Protecting Cultural Heritage inInternational Investment Law: Tracing theEvolution and Treatment of CulturalConsiderations in Recent FTAs andInvestor-State Jurisprudence

Elsa Sardinha

ContentsIntroduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

“Cultural Heritage”: Elusive, Subjective, and Ever Evolving . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7The Right to Regulate: Providing Guidance to Arbitral Tribunals . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Cultural Considerations in the Preambles and Investment Chapters of Recent FTAS . . . . . . . . . . 12CETA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12CPTPP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15EU-Singapore FTA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16EU-Vietnam FTA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Investment Disputes with a Cultural Heritage Aspect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17Parkerings v. Lithuania . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17Glamis Gold Ltd. v. the United States of America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19Bilcon v. Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21Santa Elena v. Costa Rica and SPP v. Egypt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Tribunal Secretary to Henri Alvarez QC; Doctoral Candidate, McGill University (under supervisionof Professor Andrea Bjorklund): elsa.sardinha@mail.mcgill.ca. All views and errors are the authorsalone.The author presented previous versions of this paper at the European Society of International Law

(ESIL) International Economic Law Interest Group Workshop, 6 September 2017 (Naples, Italy);Missouri University’s American Society of International Law (ASIL) & Young ICSID InternationalInvestment Law Works-in-Progress Conference, 2–3 February 2017 (Columbia, Missouri, USA);and International Law Association (ILA) & ESIL UNESCO World Heritage Conference, 27–28October 2016 (Ravenna, Italy). The author is grateful for the feedback received in those settings andto J. Christopher Thomas QC and Professors Stephan Schill, Perry Bechky, Elisa Baroncini, andVincent-Joel Proulx for illuminating discussions and comments on previous drafts. The author alsothanks the National University of Singapore’s Centre for International Law for their institutionalsupport and funding during her tenure as Research Associate in the Investment Law & Policy groupand Practice Fellow to J. Christopher Thomas QC (2015–2018).

E. Sardinha (*)Faculty of Law, McGill University, Montreal, QC, Canadae-mail: elsa.sardinha@gmail.com

© Springer Nature Singapore Pte Ltd. 2019J. Chaisse et al. (eds.), Handbook of International Investment Law and Policy,https://doi.org/10.1007/978-981-13-5744-2_35-1

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AbstractThis comparative exploration of the cultural heritage protections included in thepreambles and investment chapters of CETA, CPTPP, and the EU’s FTAs withSingapore and Vietnam reveals a desire by States to remove regulation enactedfor legitimate public welfare objectives from the reach of investors’ claims andprovide arbitral tribunals with interpretive guidance. These FTAs reflect aconcerted effort to ensure that cultural heritage and cultural diversity consider-ations guide ad hoc arbitral tribunals in their determinations on alleged treatybreaches. With a view to drawing broader conclusions about the future ofinvestment law and disputes involving a cultural heritage element, and inassessing where treaty-drafting practice stands today, the discussion takes aretrospective look at the original NAFTA – one of the first treaties to includeprovisions aimed at protecting culture and national identity – and its new, butnearly identical, iteration, the USMCA. It also examines a selection of culturalheritage-related investor-State awards to assess whether these cases have ade-quately dealt with the cultural values at stake, and considers what implicationsthis jurisprudence might have for future disputes situated at the intersection ofinternational investment law and cultural law. While arbitral tribunals might notyet be ready (or have the jurisdiction) to fully engage with cultural heritage lawon the same footing with the economic issues which arise in investment treatydisputes, they might prove more likely to acknowledge the cultural heritage-related non-investment obligations externally imposed on the respondent Statein determining whether the State has breached the treaty or regarding theappropriate measure of compensation.

KeywordsCultural heritage law · International investment law · International arbitration ·Investor-state arbitration · CETA · USMCA · NAFTA · EU-Vietnam FTA ·EUSingapore FTA · Cultural heritage protections · Cultural industries

Introduction

Aside from providing a window into the past and a gateway to better understandingthe present, the underlying object of cultural heritage shares considerable affinitywith various legal systems. It has spawned its own specific cultural legal schemes,which intersect and sometimes conflict with other regimes, such as foreign directinvestment (FDI). States are increasingly acknowledging the challenging, and some-times contradictory, interplay between the protection of cultural heritage and thepromotion of FDI in the context of resolving their disputes through investor-Statearbitration. Threats to the integrity of cultural heritage, in its many forms, haveincreased in recent years. Both tangible and intangible cultural assets are liable to be

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damaged by human interventions and “large-scale public works undertaken to meetthe demands of economic development and population growth.”1 Such disputesmight involve central or periphery issues related to film, television, publishing,sound recording, and new digital media which disseminate a State’s cultural contentor the host State’s natural environment, indigenous rights, ancestral tribal lands, orcultural artifacts, which find themselves affected by FDI.

