Labour Rights and
investment agreements
2 March 2012
Bill Rosenberg
Policy Director/Economist
N Z Council of Trade Unions
Union concerns


Union concerns are not limited to a labour chapter,
though that is increasingly important.
Joint declaration with other TPPA country union centres
includes (but is not limited to)
– A new form of agreement recognising need for balance
– Process transparency
– Investment – investor-state disputes, right to regulate, capital
controls
– Services – public services, financial services
– Environment
– Procurement
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Today
Focus on potential impacts on Labour
Rights and other Human Rights of
Investor-State Dispute Settlement,
Expropriation and Minimum Standard of
Treatment in Investment agreements
 Implies the need for an exception for
such rights

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Could investors challenge
labour rights?
Question arises under ISDS whether
investors could challenge labour laws,
rights and practices
 Almost identical arguments apply to
other Human Rights.
 In addition, there are more general
findings regarding human rights and
trade rules.

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Bases for investor claims



Government labour measures or practices could form
the basis for claims
Indirect expropriation: substantial loss of
profitability or value of an investment could be
claimed after change that significantly increases
labour costs
Fair and Equitable Treatment could provide basis
– “obligation to maintain a stable and predictable legal and
business framework in line with the investor’s legitimate
expectations”
– “the most relied upon and successful basis for a treaty
claim” according to UNCTAD
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Bases for investor claims

Examples – Introduction or significant rise in minimum
wage
– Introduction or strengthening of collective
bargaining
– Constraints on use of casual labour
– Failure to end industrial dispute
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Bases for investor claims

New Zealand case:
– Warner Brothers threatened to withdraw production of a film
–
–
–
–
(The Hobbit) from New Zealand
Government changed employment law to allow employers to
employ workers in film and video recording and gaming
industry as contractors without employment rights
Lost rights include to bargain collectively, strike, personal
grievance, minimum conditions such as minimum wage,
annual leave, sick leave…
What if a future government restored previous labour rights?
Investors in existing and future productions could claim loss
either as indirect expropriation or failure to “maintain a stable
and predictable legal and business framework in line with the
investor’s legitimate expectations”
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Case examples - 1
Noble Ventures, Inc. vs Romania
 Ref: Investment Treaty News, 26 October 2005
 US firm invested in a privatized steel mill in Romania
 Claim of failure to provide full protection and
security, fair and equitable treatment, treatment in
accordance with international law, expropriation, and
to live up to obligations undertaken.
 Among specific charges, Noble accused authorities
of failing to protect Noble officials from labour unrest
 Claim ultimately dismissed but panel did not rule out
labour aspect as a cause for claim.
1.
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Case examples - 2
2.
UPS vs Canada

Ref: Investment Treaty News, 21 November 2005

Well known NAFTA Chapter 11 case

UPS alleged that express-courier services provided by
Canada’s public postal service received more favourable
treatment than UPS subsidiary

Argued inter alia that Canada Post competes unfairly by
keeping wages low, due to denial of collective bargaining rights
to certain postal workers; that this is inconsistent with obligation
to provide “treatment in accordance with international law”.

Dispute Panel found against UPS but did not rule out
consideration of labour law.
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Case examples - 3
3.
Piero Foresti, Laura de Carli & Others v. The
Republic of South Africa

Ref: Investment Treaty News, 14 February 2007 and others

European-based investors in South Africa’s mining industry
alleged that its Black Economic Empowerment (BEE) mining
regime violated the terms of investment protection treaties

New law vested all mineral and petroleum rights with the South
African government to allow it to take into account its
Constitution’s goal of redressing historical, social and economic
inequalities, and the progress of applicant companies in meeting
targeted social, labour and development objectives set out in a
broad-based socioeconomic empowerment mining charter.
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Case examples - 3

Claimants alleged the law extinguished their ownership of
mineral rights without “prompt, adequate and effective
compensation”

Also alleged they had been denied fair and equitable treatment
by virtue of being forced to divest 26% of their investments to
Historically Disadvantaged South Africans

Also that they were victims of ‘discrimination’ – contrary to the
fair and equitable treatment guarantee – by being treated less
favourably than Historically Disadvantaged South Africans.

Eventually settled by agreement, but claimants considered that
“had they exhausted the administrative process in South Africa,
they would not have received the new order rights on the terms
that they have now received them”.
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Further ...

Further cases affect indigenous rights (e.g. Burlington
Resources vs Ecuador)

More general findings regarding Human Rights and
trade/investment agreements – e.g.

UN High Commissioner for Human Rights 2002
report on Trade in Services: the state’s human
rights obligations must not be subordinated to
trade rules; nor should states be subject to
sanctions for protecting human rights
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Conclusion

Labour rights and other human rights are at
risk in ISDS investment disputes

Requires clarification and specific exceptions
Thank you
billr@nzctu.org.nz
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Further detail on the Warner
Brothers case
The law change (to the Employment Relations Act) was a clear
reduction in the rights of the employees involved
 Expressly excluded film production workers from definition of
“employee” (s.6(1)(d))
 Unless “the person is a party to, or covered by, a written employment
agreement that provides that the person is an employee” (s.6(1A)) –
i.e. cannot be an “employee” without explicit employer agreement
 So employer can place any workers it wishes on contracts for service
 Previously Courts etc had to “determine the real nature of the
relationship between them” regardless of the written form of the
agreement (s.6(2))
 Such workers lose rights including to bargain collectively, strike,
statutory duty of good faith, personal grievance, and gain minimum
conditions such as minimum wage, annual leave, sick leave…
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