected children. See discussion in part 1 hereof regarding reconciling this conflict.

2. As the Series introduction suggests, these conventions are the result of politics, disengaged from the objectives of the best interests of the children, because they lack an understanding of the social, cultural, and economic circumstances surrounding young people’s work.

Thus, when BEs engage in due diligence, they must look at why children under 18 work in the particular situation.  Is their income required for them (and their family) to survive? Is there meaningful education available to the child who does not work?  In many developing countries, little or no education is available for poor children, especially those in remote areas. Even if there is meaningful education for poor children in the region, should children be expected to attend if the result would be highly detrimental to the child’s or family’s economic survival?

As Justice Posner stated in Flomo v Firestone Natural Rubber Co  (7th Circuit of Appeals 2011), this is a balancing act. Is the child better off not working if, by not working, the child and family will suffer greater deprivation?  Can the child consider that when deciding to work or not, under the CRC? International laws are blunt instruments to be applied to unique, delicate situations.  It becomes the role of businesses to assess each situation on its merits, using international law as a guide, but never taking these laws as definitive of their obligations without carefully examining the effects in the individual situation.

The issue of child labor vs. child exploitation is complex and delicate. As discussed in the first blog piece, the ILO Age Convention refers to age without differentiating between exploitation and non-exploitation. Differentiating between exploitative and non-exploitative situations for children is discussed in Article 32 of CRC wherein it refers to “economic exploitation” and perhaps alluded to in the ILO Age Convention in Article 5(3) regarding family farms and small-scale holdings which state “but excluding family and small-scale holdings producing for local consumption and not regularly employing hired workers.”

Much of the guidance regarding child labor emphasizes the importance of education. If a child does not have the opportunity to attend school (for example, due to a lack of proximity to a decent free educational facility) and chooses to work, is that considered interference with the child’s education? The World Bank report of 2019, The Education Crisis: Being in School Is Not the Same as Learning, explains the significant difference between children being in a school and actively learning. The guidance rarely acknowledges this reality, but BEs need to understand this difference and investigate whether the child is merely ‘in school’ and learning little of value or is engaged in meaningful education. If the former is true, does work interfere with their education?

Moreover, this concept is supported by The Guardian’s report ‘Tired, hungry and shamed: pupil poverty stops learning,’ which concludes that children in poverty cannot learn effectively, even if the quality of education is high. This report focuses on children in poverty in the UK.

Adolescents as heads of households arise from circumstances such as the death of parents, separation from parents, or the adolescent being a parent with children, and are referred to in some of the guidance documents. These adolescents must support their families and, as a result, work instead of attending school. While governments have legal obligations to provide support, they rarely do. Therefore, BEs must be aware of this issue, as removing adolescents from work without giving sufficient alternative income would significantly harm them and their families.

The type of work being done by a child is an essential factor to consider. Article 3(1) of the ILO Age Convention refers to work likely to jeopardize young persons’ health, safety, or morals.  CRC Article 32 refers to economic exploitation and performing any work that is likely to be hazardous, interfere with the child’s education, or harm the child’s health or physical, mental, spiritual, moral, or social development.  If the work is non-exploitative, such as working in a family operation or in a situation where the child is choosing freely to work (CRC Article 12), then it could be said that this type of work does not run contrary to any of the prohibitions.  Thus, BEs should consider whether work by a child in a textile factory harms health, physical, mental, spiritual, moral, or social development, particularly regarding the local conditions in which the child lives.

Conclusions Regarding BEs and Child Labor Issues:  The Kigali Declaration and a Call to Action

The Kigali Declaration of 2023

A conference of children met in Kigali, Rwanda, in 2023 to discuss issues related to children, particularly concerning their right to work and the right of children to be heard and to make decisions in accordance with Article 12 of the CRC. At this conference, representatives of committees and associations of working children from 16 countries across the world came together for a Global Gathering of Working Children and Youth. The Kigali Declaration states:

“Protect us from labour exploitation, harsh conditions and risks, and allow children to do suitable dignified work.

We all want our right to be protected from exploitation to be respected. We do not want to do work that is too heavy, underpaid, harmful, in harsh or risky conditions or linked to trafficking and bonded labour, which is a crime. Boys face increased risks of heavy work, and girls face increased risks of doing unpaid household work for long hours, taking them away from proper and dignified work.

However, we do not want to stop all forms of child work. We want to do work that is suitable to our age and capacity to support our families, to learn skills, to earn money, to meet our basic needs and to respect our traditional cultures. This work needs to be safe, fairly paid, and allow for sufficient time to study, rest, and play.” (emphasis added)

The Kigali Declaration continues:

“Many of us feel proud to contribute to our families and want our work to be valued. Our work gives us the opportunity to lead our lives with dignity, provide for our families, and to continue our education as it is also our cultural practice, not just the effect of poverty and exploitation.

Existing laws on protection from child labour and exploitation must be adequately enforced and monitored everywhere. Plus, policies should support safe work, earn and learn education opportunities, and inclusive skill-based training. Work conditions should be improved, including for working children with disabilities.”

As we read this, we need to be aware of the following further elements of that Declaration:

1. This is coming from children and children’s representatives. Under the CRC, their voices are to be heard and respected. As they said in the Declaration: “We have the right to be heard and need to be seen, heard and engaged in all matters that affect our lives. We want to participate in decisions at all levels and be taken seriously by parents, caregivers, teachers, employers, police, practitioners, religious, traditional and community leaders and policy makers – including government authorities, and other national and international agencies, such as UNICEF, ILO  or regional bodies.”