Recent multilateral investment treaties and a handful of arbitral awards show thatStates and tribunals are turning their minds to the crosscutting issues that arise whencultural heritage intersects with, and sometimes disrupts, foreign investors’ expec-tations. Canada has long since included a strong “cultural industries” exemption inits investment treaties to ensure Canadians have access to quality Canadian content,which it deems essential for the continued sustainability and growth of Canada’screative industries – books, music, video, and radio. Canada was successful inpreserving this cultural exemption in its negotiations for the USA-Mexico-CanadaAgreement (USMCA), which will replace NAFTA if approved by the respectiveinternal processes of the State parties to that agreement.2

It is time for scholarship to follow suit and contribute to the debate about how toreconcile cultural considerations in recent free trade agreements (FTAs) and inves-tor-State jurisprudence. Just like archaeologists working tirelessly to unearthhumanity’s cultural treasures, the task of international investment law commentatorsand policy makers is to dig deep into the law and policy underlying the interactionsand contradictions between cultural heritage and international law and identify thebest ways forward to protect and harmonize the sometimes incompatible objectivesin these fields. The precise contours of recent FTA investment chapters in relation tocultural heritage, and particularly to investor-State dispute settlement (ISDS), areimportant for assessing current prospects and limits of trade and investment mega-regionals.3 This is especially the case in light of recent challenges waged againstISDS in some quarters – be they grounded on perceived concerns over legitimacy or

1Chechi A (2014) The settlement of international cultural heritage disputes. Oxford UniversityPress, 31 (Chechi)2It remains unclear whether digital products are included in the exemption.3Indeed, attention is increasingly paid to the rise of mega-regional IIAs in both policy and scholarlycircles, with a particular focus on the differences and commonalities between CPTPP, the Compre-hensive Economic Trade Agreement (CETA) between Canada and the EU, and the TransatlanticTrade and Investment Partnership agreement (TTIP) between the EU and the USA. For a detailedcomparison of these instruments, see Schacherer S (2016) TPP, CETA and TTIP between innova-tion and consolidation: resolving investor-state disputes under mega-regionals. JIDS 7:628. Seealso Sardinha E (2017) Towards a new horizon in investor-state dispute settlement? Reflections onthe investment tribunal system in the comprehensive economic trade agreement (CETA). Can YearbInt Law 55:311. Even more relevantly for the present account, other publicists focus on USinfluence on the substantive provisions enshrined in the proposed mega-regionals. See, e.g., SchillSW, Bray HL (2016) The brave new (American) world of international investment law: substantiveinvestment protection standards in mega-regionals. Br J Am Leg Stud 5:419.

Protecting Cultural Heritage in International Investment Law: Tracing the. . . 3

transparency,4 the appointment process,5 the North/South divide,6 the lack of anappellate mechanism for errors of law and fact7 and/or the creation of a multilateralinvestment court (and abolishment of the long-standing practice of party-appointedarbitrators and ad hoc tribunals),8 or potential problems with enforcement of awardsrendered under that envisaged regime.9 Indeed, the potential implications of FTAs

4For instance, recently over 200 North American law and economics scholars urged US PresidentTrump to remove ISDS from future FTAs. One reason animating this proposed retreat from ISDSresides in the fact that no mechanism exists for domestic citizens or entities affected adversely tointervene or meaningfully participate in the disputes which affect them. “230 Law and EconomicsProfessors Urge President Trump to Remove Investor-State Settlement (ISDS) from NAFTA andOther Pacts” (25 October 2017) https://www.citizen.org/system/files/case_documents/isds-law-economics-professors-letter-oct-2017_2.pdf. Accessed 11 November 2017. See also generally SchillSW (2015) Conceptions of legitimacy of international arbitration. In: Caron DD et al (eds)Practising virtue: inside international arbitration. Oxford University Press, 106–24; Maupin JA(2013) Transparency in international investment law: the good, the bad, and the murky. In: BianchiA, Peters A (eds) Transparency in international law. Cambridge University Press, 142–71; SchillSW (2011) Enhancing international investment law’s legitimacy: conceptual and methodologicalfoundations of a new public law approach. Virginia J Int Law 52:57; Franck SD (2005) Thelegitimacy crisis in investment treaty arbitration: privatizing public international law throughinconsistent decisions. Fordham Law Rev 73:152.5See, e.g., the thought-provoking study and reform proposals advocated in Puig S (2016) Bindinginternational justice. Virginia J Int Law 56:647.6See, e.g., Sornarajah M (2015) Resistance and change in the international law on foreign invest-ment. Cambridge University Press, esp chapter 8.7See generally Thomas JC, Dhillon HK (2017) The foundations of investment treaty arbitration: theICSID convention, investment treaties and the review of arbitration awards. ICSID Rev 32(3):459–502; Sauvant KP (ed) (2008) Appeals mechanism in international investment disputes.Oxford University Press. For a critical take, see Calamita NJ (2017) The (In)Compatibility ofappellate mechanisms with existing instruments of the investment treaty regime. JWIT 18:585. Theparallels with a would-be appellate mechanism for investment arbitration and the current WTOappellate structure are almost self-evident, not to mention that current proposals to set up suchappellate mechanism in ISDS would seek considerable inspiration from the WTO dispute settle-ment universe. See Ngangjoh-Hodu Y, Ajibo CC (2015) ICSID annulment procedure and the WTOappellate system: the case for an appellate system for investment arbitration. JIDS 6:308.8See, e.g., Kho SS et al (2017) The EU TTIP investment court proposal and the WTO disputesettlement system: comparing apples and oranges? ICSID Rev 32:326; Schill SW (2016) TheEuropean commission’s proposal of ‘Investment Court System’ for TTIP: stepping stone orstumbling block for multilateralizing international investment law? ASIL Insights 20:9 (22April), https://www.asil.org/insights/volume/20/issue/9/european-commissions-proposal-investment-court-system-ttip-stepping. Accessed 8 June 2018.9See, e.g., Reinisch A (2016) Will the EU’s proposal concerning an investment court system forCETA and TTIP lead to enforceable awards?: the limits of modifying the ICSID convention and thenature of investment arbitration. JIEL 19:761.

