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  • Print publication year: 2019
  • Online publication date: September 2019

Chapter Sixteen - Making Local Communities Visible: A Way to Prevent the Potentially Tragic Consequences of Foreign Investment? 171



For decades, international investment law has focused on investor-state dispute settlement (ISDS). The academic and policy debate has polarized into two competing camps arguing in favor and against this dispute settlement mechanism. A fundamental issue is whether ISDS can be consistent with an appropriate interpretation of states’ right to regulate. There is nothing surprising in this debate. The private vs. public or international vs. domestic tensions are recurrent topics nowadays. What is surprising, however, is how both promoters and critics of ISDS have managed to narrow down the complex and multifaceted field of foreign investment governance to ISDS and how investment tribunals resolve certain high-profile cases, such as the famous tobacco saga. This limited view does not acknowledge the complexity of foreign investment relations and how the benefits, costs and risks of large investment projects are allocated. Also, international investment law makes some interests and their actors less visible— or even invisible— potentially reducing their benefits and increasing their costs and risks. The most paradigmatic case is that of local communities.

The literature on international investment law and policy has consistently avoided the role and interests of local communities. This is especially troublesome in natural resource and infrastructure projects, as local communities live near these projects and are often the most affected. Experience shows that foreign investment in natural resources can lead to overexploitation, environmental harm and, just as important, social conflict. However, there is little evidence that host states will necessarily use their regulatory powers to promote and protect local communities. Host states play an ambivalent role, facilitating foreign investment first and responding to local demands only when resistance escalates to unacceptable levels, such as in the case of Cochabamba, Bolivia (Aguas del Tunari v. Bolivia), which illustrates the potentially tragic consequences of a foreign investment and how difficult it is for local communities to find relief in either domestic or international jurisdictions.

This essay explores how the international investment regime makes things more difficult for local communities. This regime is not the sole reason for their problems, but it does deteriorate their situation vis-à-vis foreign investors and states. The good news is that there is no rationale for a narrow international investment regime. The crisis of ISDS can be an opportunity to move from foreign investment dispute settlement to foreign investment governance, ensuring local participation before, during and after the investment.