2. As Section 4 of the Declaration states in part, “Listening is not enough; we want adults to act on what we say.” This is crucial—they do not want to be listened to, patted on the head, and then the government does as it wishes. That is contrary to the concept of the CRC Article 12.

Thus, the author suggests that BEs look at the contradictions within the international conventions on child labor and child rights, and try to reconcile those contradictions to assist children, based on their needs, wants, and their best interests.  Suppose the children have no educational possibilities in their particular region. In that case, they may want to help those children initially to obtain work that will fall within the demands under the Kigali Declaration, while simultaneously exerting pressure on the government of the state, inter-governmental organizations, NGOs and other stakeholders to provide the children with their rights to education, and better quality of life.  This will require BEs to embrace, investigate, and invest in solutions to help the children.

Further reading: It’s Time to Talk: Children’s Views on Children’s Work, Kindernothilfe, Germany Terre des Hommes. This discusses children’s views on their right to work, but within limits.

Read Part One here.

*Alan Franklin practiced law for many years before transitioning into academia and consulting. He taught International Business Risk Management for 12 years in the Executive LLM program at Athabasca University in Canada, and for five years, he taught International Business at the Royal University of Law and Economics in Cambodia. Currently, he is working with international legal experts to develop a global Charter addressing child labour issues in business. He has delivered seminars on child labour in cities including Toronto, Vancouver, New York, and Phnom Penh.

The post Child Labor and International Law – A Clash of Conventions: Business Obligations Regarding Child Labor Issues (IIL Symposium) (2/2) appeared first on ABILA.

Source: Aditi Gautam

This piece is part of the American Branch’s second blogging symposium, examining the ILW 2024 theme of ‘Powerless law or law for the powerless?’ from an International Investment Law perspective. This symposium is sponsored by the International Investment Law Committee, but published works are solely those of the authors.

Child Labor and International Law – A Clash of Conventions:  Business Obligations Regarding Child Labor Issues

Part 1: International Conventions and Child Labor Issues

by Alan Franklin, JD LLM*

Introduction

Child labour is a major global issue for governments, businesses, international lawyers, non-governmental organizations, and civil society, all of whom are important stakeholders. The United Nations Sustainable Development Goals (SDGs), Target 8.7, seek to end all forms of child labour by 2025, an obvious impossibility.

This two-part blog series will examine child labor from several perspectives, examining the international conventions and instruments governing the issue. As we will see, the various conventions conflict with each other. Also, the concept of the best interests of the child, as articulated by the United Nations Convention on the Rights of the Child, should, in the author’s view, be seen as the supreme principle. Yet, many of the conventions and instruments seem to ignore the best interests of the child.

This paper will critically analyze the International Labour Organization Convention 138 1973 (Minimum Age) (hereafter referred to as ILO Age Convention) and then compare it with the Convention on the Rights of the Child (CRC), highlighting some of the key differences between them.  ILO Convention 182 (Worst Forms of Child Labour) will be discussed in the context of the Age Convention and CRC, and show its importance, perhaps legally overshadowing the ILO Age Convention.

This discussion is important to the above-noted stakeholders because most literature, guidance, guidelines, and commentaries on child labor focus almost exclusively on the ILO Age Convention, with little discussion of the CRC and the Worst Forms of Child Labour. To reconcile the contradictions between the Conventions and internal contradictions within the CRC,  we must examine the guidance issued by the Committee on the Rights of the Child and that of the United Nations Children’s Fund (UNICEF) on these issues.

Part 1 of this series will therefore present a comprehensive modern interpretation of the child labor issue, presented primarily from the perspective of the best interests of the child, which may not require the ending of all forms of child labor, since it will be shown that even children often agree that child labor can be beneficial to children and society in many situations.

Based on the discussion and analysis in Part 1, Part 2 will discuss the obligations of Business Enterprises regarding child labor issues.

C138 International Labor Organization Age Convention (1973)

Most stakeholders see this Convention as key to understanding international law rules regarding child labor. ILO (Age Convention) To date, 176 countries have ratified this Convention.

Article 3 (1) sets out the general principle: “The minimum age for admission to any type of employment or work which by its nature or the circumstances in which it is carried out is likely to jeopardise the health, safety or morals of young persons shall not be less than 18 years.”

Article 2 allows member states to lower those ages in certain situations and to define the type of work that can be done by those under 18, allowing for a minimum age of 15 generally, but aged 14 for “a Member whose economy and educational facilities are insufficiently developed.” This Convention is prescriptive, without concern for whether these ages are in the best interests of the children involved.

To give an example of the interpretation of the ILO Age Convention. The Canadian Province of Ontario (a highly developed jurisdiction), pursuant to its Occupational Health and Safety Act (OHSA), allows children aged 15 to work in most factories, and children aged 14 can work in restaurants.  Thus, state practice often shows that the rules set out in the Age Convention are ignored, even by developed states.

United Nations Convention on the Rights of the Child (‘CRC’) (1989)

This Convention has been ratified by every UN member state except the US. Its focus is children’s rights, in contrast with the ILO Age Convention. It post-dates the ILO Age Convention by 16 years, a significant period of time that allowed the states of the UN to consider many issues regarding children from a very different perspective from the ILO Age Convention.

The CRC, while defining “children” as being under 18, gives children agency by allowing them to make their own decisions regarding work and education, depending upon their maturity and development level, under Articles 12 and 13.

CRC Article 12 (1) provides:

“States Parties shall assure to the child who is capable of forming his or her own views the right to express those views freely in all matters affecting the child, the views of the child being given due weight in accordance with the age and maturity of the child.”