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on ISDS are a source for concern and continue to be heavily debated by scholars,practitioners, policy makers, and other civil society participants.10

Apart from Canada and its cultural industries exception in all of its treaties sinceNAFTAwas concluded nearly a quarter century ago, culture was rarely mentioned insuch treaties. Without further guidance enshrined in the treaty text, the criticism ofolder bilateral investment treaties (BITs), and international investment agreements(IIAs) more broadly, is that ad hoc arbitral tribunals can, and do, sometimes renderdiverging interpretations of similar, even identical, provisions in investment treaties.This reality, and the hard lessons learned from seeing other States get sued byinvestors, has led many States to adopt more detailed and precisely drafted pro-visions in their treaties, both in terms of procedure and substance.

With this context in mind, my chapter undertakes a comparative exploration ofthe cultural heritage protections included in the preambles and investment chaptersof four recent regional FTAs: EU-Canada Comprehensive Economic Trade Agree-ment (CETA),11 Comprehensive Progressive Trans-Pacific Partnership (CPTPP),12

EU-Singapore FTA,13 and EU-Vietnam FTA14. With a view to drawing broaderconclusions about the future of investment law and disputes involving a culturalheritage element, and in assessing where treaty-drafting practice stands today, mycontribution will also take a retrospective look at the original North American FreeTrade Agreement (NAFTA) – one of the first treaties to include provisions aimed atprotecting culture and national identity – and its new, but nearly identical, iteration,the USMCA.

10See, e.g., Schill SW (2017) Authority, legitimacy, and fragmentation in the (Envisaged) disputesettlement disciplines in mega-regionals. In: Griller S et al (eds) Mega-regional trade agreementsCETA, TTIP, and TiSA: new orientations for EU external economic relations. Oxford UniversityPress, 111–150; Waibel M et al (2010) (eds) The backlash against investment arbitration: percep-tions and reality. Kluwer; Kaushal A (2009) Revisiting history: how the past matters for the presentbacklash against the foreign investment regime. Harv Int Law J 50(2):491; Sardinha E (2017) Theimpetus for the creation of an appellate mechanism. ICSID Rev 32(3):503.11Canada-European Union Comprehensive Economic and Trade Agreement (CETA), version as of29 February 2016, signed 30 October 201612Trans-Pacific Partnership (TPP), signed 4 February 2016. The USA withdrew from TPP on 24January 2017, in a purported effort to renegotiate its approach to trade and investment deals. On 11November 2017, TPP was renamed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), and the legally verified text was released on 21 February 2018.CPTPP was signed by the remaining 11 State parties on 8 March 2018 and shall enter into force 60days after the date on which at least 6 or 50% of signatories, whichever is smaller, have notified theDepositary in writing of the completion of their applicable legal ratification procedures (CPTPPArt.3(1)).13EU-Singapore Free Trade Agreement and Investment Protection Agreement, signed 19 October2018. Following the European Parliament’s consent to the agreements on 13 February 2019, theEU-Singapore FTAwill continue its ratification process in line with the procedures foreseen in theEU Treaties to allow for their entry into force.14Free Trade Agreement between the EU and the Socialist Republic of Vietnam, draft of 1 February2016 (EU-Vietnam FTA). Final legally scrubbed text completed as of June 2018, but not yetreleased.

Protecting Cultural Heritage in International Investment Law: Tracing the. . . 5

The cultural considerations embedded within the preambles of these FTAs, albeitsomewhat aspirational and non-binding, can assist arbitral tribunals in interpretingthe substantive provisions of these treaties in light of their object and purpose. Whileall four treaties reflect a notable shift toward more precision and detail in treaty-drafting practice in the articulation of both procedural and substantive investmentprovisions, and a further enshrining of States’ inherent right to regulate in further-ance of legitimate public welfare objectives, they differ in the extent to which theyinclude cultural heritage protections. For instance, only CETA includes an expressreference to the 2005 UNESCO Convention on the Protection and Promotion of theDiversity of Cultural Expressions. In so doing, CETA evinces the growing com-plexity of this field of law, where several different regimes of international regulationinteract.

These FTAs reflect a desire by States to remove regulation enacted for legitimatepublic welfare objectives from the reach of investors’ claims and provide arbitraltribunals with interpretive guidance. They also appear to reflect a concerted effort toensure that cultural heritage and cultural diversity considerations guide ad hocarbitral tribunals in their determinations on alleged treaty breaches. In investor-State arbitrations in which cultural heritage norms are engaged, even if such issuesdo not technically form part of the law applicable to the dispute, cultural consider-ations may “influence the way in which the applicable treaty norms are interpretedand implemented by the arbitrators, thus ultimately conditioning the outcome of thedecision.”15 This shift in treaty-drafting practice is likely the result of far-reachingpolitical, financial, legal, and social implications of investment tribunal awards ongovernance and the public interest. It is these legitimate public welfare objectiveswhich makes this private arbitral system – entirely disconnected from domestic courtand administrative law processes in the case of International Centre for Settlement ofInvestment Disputes (ICSID) arbitration (and substantially free of any judicialreview on the merits in non-ICSID cases) – particularly prone to scrutiny andcriticism. States’ right to regulate commercial activities in a way that is compatiblewith their domestic obligations to their citizenry and the promotion of FDI canconflict with both the investor and the host State’s conceptions of what treatment isowed where specific commitments are made by the State.

