Water Services Disputes in International Arbitration

Reconsidering the Nexus of Investment Protection, Environment, and Human Rights

by Xu Qian

The argument that universal access to water is a human right is based on the fact that life on Earth cannot exist without water. Yet the enormous cost of building and maintaining water service infrastructure, purifying, monitoring quality, and providing sanitation services is beyond the means of many of the States most in need. Foreign investment is thus mandated—hence the often acrimonious tension manifest in investor-State disputes over water rights. This book offers the first in-depth analysis of both international treaty norms and their interpretation by arbitral tribunals applicable to investment in water and sanitation services, complete with thoroughly researched recommendations for those arbitral practitioners in the eye of the storm.

Like no previous study the book clearly reveals how to reconcile the economic and fundamental human interests arising from investment in water and sanitation services under the international investment regime. Among many vital issues, the author highlights the importance of the following:

• legitimacy of a State’s alleged regulatory objectives, the suitability of the measures undertaken to achieve the objective, and whether there are less restrictive means available;
• legal framework and stability of the State;
• applicable law, changes in law, and emergency circumstances;
• economic issues such as water pricing;
• profit-driven private companies’ reluctance to serve the poor;
• investment tribunals’ generation of a “regulatory and jurisprudential regime” on water and sanitation services; and
• determination of liability in relation to expropriation, fair and equitable treatment, and necessity.

Arguing that the current investment treaty and arbitral case law framework can regulate water and sanitation services if certain interpretations are favored by adjudicators, the author offers viable, sustainable, and reasonable legal solutions. A detailed annex presents cases decided before a variety of arbitral tribunals, as well as relevant WTO and ICJ cases, and reviews critical literature in the field.

The increasing number of cases involved with States’ regulatory measures shows that stakes around water services generate specific legal problems which are new in the world of international economic law. As an incisive investigation of what has been called the “incursion of investment tribunal decisions into the regulatory autonomy of host States,” this profound and innovative analysis provides a coherent and consistent method of review that provides greater certainty to both States and investors and deters abuse of power. It will be welcomed by policymakers and stakeholders interested in the implications of “globalization” of water services for the capacity to adapt to climate change and will suggest ways to enable States to better manage vital water services, even after privatization to foreign companies.