This concept is buttressed by the Charter of Fundamental Rights of the European Union, Article 24: “Children shall have the right to such protection and care as is necessary for their well-being. They may express their views freely. Such views shall be taken into consideration on matters which concern them in accordance with their age and maturity.”

However, within the CRC, we have a seeming internal contradiction regarding the rights of children to express their views, in that Article 32 states:

ONE: States Parties recognize the right of the child to be protected from economic exploitation and from performing any work that is likely to be hazardous or to interfere with the child’s education, or to be harmful to the child’s health or physical, mental, spiritual, moral or social development.

TWO: States Parties shall take legislative, administrative, social and educational measures to ensure the implementation of the present article. To this end, and having regard to the relevant provisions of other international instruments, States Parties shall in particular:

(a) Provide for a minimum age or minimum ages for admission to employment;

(b) Provide for appropriate regulation of the hours and conditions of employment;

(c) Provide for appropriate penalties or other sanctions to ensure the effective enforcement of the present article.

Article 32 incorporates the concepts in the ILO Age Convention regarding the setting of ages.  Yet, it refers to economic exploitation as a separate concept – is a child working on a family farm or family enterprise being exploited?  Likely not, especially since ILO Age allows states to exclude “family and small-scale holdings producing for local consumption and not regularly employing hired workers.” (Article 5 (3)).

To reconcile this internal contradiction, we must examine the guidance issued by the Committee on the Rights of the Child and the United Nations Children’s Fund (UNICEF) on these issues.

The CRC Committee has published General Comments on interpreting aspects of the CRC. General Comment No. 12 (2009) (the rights of the child to be heard) confirms the child’s rights to be heard and for their views to be respected; the child’s maturity level determines the extent of that respect. A key element thereof is contained in paragraph 30, which states:

“Maturity is difficult to define; in the context of article 12, it is the capacity of a child to express her or his views on issues in a reasonable and independent manner. The impact of the matter on the child must also be taken into consideration. The greater the impact of the outcome on the life of the child, the more relevant the appropriate assessment of the maturity of that child.” (emphasis added)

As the CRC clearly establishes, issues such as work and education significantly impact the outcome of the child’s life, and thus, their views on these matters are very relevant.

 This is confirmed by Paragraph 116:

“Children working at younger ages than permitted by laws and International Labour Organization Conventions Nos. 138 (1973) and 182 (1999) have to be heard in child-sensitive settings in order to understand their views of the situation and their best interests. They should be included in the search for a solution, which respects the economic and socio-structural constraints as well as the cultural context under which these children work. Children should also be heard when policies are developed to eliminate the root causes of child labour, in particular regarding education.”

Here, we see clearly that underage children working are not to be dismissed, but instead, solutions must be sought with their views in mind.

Child Exploitation vs Child Labor

Paragraph 117 relates to child exploitation: “Working children have a right to be protected by law against exploitation and should be heard when worksites and conditions of work are examined by inspectors investigating the implementation of labour laws.” Again, we see the necessity of listening to children’s views on these matters, in contrast to the ILO Age, which disregards the views of children.

Paragraphs 105-114 articulate children’s rights regarding education and schooling. If those rights are not adhered to by the state, there is little that states, international organizations, or other stakeholders can do to remedy these international law breaches. Yet, most guidance ignores this reality, suggesting that children should attend school rather than work.  One of the key theses of this blog is that children should be entitled to work instead of being forced to remain idle with neither education nor work available to them, or being forced into an education system that is not compliant with their rights.  In many developing countries, there may be either no schooling available to poor children or the education is so poor that it is not helpful to children.

CRC General Comment 20 (2016) details the protection of adolescents (aged 10 to 18) from risks which it lists such as substance use and addiction, violence and abuse, sexual or economic exploitation, trafficking, migration, radicalization or recruitment into gangs or militias., but the CRC suggests that adolescents are rarely protected from said risks; families cannot protect, governments refuse to protect and so the solution is often for children to make their own decisions and act upon them, to support themselves, their families, and to grow. Note the comment on page 7 under ‘Best Interests of the Child.’ Paragraph 22 states in part:

“In the light of its general comment No. 14 (2013) on the right of the child to have his or her best interests taken as a primary consideration, the Committee stresses that, when determining best interests, the child’s views should be taken into account, consistent with their evolving capacities and taking into consideration the child’s characteristics. States parties need to ensure that appropriate weight is afforded to the views of adolescents as they acquire understanding and maturity.”

This suggests that states (and thereby international institutions) must consider these issues in setting child labor and education rules rather than the current “one size fits all” system.

Comment 20 refers throughout to preventing the exploitation of adolescents. However, it does not suggest that work not considered exploitative should be disallowed. Paragraph 45 supports this, suggesting that adolescents should be permitted to join trade unions for workers.

Paragraphs 73 and 74 put the burden on the government to ensure proper programs for transitioning from school to work, a crucial element. When governments do not comply with these obligations, children (as well as their families) are left with few options for their development and economic support. One of these options is for children to start working, hoping to get some of that training through their work. Otherwise, we leave children in a limbo situation where they cannot support themselves or their families.

The Section on Child Labour (Paragraphs 84-86) outlines transitioning from education to work, setting out essential intermediate to long-term goals.  Adolescents must often work to support themselves or their families in the short term. They cannot await the implementation of these longer-term goals. Paragraph 84 refers to children being protected by the ILO Age Convention. Is this protection real or illusory?   Does that Convention take into consideration all of the issues outlined in the CRC regarding the rights of children to be heard, particularly when the protections of that age convention are firstly not being provided to children, and secondly are not subtle enough to provide for the best interests of the child, depending upon circumstances?