The discussion also examines a selection of cultural heritage-related investor-State awards, namely, Parkerings-Compagniet v. Lithuania, Glamis Gold Ltd. v. theUnited States of America, Bilcon v. Canada, SPP v. Egypt, and Santa Elena v. CostaRica. While the new generation of FTAs represents a deliberate effort by States tonegotiate the sort of exceptions that they expect to see arbitral tribunals apply, it isimportant to consider how these might play out in future cases with a culturalheritage element. Reviewing the available case law is one way of predicting howarbitral tribunals might balance cultural interests against those of investors. To this

15Francioni F (2013) Plurality and interaction of legal orders in the enforcement of cultural heritagelaw. In: Francioni F, Gordley J (eds) Enforcing international cultural heritage law. Oxford Univer-sity Press, 53

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end, the chapter assesses whether these cases have adequately dealt with the culturalvalues at stake, as well as what implications this emerging jurisprudence might havefor future disputes situated at the intersection of international investment law andinternational cultural law.

Before turning to a dissection of the relevant cultural considerations included inrecent FTAs, it is helpful for framing the discussion to first address the difficulty indefining cultural heritage, and the relatively new attention this field has garnered inthe ‘right to regulate’ discourse in international investment law.

“Cultural Heritage”: Elusive, Subjective, and Ever Evolving

Cultural heritage is intrinsically multidimensional, and thus a single, comprehensivedefinition does not exist under international investment law. While the ever-expanding scope of cultural heritage defies easy characterization, it is generallyviewed as a fundamental “international public good.”16 The protection of culturalheritage is seen by some to promote international peace and security.17 The under-lying object of cultural heritage conservation finds considerable affinity betweenvarious legal systems. While cultural heritage has spawned its own specific culturallegal schemes in many national systems, these policies potentially intersect with theregulation of international trade relationships between investors and States. Not-withstanding this potential tension between international cultural law and interna-tional investment law, the two fields are capable of being complementary, in part

16Francioni F (2012) Public and private in the international protection of global cultural goods. EurJ Int Law 23(3):719: cultural heritage as an “international public good” can be traced back to thePreamble of the 1954 Hague Convention for the Protection of Cultural Property in the Event ofArmed Conflict, according to which “damage to cultural property belonging to any people whatso-ever means damage to the cultural heritage of all mankind, since each people makes its contributionto the culture of the world.” See also Francioni F (2013) Plurality and interaction of legal orders inthe enforcement of cultural heritage law. In: Francioni F, Gordley J (eds) Enforcing internationalcultural heritage law. Oxford University Press, 56; Radi Y (2013) The ‘culture of balancing’ ofinternational investment law: cultural interests and investors’ interests in international investmenttreaties and arbitration. Grotius Centre for International Law working paper series 2013/014-IEL.https://ssrn.com/abstract=2355923. Accessed 2 Oct 2016 (published in TDM 5 (2013) (Radi)): TheHague Convention’s explicit protection of culture in terms of property and specific assets, and itsprotection in the event of armed conflict evinces a shift from “property” to “heritage,” which pavedthe way for the protection of intangible assets by, for instance, the Convention for the Safeguardingof Intangible Cultural Heritage in 2003.17See, e.g., Constitution of the United Nations Educational, Scientific, and Cultural Organization(adopted 16 Nov 1945, entered into force 1946) 4 UNTS 275 http://portal.unesco.org/en/ev.php-URL_ID=15244&URL_DO=DO_TOPIC&URL_SECTION=201.html (UNESCO Constitution),Preamble – “ignorance of each other’s ways and lives has been a common cause, throughout thehistory of mankind, of that suspicion and mistrust between the peoples of the world through whichtheir differences have all too often broken into war; . . . the wide diffusion of culture, and theeducation of humanity for justice and liberty and peace are indispensable to the dignity of man andconstitute a sacred duty which all the nations must fulfil in a spirit of mutual assistance andconcern.”

Protecting Cultural Heritage in International Investment Law: Tracing the. . . 7

because cultural resources have the propensity to foster human development andeconomic growth, and FDI is aimed at promoting development.18

The term “cultural heritage” encompasses both the tangible (culturally significantmonuments, archaeological resources, built heritage, cultural heritage landscapes,moveable artifacts susceptible to economic evaluation, etc.) and the intangible19

(inherited values and traditions, food preparation, indigenous hunting practices, art,music, or other “objects endowed with intrinsic value as expressions of humancreativity and as part of a unique or very special tradition of human skills andcraftwork”20). It is an inherently difficult concept for which to provide a generaldefinition or even general identifying criteria. Different investment treaties, and therelated jurisprudence, each bring their own definitions and understandings to bear onthe concept of cultural heritage, which is often only referred to briefly in each treaty,if at all (particularly in older BITs). Other international legal instruments often focuson specific categories of cultural heritage – such as cultural diversity, underwatercultural heritage, indigenous cultural heritage, and intangible cultural heritage –rather than attempting to provide a more holistic, yet comprehensive approach.21

A “holistic approach” might be one which “brings together cultural and naturalheritage and takes into account the interactive link of such heritage with the real life

18Vadi V (2014) Cultural heritage in international investment law and arbitration. CambridgeUniversity Press, 291–29219See, e.g., Convention for the Safeguarding of Intangible Cultural Heritage (2003) http://www.unesco.org/culture/ich/en/convention. Accessed 16 Oct 2016:

