Workers’ rights and investors’ rights

Investors’ rights

Certain clauses are included in trade agreements in order to protect foreign investors from measures adopted by a State that could be considered as a form of expropriation. However, there is an explicit exception in investment protection clauses when the measures taken by the State are justified by public interest objectives such as environmental protection, safety or public health. These clauses are often controversial as they allow investors to sue the host State, a sovereign actor, and States may be reluctant to adopt social measures for fear of being sued by foreign investors. In principle, an investor could attempt to sue a State following the adoption of labour rights laws on the basis that such laws constitute a form of indirect expropriation impacting its profit margins.


Investments under the CETA

CETA’s trading partners adopted a joint interpretative instrument on the agreement that is being perceived as more progressive than the agreement itself, mainly because it responds to civil society’s concerns. Its dispute settlement mechanism has been the subject of controversy due to the power granted to investors to pursue States, before an investment arbitration panel, when adopting policies and legislation on social issues. For some, certain social gains could be weakened by the original text of the agreement, therefore, its interpretative declaration offers certain guarantees to companies in relation to those gains.  There is concern that this instrument may be forgotten once the agreement enters into force and governments have been urged to either incorporate its provisions directly into the text of the agreement, or to add the interpretative instrument as a part of the agreement to provide it with the same legal force.


Ways to rebalance workers’ rights and investors’ rights

  • Mentioning explicitly that labour laws cannot be considered as measures of indirect expropriation. Recent agreements provide a (non-exhaustive) list of legitimate public interest objectives. Adding workers’ rights into this list would ensure that the adoption of new legislation on workers’ rights is not considered as a measure of indirect expropriation.
  • Affirming that labour laws are of public interest and that no further action is necessary. In this way, the State will strengthen an open concept of public interest allowing it to evolve and adapt to changing circumstances, while understanding that labour laws are legitimate objectives of public interest.
  • Rethinking the idea of «indirect expropriation» in investor protection clauses. Investors should understand that market risks are not only economic but also social. In that sense, the host State will have the power to take measures and adapt itself to changing circumstances, even if they might affect its fiscal, economic and working environment.
  • Keeping the investor protection clause and withdrawing the dispute settlement procedure. Foreign investors should file complaints within their government of origin rather than pursue the host State directly, like in other chapters.
  • Allowing civil society to initiate proceedings when measures and/or investments are detrimental to the rights of workers. Investor protection clauses should recognize the right of the State to adopt measures protecting the public interest, at the same time, civil society should have the right to initiate proceedings against foreign investors whose activities weaken or threaten the rights of workers.

Arguments in favour

  • Workers’ rights would be on an equal footing with investment and trade law.
  • It would facilitate the defense of the State pursued by foreign investors for adopting legislation with higher labour standards.
  • It would limit the abusive use of arbitration mechanisms based on indirect expropriation.
  • Without it, domestic companies are at a disadvantage because, in principle, domestic investors cannot sue their own state for adopting stronger labour laws but foreign investors could.

Arguments against

  • If the host State has to defend the measures adopted on workers’ rights, it must justify them as public interest, a guarantee already enjoyed by the host State.
  • It is better to deprive investors of the possibility of suing the State rather than strengthening the measures that are an exception to indirect expropriation.
  • It could limit investors’ interest in investing abroad.
  • Labour laws could still be “challenged” by investors if they consider the measures to be excessive or protectionist.

What they said:

«What we need is legally binding clauses that will ensure that the power of the State to regulate, to protect our public services, our social and environmental standards and everything that makes the European society a role model, are not weakened when a conflict between a multinational and a State arise.»

Paul Magnette, Minister-President of Wallonia, 14 October 2016



«There are several ways for States to preserve their right to regulate for rebalancing investor and host State interests in […] Agreements (labour exceptions, labour veto, liability defence and counterclaims). The careful drafting of labour exceptions could serve this purpose. Indeed, certain sectors and subject matters can be excluded by the overall investment protection granted to investors in order to allow the State to meet public policy objectives, such as the protection and promotion of workers’ rights.»

Vandevelde, K. «Rebalancing Through Exceptions». Lewis & Clark Law Review, vol. 17, n° 2, 2013


«[W]e are concerned with the bias inherent in the TPP’s Investor State Dispute Settlement […] provisions, which create an imbalance between corporate rights and the rights of citizens, workers, and other groups.»

Council of Canadians (Nova Scotia). «A Brief Concerning the Investor State Dispute Settlement (ISDS) Provisions in the Trans-Pacific Partnership (TPP) Agreement», 2015


«[The TTIP’s proposed Court system] suffers from fundamental flaws and can only be adopted if the primacy of human rights is guaranteed, and those essential areas of State regulation including tobacco control, labour standards and environmental protection are carved out, i.e. excluded from the Court’s jurisdiction.»

Alfred de Zayas, United Nations Independent Expert on the promotion of a democratic and equitable international order. «International trade: UN expert calls for the abolition of investor-State dispute settlement arbitrations», 2015


«Workers, environmental organizations and NGOs are not afforded the same rights to challenge governmental actions that devalue workers or consumer rights or the environment.»

Communications Workers of America (CWA). «The Impact of Investor State Dispute Settlement Provisions in Trade Agreements», May 2014


«[P]rovisions on investment protection may constrain the capacity of governments to implement sustainable policies in other areas, particularly labour. As a response, a “right to regulate” or “policy space” clause is often included in agreements, to balance the concerns of investors on the one hand and the State’s ability to achieve legitimate policy objectives on the other.»

International Labour Organization (ILO). «Studies on Growth with Equity: Assessment of Labour Provisions in Trade and Investment Agreements», 2016


«Some critics have argued that Investor-state dispute settlement […] “chills” regulation.  But, far from inhibiting regulation, in the wake of U.S. trade agreements we typically see increases in public interest regulation.  This is particularly true of recent U.S. agreements that have required trading partners to upgrade both their labor and environmental laws.»

United States Trade Representative. «Fact-Sheet: Investor-State Dispute Settlement (ISDS)», March 2015


«The Canada and European Union Comprehensive Economic and Trade Agreement will give tribunals the power to classify legitimate public policies as “manifestly excessive” and, on that basis, as an indirect expropriation that requires full compensation of the affected foreign investors.»

Gus Van Harten. «The EU-Canada Joint Interpretative Declaration/Instrument on the CETA, Updated Comments». Osgoode Legal Studies Research Paper, vol. 13, n° 6, 2017