UNICEF has published an Implementation Handbook for the Convention on the Rights of the Child, now in its third edition (2007). On page 77, this document states that “[u]sing the concept of ‘evolving capacities’ has avoided the need for the Convention to set arbitrary age limits or definitions of maturity tied to particular issues.” This is one of the Convention’s key concepts – acknowledging that children’s development towards independent adulthood must be respected and promoted throughout childhood.

It is linked to the requirement of CRC Article 12 that children’s views should be given “due weight in accordance with the age and maturity of the child.” The treaty further refers to the rights of the parents to oversee education and work; they are the decision makers, in conjunction with the child, whose views must be respected as the child matures.

In addition to protective legislation and procedures to prevent exploitation of children in employment (Implementation Handbook, pg. 479), under CRC Article 12, respect is required for the views of the child; in any judicial or administrative proceedings relating to employment of children, the child has a right to be heard. Children must also have access to complaints procedures relating to employment. However, “one of the challenges of ending exploitation of child labour is to ensure that children’s often sincere view that they should earn money and help to support the family is also heard and responded to.” (Implementation Handbook, pg. 168) (emphasis added)

Do the Conventions Adhere to the Principle of the Best Interests of the Child?

A compelling argument can be made that the Preamble to the ILO Age Convention 138 was created to gradually abolish child labor globally, but without concern for children’s rights.

The comments published by Open Democracy in an open letter to the CRC Committee dated January 27, 2016, recommended that the guidance regarding the Rights of Adolescents (which was then being prepared by the CRC Committee) not adopt any fixed age limits for child labor states as follows:

“Although the Minimum Age Convention was written before discourse on children’s rights became prominent, it is frequently assumed to be a child rights document.

This assumption is fallacious.

The universal minimum-age policy abridges for children certain human rights that are granted to everyone. Under international human rights law, rights extended to everyone – such as the right to work – may be abridged for children for their own protection. However, the validity of that exception depends on showing that it is necessary (i.e., not achievable by means that do not abridge their rights) and effective (protects children in practice). Neither of these conditions is met by the universal minimum-age policy: children can indeed be protected by measures against harmful work that do not prohibit them from all work; and no evidence that we could find suggests that a universal ban actually protects children, but we have found a number of cases where it clearly worked to their detriment.”

This raises the Vienna Convention on the Law of Treaties (1969) (VCLT) regarding conflicts between treaties on the same subject matter.  Article 30 of the VCLT states that in the event of a conflict between treaties regarding the same subject matter, the latter treaty shall govern to the extent of any disputes.

The International Law Commission (ILC) study group published its report, Fragmentation of International Law: Difficulties Arising from the Diversification and Expansion of International Law, in 2006, which studied this issue in depth. In paragraph 24 of that ILC report, they suggest that “conflict exists if it is possible for a party to two treaties to comply with one rule only by thereby failing to comply with another rule.  This is the basic situation of incompatibility […] [a] treaty may sometimes frustrate the goals of another treaty without there being any strict incompatibility between their provisions.” Hence, the setting of age restrictions in the ILO Age Convention conflicts with the CRC concept of children having individual human rights and thus agency to make decisions for themselves, based upon their level of maturity.  In this conflict situation, the ILC Report at paragraph 320 states that the result is not invalidity of the earlier convention (ILO Age) but that the later convention (CRC) would have relative priority.

Part 2, Obligations of Business Enterprises Regarding Child Labor Issues, can be read here.

*Alan Franklin practiced law for many years before transitioning into academia and consulting. He taught International Business Risk Management for 12 years in the Executive LLM program at Athabasca University in Canada, and for five years, he taught International Business at the Royal University of Law and Economics in Cambodia. Currently, he is working with international legal experts to develop a global Charter addressing child labour issues in business. He has delivered seminars on child labour in cities including Toronto, Vancouver, New York, and Phnom Penh.

The post Child Labor and International Law – A Clash of Conventions: Business Obligations Regarding Child Labor Issues (IIL Symposium) (1/2) appeared first on ABILA.

The post Commodified Climate Solutions: The Ethical Dilemma of Adaptation and Resilience Investments (IIL Symposium) appeared first on ABILA.

Source: World Economic Forum

This piece is part of the American Branch’s second blogging symposium, examining the ILW 2024 theme of ‘Powerless law or law for the powerless?’ from an International Investment Law perspective. This symposium is sponsored by the International Investment Law Committee, but published works are solely those of the authors.

Commodified Climate Solutions: The Ethical Dilemma of Adaptation and Resilience Investments

by Champion Olatunji*

Introduction

The world is experiencing increasing climate-related disasters, such as droughts, famines, and rising sea levels. To reverse this problem, the Intergovernmental Panel on Climate Change (IPCC) called for new pathways to reduce vulnerabilities to climate impacts and development through adaptation and resilience, which has become a critical subject in global climate action discussions.   

However, profit increasingly shapes efforts to adapt and build resilience rather than fairness. Companies and investors are turning adaptation and resilience into business opportunities, often at the expense of vulnerable communities and ethical outcomes. This blog investigates how these financial priorities conflict with the need for equitable climate solutions and argues for a shift to frameworks that put justice first.

The IPCC states that we should consider adaptation as a response strategy to anticipate and cope with impacts that cannot be avoided under different climate change scenarios. Similarly, resilience refers to the capacity to prepare for, respond to, and recover from the impacts of hazardous climatic events while incurring minimal damage to societal well-being, the economy, and the environment, including at the local, subnational, national, regional, and international levels. Together, these strategies form a necessary framework for safeguarding vulnerable communities against the worsening impacts of climate change. Implementing adaptation and resilience measures, however, requires substantial financial investment. This need appears in Article 2.1 (c) of the Paris Agreement, which calls for aligning financial flows with low-carbon and climate-resilient development.