For the purposes of this Convention, 1. The intangible cultural heritage”means the practices,representations, expressions, knowledge, skills – as well as the instruments, objects, artefactsand cultural spaces associated therewith – that communities, groups and, in some cases,individuals recognize as part of their cultural heritage. This intangible cultural heritage,transmitted from generation to generation, is constantly recreated by communities andgroups in response to their environment, their interaction with nature and their history, andprovides them with a sense of identity and continuity, thus promoting respect for culturaldiversity and human creativity. For the purposes of this Convention, consideration will begiven solely to such intangible cultural heritage as is compatible with existing internationalhuman rights instruments, as well as with the requirements of mutual respect amongcommunities, groups and individuals, and of sustainable development. 2. The ‘intangiblecultural heritage’, as defined in paragraph 1 above, is manifested inter alia in the followingdomains: (a) oral traditions and expressions, including language as a vehicle of the intangiblecultural heritage; (b) performing arts; (c) social practices, rituals and festive events; (d)knowledge and practices concerning nature and the universe; (e) traditional craftsmanship.

20Francioni F (2012) Public and private in the international protection of global cultural goods. EJIL23(3):719, 72121See, e.g., Forrest C (2010) International law and the protection of cultural heritage. Routledge, 1,20–29, 85; Frigo M “Cultural property v. cultural heritage: a ‘battle of concepts’ in internationallaw? Int Rev Red Cross 86:367; Ahmad Y (2006) The scope and definition of heritage from tangibleto intangible. Int J Herit Stud 12(3):292. http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.600.3118&rep=rep1&type=pdf. Accessed 13 Oct 2016.

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of people inhabiting it.”22 The recognition by a group (be it a minority, majoritypopulation, entire nation, region, or mankind more generally) of certain tangible andintangible aspects of cultural heritage is an essential part of the identification ofcultural heritage worth protecting. The extent to which international investment lawallows States to protect and promote what it, or its local groups, considers to be partof their cultural heritage is largely dependent on the voice given to these opinionswhen a dispute arises with respect to cultural heritage.23

The Right to Regulate: Providing Guidance to Arbitral Tribunals

The right of States to regulate commercial activities in ways that are compatiblewith their domestic obligations to their citizenry, and international non-investmenttreaty obligations, can sometimes conflict with investors’ rights under IIAs. Evenwhere States maintain high cultural heritage protections, investors can bring claimsalleging violations of the applicable IIAs. One commentator highlights that thiscostly reality of potential arbitral proceedings, for both wealthy and poor nationsalike, “could be enough to discourage governments from pursuing cultural orheritage protection measures.”24 Conversely, the expansion of trade and investmentfosters interaction between different cultures, as well as development throughknowledge sharing, which might expand cultural freedom within and amongnations.25 However, the asymmetry in the flow of cultural goods under investmenttreaties has the potential to lead to “cultural homogenization” and the “changing ofcultural landscapes.”26 For less developed nations, it is also easy to see how thosegovernments might knowingly, or unwittingly, allow FDI into their country whichmight threaten or harm important historical and archaeologically significant culturalsites. Sometimes referred to as a regulatory “race to the bottom,” States might betempted to lower their cultural standards to attract FDI into their territory.27

22Francioni F (2012) Public and private in the international protection of global cultural goods. EJIL23(3):719, 72123See, e.g., ibid., 720: “[a]rt itself, as a medium essentially devoted to giving form to culturalexpression, always transcends its economic value as a mere object and reflects the pluralism anddiversity of taste and inclination of the societies that have produced it.”24Maltais AL (2016) The TPP and cultural diversity. Canadian Centre for Policy Alternatives, 725Ibid.; See generally. Sen A (1999) Development as freedom. Knopf.26Vadi V (2015) Crossed destinies: international economic courts and the protection of culturalheritage. J Int Econ Law 18:51, 5227The phrase “race to the bottom” was coined by US Supreme Court Justice Louis DembitzBrandeis. This phenomenon is a by-product of globalization and free trade and tends to increasein tandem with increased competition between geographic areas over a particular industry orproduct. See, e.g., Meisel N (2004) Governance culture and development: a different perspectiveon corporate governance. OECD, 41; Schram SF (2000) The culture of postindustrial social policy.New York University Press, 91: “The ‘race to the bottom’ implies that the states compete with eachother as each tries to underbid the others in lowering taxes, spending, regulation. . .so as to makeitself more attractive to outside financial interests or unattractive to unwanted outsiders.”

Protecting Cultural Heritage in International Investment Law: Tracing the. . . 9

Bangladesh, for instance, is currently facing a cultural heritage preservationdilemma of an environmental nature with respect to its controversial Rampalpower project. The project involves the construction of a coal-based power plantin Bangladesh, located dangerously close to the Sundarbans mangrove, which since1997 has been designated as a UNESCO World Heritage for its outstanding univer-sal value.28 The project is an outcome of an agreement reached between Bangladeshand India in 2010, which led to the establishment of the Bangladesh-India State-runpower company in late 2015 to own and operate the plant.29 An Indian public sectorengineering company was awarded the contract to build the plant, and a major Indianbank is the principle financier of the project. If Bangladesh were to adopt regulatorymeasures against the environmental impact of the power plant, Indian investorsmight bring a claim against Bangladesh for violating its obligations under the 2009India-Bangladesh BIT.30 It will be interesting to see if, and how, this matter developsfurther.