In recent years, adaptation and resilience (A&R) investments have emerged as a frontier for institutional investors, mostly from wealthier nations, and blended finance platforms. Across sectors like insurance, agriculture, energy, and healthcare, these investments are increasingly seen not just as environmental necessities but as lucrative opportunities.

However, this commodification of climate solutions raises profound ethical questions: Are these profit-driven investments reinforcing global inequalities rather than addressing them? Are the most vulnerable communities being left behind in the race to monetize climate solutions? Can we rethink the role of international investment law to ensure that (A&R) investments uphold the principles of climate justice rather than perpetuate global inequalities?

The Commodification of Adaptation and Resilience as Climate Solutions

Unlike other investment models well understood by financial institutions, adaptation and resilience (A&R) measures face challenges that limit their uptake. The evidence from the 2023 publication from Race to Resilience revealed some key reasons for the low investment in adaptation.  These include perceptions of low profitability, limited information availability, and the long-term horizon of projects (often spanning 10-20 years).

Despite these barriers, the commodification of A&R solutions is on the rise. Commodification refers to how climate solutions, designed to address critical risks, are commercialized and marketed primarily for profit rather than public interest. These solutions include technologies and services to reduce greenhouse gas emissions, increase energy efficiency, or promote sustainable practices.

Some examples of commodified A&R solutions include:

– Climate-resilient real estate, which focuses on developments designed to withstand climate risks like flooding and hurricanes, commands premium market values;

– Flood insurance products that leverage advanced climate risk models to determine coverage and premiums;

– Disaster recovery technologies such as satellite imagery, geospatial mapping, and risk modeling tools that are commercialized to support governments and businesses in disaster preparedness; and

– Smart grids and energy upgrades that provide infrastructure improvements tailored to extreme weather conditions, ensuring energy continuity and efficiency.

One key factor driving this trend is the potential financial returns in developing markets. A 2022 report by the World Economic Forum (WEF) highlighted that the market for adaptation solutions in developing countries could reach $2 trillion annually by 2026. The report framed adaptation as an “enormous opportunity,” encouraging private sector actors to “place their bets” on A&R solutions, particularly in regions most vulnerable to climate impacts. By tying climate responsibilities to financial returns, businesses increasingly view climate change as an opportunity for wealth creation, often at the expense of broader equity and justice concerns.

While the intent to scale up adaptation is well-meaning, the growing focus on profitability risks sidelining the equitable and inclusive dimensions essential to climate justice. The inherent ethical concern in this commodified approach is evident as financial actors tie climate adaptation into a business-first endeavor. This approach may detract from the systemic changes required to address climate justice, equity, and resilience for the most vulnerable communities.

While these solutions address critical risks, their development and deployment are shaped by market incentives rather than equitable frameworks. Without deliberate efforts to integrate justice and equity, commodification may exacerbate inequalities in climate vulnerability.

Investment Drivers Responsible for Commodifying A&R Climate Solutions

Institutional investors and blended finance platforms increasingly recognize the financial opportunities within climate adaptation. Reports from major players such as BlackRock suggest that A&R investments are gaining traction because of the following:

– Hedging Against Climate Risks: Adaptation investments mitigate climate-related vulnerabilities, providing stability in diversified portfolios.

– Increasing Demand: Rising climate impacts drive the need for resilience solutions across agriculture, energy, and infrastructure sectors.

– Enhanced Project Returns: Incorporating climate risk assumptions (e.g., wildfire risk in energy infrastructure) can increase profitability.

Blended finance models, such as those employed by Climate Fund Managers Investor Two, are packaging A&R solutions as bankable projects to attract private capital. These approaches de-risk investments and promote private sector participation, further normalizing the commodification of resilience.

Recent studies, such as one from Harvard Business School, reflect a broader shift in corporate strategy. U.S. public companies are not only responding to climate risks but also actively framing them as business opportunities. This transformation signals the growing alignment between climate solutions and financial objectives, albeit with risks of prioritizing short-term returns over long-term equity.

Ethical Dilemmas of Commodifying A&R Climate Solutions

In a bid to raise the inherent issues in this new strategy among financial actors or private investors, the commodification of climate solutions could be problematic. For instance, in emerging markets, investments are sometimes directed into projects like large-scale solar or wind farms that benefit from tax incentives or land concessions but do not necessarily support local adaptation strategies or respect indigenous land rights. Conversely, in developed economies, investments might not align with national decarbonization targets, focusing instead on short-term profitability.

Some of the ethical dilemmas that arise from the commodification of climate solutions include:

– Misalignment with climate goals – If investments focus more on financial returns than on actual climate resilience or emission reduction, they could undermine global climate goals and the Nationally Determined Contributions (NDCs) under Article 4 of the Paris Agreement which embodies efforts by each country to reduce national emissions and adapt to the impacts of climate change.

– Equity Gaps – Here, the differential vulnerability and exposure of vulnerable groups, communities, and ecosystems to climate hazards is already recognized under the UNFCCC. As such, guidance on A&R action requires actual solutions for such groups and ecosystems. Still, when the motive for prioritizing these communities is profit-driven, resources may be shifted to wealthier regions and consumers, leaving these communities to bear the burden of the climate crisis.