One of the crucial questions posed by the application of IIAs since the early 2000sis the extent to which such treaties have the potential to constrain host States’ right toregulate in the public interest. The occasional clash between the protection ofcultural heritage interests and the promotion of FDI is a microcosm of “the moregeneral tug-of-war between State regulatory autonomy and international businessconcerns.”31 States appear to be increasingly acknowledging the challenging, andsometimes contradictory, interplay between the protection of cultural heritage andthe promotion of investment in the context of resolving their disputes throughinvestor-State arbitration. Investors can, and have, brought claims that culturalpolicies adopted or enforced in the host State of their investment violate theinvestment protections guaranteed under the applicable IIAs. Specifically, investorshave most often alleged breaches of the following standards of protection: perfor-mance requirements, most-favored-nation (MFN) treatment, national treatment, fairand equitable treatment (FET), and indirect expropriation.

The tension between cultural heritage and international investment law mightstem, in part, from the uncertainties associated with arbitral tribunals sometimeshaving to reconcile cultural considerations with the protections afforded to investorsunder IIAs. CETA, EU-Singapore FTA, and EU-Vietnam FTA are the most complexinstruments of their kind ever negotiated by Canada, Singapore, and Vietnam andarguably the most far-reaching ever negotiated by the EU. These agreements and themechanisms they set up provide a very detailed body of law, at least with respect to

28UNESCO Heritage List, “The Sundarbans” http://whc.unesco.org/en/list/798. Accessed 12 Oct201629A joint initiative of India’s National Thermal Power Company and Bangladesh’s Power Devel-opment Board30Ranjan P, Anand P (2016) Regulating rampal power project could mean trouble under the India-Bangladesh BIT. The Wire (India). http://thewire.in/72165/rampal-power-project-india-bangladesh-bit/. Accessed 11 Oct 201631Vadi V (2015) Crossed destinies: international economic courts and the protection of culturalheritage. J Int Econ Law 18:51, 54.

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international investment law. Similarly, the CPTPP investment chapter is hailed asthe “gold standard” in international investment law, the structure of which is said toreflect hard lessons learned from past mistakes. The CPTPP’s evolved regulatoryapproach may be seen to add clarity and predictability to the current regime – at atime when investor-State arbitration faces its greatest ever legitimacy crisis in thepublic arena – by reducing the discretion, or leeway, arbitral tribunals wouldotherwise enjoy when applying and interpreting broadly drafted clauses. In princi-ple, the protection of cultural heritage has been sought through the inclusion ofbroader and more numerous exceptions and special provisions in CPTPP, CETA, andthe EU-Singapore and EU-Vietnam FTAs.

A cultural heritage court does not exist, and there is no one institutionalized bodyto determine investment disputes with a cultural law aspect. While investor-Statearbitration is not typically the only available means of resolving cultural disputes,investors might prefer not to resort “to local courts and human rights courts (whichrequire the exhaustion of local remedies), but to bring the case before investmenttreaty arbitral tribunals because of streamlined procedures and alleged indepen-dence.”32 As one commentator points out, the “rationale for internationalizinginvestor-State disputes lies in the assumed independence and impartiality of inter-national arbitral tribunals, while national dispute settlement procedures are oftenperceived as biased or inadequate.”33 However, although some commentators notethat arbitral tribunals have exhibited a relatively balanced approach to public policyquestions,34 others highlight the potential risk inherent in granting private individ-uals appointed in international investment cases the extraordinary power to makedeterminations on what were essentially issues of the public interest.35 For pro-ponents of this position, important issues of public interest, such as the protection ofcultural heritage, should not be entrusted to private individuals but instead might bebetter decided by tenured judges. To this end, it is interesting to note that both CETA,EU-Vietnam, and EU-Singapore have replaced the prevailing system of ad hocarbitrators with an Investment Court System (ITS). The ITS provides for the creationa permanent Tribunal and an Appeal Tribunal, featuring a pre-elected roster oftribunal members, competent to review the Tribunal’s decisions for errors of law

32Vadi V (2014) Cultural heritage in international investment law and arbitration. CambridgeUniversity Press, 2.33Ibid., 7634Hobér K (2015) Does investment arbitration have a future? In: Bungenberg M et al (eds)International investment law. Hart, 187635McRae D (2014) International economic law and public international law: the past and the future.J Int Econ Law 17:634, citing two WTO cases involving environmental issues: Report of the Panel,United States-Import Prohibition of Certain Shrimp and Shrimp Products, WT/DS85/R (11 March1998); Report of the Appellate Body, WT/DS85/AB/R (10 Dec 1998); Report of the Panel, Brazil-Measures Affecting Imports of Retreaded Tyres, WT/DS332/R (6 Dec 2007); Report of theAppellate Body, WT/DS332/AB/R (12 March 2007)

Protecting Cultural Heritage in International Investment Law: Tracing the. . . 11

and fact, in addition to the grounds stipulated in Article 52 of the ICSIDConvention.36

Cultural Considerations in the Preambles and InvestmentChapters of Recent FTAS

CETA

This section of the discussion will present an overview of the provisions in thepreamble and investment chapter (as well as the definition of “cultural industries” inChap. 1 (▶General definitions and initial provisions), unique to Canada) whichprotect cultural heritage concerns in the context of investor-State arbitration. While itis outside the scope of this chapter, it is worth noting that the cultural industriesexception appears in other chapters of CETA.37

CETA’s preamble explicitly refers to the 2005 UNESCO Convention, as well asrestates the State Parties’ commitments thereunder. The preamble to CETA expresslyaffirms that, as parties to the 2005 UNESCO Convention, Canada and the EU will:

preserve, develop and implement their cultural policies, to support their cultural industriesfor the purpose of strengthening the diversity of cultural expressions, and to preserve theircultural identity, including through the use of regulatory measures and financial support.38

361965 Convention on the Settlement of Investment Disputes between States and Nationals of OtherStates, 575 UNTS 159/[1991] ATS 23/4 ILM 532 (1965)/UKTS 25 (1967) (ICSID Convention)37Chapter 7 Subsidies, Chapter 9 Cross-Border Trade in Services, Chapter 12 Domestic Regulation,and Chapter 19 Government Procurement – Annex 19-7 (General Notes): Chapter 19 “will notcover procurement: . . . (i) by Québec entities of works of art from local artists or to procurement byany municipality, academic institution or school board of other provinces and territories with respectto cultural industries. For the purpose of this paragraph, works of art includes specific artistic worksto be integrated into a public building or a site.”38EU and Canada, Final Draft: Joint Interpretive Declaration leaked in connection with execution ofthe Comprehensive Economic and Trade Agreement (CETA) between Canada and the EuropeanUnion and its Members States, Brussels https://www.international.gc.ca/trade-commerce/trade-agreements-accords-commerciaux/agr-acc/ceta-aecg/jii-iic.aspx?lang=eng. Accessed 29 April2019: “The European Union and its Member States and Canada will therefore continue to havethe ability to achieve the legitimate public policy objectives that their democratic institutions set,such as public health, social services, public education, safety, environment, public morals, and thepromotion and protection of cultural diversity. CETA will also not lower our respective standardsand regulations related to food safety, product safety, consumer protection, health, environment orlabour protection. Imported goods, service suppliers and investors must continue to respectdomestic requirements, including rules and regulations.” (Emphasis added.)

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This language is also reflected in the EU/Canada Joint Interpretative Declara-tion.39 However, as one commentator points out, “[w]hile this in itself is a greatnovelty, one may note in parallel that within the main text of the agreement, thecultural exemption is not treated as a general exemption that relieves culturalindustries of certain obligations contained in the treaty” but more so as an overarch-ing guiding policy concern which should guide arbitral tribunals in balancing theaims of cultural heritage policies with investors’ rights guaranteed under CETA.40

CETA’s inclusion of an express reference to the 2005 UNESCO Convention isunique and reflects a strengthening of international cultural law in the trade regimewhich might be mirrored in future agreements.41 While the CPTPP, EU-SingaporeFTA, and EU-Vietnam FTA were concluded at roughly the same time and do notinclude reference to the 2005 UNESCO Convention, it will be interesting to seewhether other IIAs in the coming years elect to include this novel restatement of theparties’ commitments under that Convention.

In nearly identical terms to the preamble, CETA begins the investment protectionprovisions section of the investment chapter by “reaffirm[ing]” the State Parties’right to regulate “to achieve legitimate policy objectives, such as . . . the promotionand protection of cultural diversity.”42 CETA further elaborates that, “[f]or greatercertainty, the mere fact that a Party regulates, including through a modification of itslaw, in a manner which negatively affects an investment or interferes with aninvestor’s expectations, including its expectations of profits, does not amount to abreach of an obligation under this Section.”

Canada includes a broad definition of “cultural industries,” in Chap. 1 (▶Generaldefinitions and initial provisions) of CETA, which are excluded from the applicationof certain aspects of CETA’s investment chapter. Therein, “cultural industries” aredefined as books, magazines, periodicals, or newspapers; films; audio or video musicrecordings; print or machine-readable music; or radio, television, or cable broad-

39Ibid.: “Right to regulate: CETA preserves the ability of the European Union and its Member Statesand Canada to adopt and apply their own laws and regulations that regulate economic activity in thepublic interest, to achieve legitimate public policy objectives such as the protection and promotionof public health, social services, public education, safety, the environment, public morals, social orconsumer protection and the promotion and protection of cultural diversity.” McGregor J (2010)Joint statement leaks as Canada, EU try to overcome trade deal critics. CBC. http://www.cbc.ca/news/politics/ceta-canada-eu-trade-leak-interpretative-declaration-1.3794013. Accessed on 11 Oct2016.40Gagne G (2016) The trade and culture debate: evidence from US trade agreements. LexingtonBooks, pp xxi–xxii (Foreword by Christian Deblock).41Vlassis A, Hanania LR (2014) Effects of the CDCE (2005 UNESCO convention on the protectionand promotion of the diversity of cultural expressions) on trade negotiations. In: Hanania LR (ed)Cultural diversity in international law: the effectiveness of the UNESCO convention on theprotection and promotion of the diversity of cultural expressions. Routledge, Chapter 1, 3142CETA, Article 8.9(1) (Investment and regulatory measures)

Protecting Cultural Heritage in International Investment Law: Tracing the. . . 13

casting.43 CETA also contains a provision setting out the scope of the application ofthe investment chapter, provided that, for Canada, these cultural industries (and forthe EU, audiovisual services) are excluded from the Sections B (Establishment ofinvestments) and C (Non-discriminatory treatment).44 These parts of the investmentchapter seek to liberalize and open markets, which are perceived by some to riskundermining essential cultural policies.45 This likely stems from the experience intrade disputes before the World Trade Organization (WTO) Dispute SettlementBody, which has, on occasion, held that a State’s protections on domestic culturalheritage contravene free trade principles.46 CETA also specifically provides that, forthe EU, these operative parts of the investment chapter do not apply to a measurewith respect to audiovisual services, and for Canada, they do not apply to a measurewith respect to the cultural industries defined above.47 Therefore, the EU’s exclusionis rather limited, whereas the Canadian exception applies to several kinds of culturalindustry. That said, audiovisual services for the EU and cultural industries forCanada are not excluded from the application of the rest of the investment chapter,namely, Sections D (Investment protection), E (Reservations and exceptions), and F(Resolution of investment disputes between investors and states).