– Climate Injustice – The commodification of A&R might exacerbate global inequities. Wealthier countries or communities could afford to invest in and benefit from these solutions. At the same time, developing nations or marginalized groups might be left with insufficient resources to adapt, thus widening the gap in climate resilience.

– Accountability and Responsibility – Commodification raises the question of who should be held accountable for ensuring that A&R investments are ethical and equitable. Should it be investors, governments, or international bodies? And how can we ensure that these entities act in the interest of climate justice?

– Risk of Greenwashing – With the rush to capitalize on climate solutions, there is a risk of greenwashing. Companies might overstate or misrepresent their contributions to A&R, leading to a false sense of progress in climate action.

– Future Generations – Today’s decisions regarding A&R investments will have long-term implications. We have an ethical responsibility to ensure these investments do not just serve current financial interests but also safeguard the environmental conditions for future generations.

This blog recognizes that markets are effective mechanisms for distributing many goods and services and rewarding returns on investment, but also acknowledges that market operations are not inherently devoid of moral considerations. Creating new forms of commodification creates new social and environmental problems. As a market investment strategy over actual environmental solutions, this approach tends to internalize the economic imperatives of market activities, which is a strategy that is becoming obvious in the way these solutions are generally promoted as one of the effective means for private investors and blended finance platforms to contribute to decarbonization.

Reforming Investments in Climate Solutions

Reforming investments in climate solutions through investment law internationally is a complex challenge. Some parts of these reforms are now front-burner issues among investment law scholars, such as the dispute settlement process and protection of foreign investors’ expectations. Yet, there is also a need to start carving out a new framework for investments in climate solutions that would not be treated as marketable assets.

For example, preferential treatment for foreign investment tends to arise from differences in overall approaches for balancing public and private interests, applicable substantive rules, and legal remedies, including damages awarded. To this end, South Africa’s constitution, for example, requires payment of ‘just and equitable compensation’, which must involve ‘an equitable balance between the public interest and the interests of those affected. This has prompted treaty drafting shifts, including more qualified language on indirect expropriation and environmental exceptions. For instance, the same approach can be adopted by adding new standards, especially in international treaties, to prevent the commodification of climate solutions.

As practitioners address specific climate finance issues through international law, especially in developing countries, they must also consider the evolving strategies employed by financial players who view the climate crisis as an economic opportunity. This is evident in how they frame adaptation and resilience (A&R) solutions and structure investments. Therefore, the United Nations Framework Convention on Climate Change (UNFCCC), investment law practitioners, and institutions should incorporate this emerging issue into their review of international investment treaties and laws in the context of climate change.

The already apparent inequities in these new commodified solutions raise concerns about the role of international investment law.  Carving out appropriate new standards in investment treaties would require considering equitable access, prioritization of vulnerable communities, and integration of justice considerations into the market mechanisms. This means incorporating clauses into investment treaties that ensure investments contribute to adaptation and resilience objectives.  Moreover, such clauses should mandate community engagement wherein financial gains from these investments are distributed equitably in the community.  They should also provide ethical investment incentives whereby climate solutions that prioritize the fundamental goal of sustainability over pure profit would receive tax benefits or recognition in global sustainability efforts.

Conclusion

The current investment law framework needs to be rethought to ensure that investments are aligned with decarbonization goals and the NDC priorities of host countries. As discussed throughout this blog, commodifying climate solutions within existing investment structures undermines justice-oriented approaches and exacerbates climate vulnerabilities. In response to this critical issue, this paper has proposed that carving out new frameworks in the current investment law model and binding them would prevent investments in climate solutions from being treated solely as marketable assets.

As detailed above, this framework reimagines A&R by centering on equity, ethical responsibility, and systemic transformation. This would help transform climate investments from mere economic opportunities, susceptible to the pitfalls of commodification analyzed earlier, into actual solutions for climate change governance. These reforms, alongside the current efforts of international law practitioners, would directly address the concerns raised regarding unchecked capital accumulation, commodification, pollution, and deepening socioeconomic inequality.

*Champion Olatunji has extensive experience working with both for-profit and non-profit organizations in the United States, serving in various capacities as a researcher and consultant on sustainable cross-border investment, climate change, and business law. His work has been published in peer-reviewed journals. He holds an LLM degree from Duke University School of Law and is a Clean Energy Leadership Institute (CELI) Fellow in Washington, DC.

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The Metalurgia Business Peru metallurgical complex in the city of La Oroya. Source: Human Rights Watch

This piece is part of the American Branch’s second blogging symposium, examining the ILW 2024 theme of ‘Powerless law or law for the powerless?’ from an International Investment Law perspective. This symposium is sponsored by the International Investment Law Committee, but published works are solely those of the authors.

La Oroya – Assessing Human Rights Obligations in an International Investment Law Context

by Dean Kristen Boon and Nickolas Eburne*

Do international courts and tribunals speak with one voice?  The parallel proceedings of the Inter-American Court of Human Rights (IACtHR) in Case of La Oroya Population v. Peru (La Oroya v. Peru) and the ongoing investor-state dispute settlement (ISDS) tribunal hearing The Renco Group v, Inc. v. Republic of Peru, PCA Case No. 2019-46 (Renco v. Peru II) shows they do not.  These cases are a new chapter in the story of fragmentation and shared responsibility.

On March 22, 2024, the IACtHR declared that Peru was internationally responsible for breaching provisions of the Inter-American Convention on Human Rights, namely the right to a healthy environment (Article 26), the right to life (Article 4.1), the right to personal integrity (Article 5), the rights of children (Article 19), and other rights. The facts of the case are related to the La Oroya Metallurgical Complex, which is responsible for the smelting and refining of metals with high levels of lead, copper, zinc and arsenic, among others, in the small community of La Oroya in Peru. Eighty members of the community instituted proceedings against their national government for what they claimed were serious environmental failings in allowing the metallurgical complex to operate, considering its impact on the environment, as it contaminated the air, water, and soil of La Oroya.

Importantly, the Court found that the right to a healthy environmental comprised a bundle of procedural and substantive elements (para 118). The procedural elements included access to information, public participation in decision-making, and access to justice with effective remedies. The substantive elements included clean air, safe and sufficient water, healthy and sustainably produced food, non-toxic environments where people can safely live, work, learn and play, healthy ecosystems and biodiversity, and a safe, livable climate.

An important aspect of the Court’s decision was its emphasis on the principles of prevention and precaution. Pursuant to the principle of prevention, the Court said, “States are obliged to use all means at their disposal in order to prevent activities carried out under their jurisdiction from causing significant damage to the environment […] [t]his obligation must be fulfilled under a standard of due diligence, which must be appropriate and proportional to the degree of risk of environmental damage” (para 126). Indeed, most human rights obligations do not apply directly to corporations but rather are mediated through state obligations. The court discussed corporate responsibility of the mining companies briefly – noting in this case, both the State and the mining company had responsibilities in terms of regulation and supervision of risky activities.  Nonetheless, it stressed their obligations to protect environment and human rights, which the States must supervise, investigate and regulate.

In parallel, in the ongoing Renco v. Peru II investment dispute, Peru is defending itself from claims that it imposed additional environmental obligations on the Renco Group – the Applicant – concerning the management of the metallurgical complex and that it refused to grant reasonable extensions to complete environmental projects at the site. This, according to the Applicant, led to the investor being forced to cease operations at the metallurgical complex, causing it to become bankrupt. More specifically, the Applicant is claiming a violation of the 2006 BIT between Peru and the United States as relates to alleged unfair and inequitable treatment (article 10.5 of the BIT) and the indirect expropriation of the La Oroya complex.

The IACtHR decision and the ISDS dispute create a complex landscape for state responsibility where environmental obligations are concerned. Depending on the outcome of the Renco v. Peru II case, Peru may be put in the precarious position under international law of having both infringed the right to a healthy environment of the people of La Oroya and of having imposed overly stringent environmental requirements on the exploitation of the La Oroya mining complex.

International human rights law has traditionally had no direct horizontal effect; that is to say, it places no direct obligations on investors as private entities or on multinational corporations, despite the fact that corporations are powerful actors, sometimes more so than states. There are only a few direct obligations applicable to corporations generally, despite deep development of state responsibility, and neighboring fields of International Organizations and criminal responsibility, CSR and business and human rights.

The key issue, in this context, lies in the general perception that the objectives of human rights and investment regimes are sometimes seen as being incompatible with the objectives of human rights law.

There are differences, but also important similarities: in both ISDS and human rights individuals can claim rights violations committed by the state, but the converse is not true. Certainly, the purpose of both systems is to protect individuals against state power. Moreover, in the new generation of investment treaties, it has become more common for human rights norms to be incorporated into the treaty itself, as applicable law, or through provisions that require investments conform to domestic law. Therefore, although there is an instinct to treat them as autonomous areas of law, they also interact.

There have tended to be five different general “categories” of investment disputes where human rights concerns can appear: cases where (i) the investor claims human rights abuse, (ii) the investor’s actions violate the human rights of the host state population, (iii) the host state alleges that the investor has human rights responsibilities, (iv) the host state amends its legislation to better comply with human rights obligations, and (v) where the host state invokes human rights to seek exceptions from investment protection provisions.

Cases where the investor claims human rights abuse are the rarest. This consists of investors – being individuals – claiming that the host state has violated their human rights. This occurred in Bozbey (where the investor was tortured) and Tulip (investor denied due process). In another case, Biloune and Marine Drive Complex Ltd. v. Ghana (Biloune v. Ghana), the claimant alleged that it had been subjected to denial of justice, and arbitrary detention and deportation. Yet, the tribunal found that it did not have jurisdiction over these claims. Some other tribunals, however, have integrated human rights reasoning into their awards (Micula v. Romania, Al Warraq v. Indonesia).

Source: Liliana Ávila/AIDA

The second category of cases, where the investor’s actions violate the human rights of the host state population, can occur in the context where security measures are taken to protect installations or where employment issues cause forced labor, or in the case of defective performance of water supply contracts for example. In some cases , states have been found responsible as co-perpetrators or for failing to prevent violations of international law. In others, investors have been denied the right to bring claims because of the “clean hands” doctrine under international law, which, creates admissibility issues.   Sometimes, human rights – such as the right to water – have been found to be part of the framework for a claimant’s legitimate expectations  under international investment law.   As a result, emergency measures did not constitute a violation of substantive treaty provisions.

Host states have also, in some disputes, alleged that an investor had HR obligations to abide by. This in the third “category” of investment disputes where human rights concerns can appear; In the Urbaser case, for example, Argentina made the argument in its $190 million counterclaim under a Spanish – Argentinian BIT against the investor that the latter had HR obligations to uphold. Indeed, Argentina claimed that the investors had violated the right of its population to access water; even though the counterclaim failed, this case remains landmark in terms of allowing human rights considerations in a host state’s counterclaim against private investors.

In the fourth category, some host states have taken measures to better comply with their human rights obligations (i.e. legislation or administrative acts related to social security, improvement of water resource protection, and affirmative action). This was the case in Piero Foresti, Laura de Carli and others v. Republic of South Africa (Foresti v South Africa) (ICSID Case No. ARB(AF)/07/1), for example, where the host nation invoked human rights by reference to the UN Convention against racial discrimination to defend its affirmative action policy. It is significant that the new generation of investment treaties carve out regulatory space for states, particularly on issues of public policy such as health and the environment and refer directly to corporate social responsibility (CSR) in preambles and operative parts of treaty.

Finally, the host state can invoke human rights to derogate from investment protection provisions as well. human rights, at its core, involve a balancing test; and in certain cases (i.e. national security), states may need to derogate from a particular treaty obligation. In both the CMS Gas Transmission Company v. Argentina (2005) and Suez, Sociedad General de Aguas de Barcelona S.A. v. Argentina (2010) cases, Argentina invoked human rights and necessity in its defense during the severe economic and social crisis that occurred in the country in the early 2000s. Argentina argued that the crisis, which led to widespread poverty, unemployment, and social unrest, justified its measures, including the freezing of utility tariffs and other regulatory actions that negatively affected foreign investors. Argentina stated that stopping the wide-spread economic and social crisis through its measures essentially protected human rights, and that the investment treaty should not prevail in this conflict of norms.  The host state also made a plea of necessity under the Articles on State Responsibility (ASR).  However, the tribunal found the defenses were not justified in those cases.

This mapping exercise, delineating between five categories of cases wherein questions of human rights obligations are raised, can help contextualize what we believe is a broader move towards investor responsibility both in human rights and in international investment law. This argument is supported by the increasing human rights substantive standards found in investment treaties, and by domestic law obligations for foreign investors to adhere by domestic law human rights standards. Certain procedural obligations, such as the disclosure obligations on funding, or transparency obligations, also indicate a broader move toward an arena where investors need to be more responsible in the way in which they conduct their activities. Some investment treaties even reference human rights, such as the Nigeria – Morocco BIT (signed but not in force) at Articles 15 and 18 and the 2019 Netherlands Model BIT  which includes references to due diligence, expectations that tribunals consider non-compliance with Business & Human Rights / CSR standards into account, and gender/social risk analysis. Furthermore, the UNCITRAL Working Group III has engaged with human rights issues, such as third-party representation, which could allow Indigenous communities whose human rights have allegedly been violated by investors to make counter claims and claim damages of their own. Finally, we have also seen a hardening of human rights and CSR related language in investment treaties from the soft formulations of earlier days. For example, the African Continental Free Trade Area (AfCFTA) Protocol on Investment, adopted in 2023, contains environmental, social, and governance (ESG) and CSR standards, in addition to language promoting gender equality and inclusion.

As the Oroya dispute unfolds, there will be much to discuss with regards to state responsibility. Its outcome will shape the continuation of this debate in coming years: will the tribunal cement the argument that there is a broader move towards investor responsibility in the world of international investment law, or will it instead reopen the debate on this issue? And where might Peru find itself at the dispute’s conclusion?

Even following the award in the Renco v Peru II dispute, the status of human rights in international investment law will remain contested. However, perhaps this award will help frame the discourse around the interaction of human rights and international investment law, and this might in turn reach the ears of prospective foreign investors.

*Kristen Boon is the inaugural Susan & Perry Dellelce Dean of Common Law at the University of Ottawa. Dean Boon is a specialist in international law and contracts. She has a particular interest in treaty interpretation, international responsibility, sanctions, and immunities. Dean Boon is an expert on investor/state dispute resolution. Dean Boon is the proud Editor in Chief of the Canadian Yearbook of International Law. She is also a former member of the Executive Council of the American Society of International Law and a current member of the Institute for Transnational Arbitration’s Academic Council.

Nickolas Eburne is a Staff Officer/Legal Advisor to the NATO Allied Comand Transformation. His previous roles include Legal Counsel with the Canadian House of Commons and Junior Trade Policy Officer with Global Affairs Canada. Eburne is the Co-Chair of the American Society of International Law’s Anti-Corruption Law Interest Group and is a 2024 recipient of ASIL’s Arthur C. Helton Fellowship. He holds his JD and LLM in International Trade and Foreign Investment from the University of Ottawa.

The opinions shared in this publication are the authors’ own, and do not reflect those of their employers.

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To participate, kindly submit a 200-word abstract and a brief biography to Freya Doughty-Wagner at media@ila-americanbranch.org by December 5, 2024. Abstracts and biographies may be in Word or PDF format. Please include the phrase ‘blog symposium’ in the email’s subject line. Abstracts must address the ILW 2024 theme from an international investment law perspective. For inspiration, please see an ILW24 international investment law panel description below.

International Investment and Human Rights: How Does International Law Control Environmental Impact on Local Communities?

Large-scale industrial projects are economically important but can have pernicious effects on surrounding communities. The Inter-American Court of Human Rights, in the recent landmark decision of La Oroya v. Peru, held Peru to be internationally responsible for its failure to protect the people of La Oroya from pollution generated by a century-old metal smelter complex. At the same time, the foreign owner of the complex continues to seek damages before an investor-State arbitral tribunal in Renco v. Peru for Peru’s failure to afford adequate flexibility in meeting pollution control regulations. Based on this fascinating case study, the panel will assess what contributions international human rights and investment law can and should make to controlling the impact of such projects.

Additionally, please find two examples of blogs from ABILA’s first symposium here and here.

Successful applicants will be notified by December 12, 2024 and requested to prepare a 1,500-word piece with hyperlinks as references and an attached open-access image by January 20, 2025. All blogs may undergo editing, subject to author approval, before publication.

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