Canada’s exception for cultural industries is not new; it has included a culturalindustries exclusion in most of its IIAs since NAFTA (so thus, since 1994).48 Somecommentators point out that Canada has historically tended toward shielding itscultural industries from possible constraints imposed by FTAs, such as preservingthe ability of federal and provincial governments to support Canadian artists andcultural producers.49 The EU has also tended to exclude audiovisual services fromnondiscrimination rules (namely, national treatment and MFN treatment) in it the

43CETA, Article 1.1 (Definitions of general application): cultural industries means persons engagedin (a) the publication, distribution or sale of books, magazines, periodicals or newspapers in print ormachine-readable form, except when printing or typesetting any of the foregoing is the onlyactivity; (b) the production, distribution, sale or exhibition of film or video recordings; (c) theproduction, distribution, sale or exhibition of audio or video music recordings; (d) the publication,distribution or sale of music in print or machine-readable form; or (e) radio-communications inwhich the transmissions are intended for direct reception by the general public, and all radio,television and cable broadcasting undertakings and all satellite programming and broadcast networkservices.44CETA, Article 8.245Maltais AL (2016) The TPP and cultural diversity. Canadian Centre for Policy Alternatives, 7.46E.g., China – Measures Affecting Trading Rights and Distribution Services for Certain Publica-tions and Audiovisual Entertainment Products, WT/DS363/R, Report of the Panel (12 Aug 2009);WT/DS363/AB/R, Appellate Body Report (21 Dec 2009) https://www.wto.org/english/tratop_e/dispu_e/363abr_e.pdf. Accessed 17 Oct 201647CETA, Article 8.2(3)48NAFTA’s Article 2016 defines “cultural industries” using identical language as that in CETA.49Gagne G (2016) The trade and culture debate: evidence from US trade agreements. LexingtonBooks, xxi (Foreword by Christian Deblock); Maltais AL (2016) The TPP and cultural diversity.Canadian Centre for Policy Alternatives, 5

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services chapters of its IIAs.50 Some commentators have observed that the 2005UNESCO Convention may have “given a new impetus to the traditional position ofboth Canada and the EU.”51 By virtue of the express affirmation of the State Parties’commitments as parties to the 2005 UNESCO Convention, it might be that, in thecontext of investor-State arbitration of disputes with a cultural heritage element,States are accorded by such tribunals broad policy space to adopt or enforce culturalmeasures which might affect investors’ rights under CETA.

CPTPP

Although Canada’s strategy in CETA was likely the same in the original TPPnegotiations with respect to securing cultural considerations in the preamble, excep-tion for “cultural industries” applicable to certain chapters, and exceptions to culturalsectors in the investment chapter, the outcomes in CPTPP differ from those achievedin CETA. A leaked version of the original TPP document revealed the existence of apro-exception group of States (namely, Canada, Chile, Brunei, Malaysia, Vietnam,Australia, and New Zealand) and an anti-exception group (composed of the USA,Japan, Mexico, and Peru).52

The preamble of the CPTPP provides that the State Parties:

Recognise the importance of cultural identity and diversity among and within the Parties,and that trade and investment can expand opportunities to enrich cultural identity anddiversity at home and abroad.53

Unlike CETA, the CPTPP’s investment chapter does not mention any other non-investment treaty obligations, such as the 2005 UNESCO Convention. While theConvention would not supersede any of the State Parties’ obligations to investorsunder the CPTPP, it could influence arbitral tribunals in balancing the legitimateaims of a State in promoting and protecting the diversity of cultural expressions andinvestors’ rights. In this regard, an ad hoc investment tribunal established under theCPTPP might arrive at different results in the event of a conflict over cultural policyif that tribunal were to interpret the list of legitimate objectives in the preamble andinvestment chapter as exhaustive, or even representative, of the kinds of

50Vlassis A, Hanania LR (2014) Effects of the CDCE (2005 UNESCO convention on the protectionand promotion of the diversity of cultural expressions) on trade negotiations. In: Hanania LR (ed)Cultural diversity in international law: the effectiveness of the UNESCO convention on theprotection and promotion of the diversity of cultural expressions. Routledge, Chapter 1, 29–3051Ibid. 3052Wikileaks, “TPP: Country Positions (6 Nov 2013)” Second Release of the Secret Trans-PacificPartnership Agreement documents, Salt Lake City (13 Nov 2013) https://wikileaks.org/IMG/pdf/tpp-salt-lake-positions.pdf. Accessed 15 Oct 201653Consolidated TPP Text, Preamble http://www.international.gc.ca/trade-agreements-accords-commerciaux/agr-acc/tpp-ptp/text-texte/00.aspx?lang=eng. Accessed 20 Sept 2016.

Protecting Cultural Heritage in International Investment Law: Tracing the. . . 15

considerations that can be balanced against investors’ rights. It is worth comparingthe cultural exception in the CPTPP’s preamble with an example of a very strongformulation in the 2009 Canada-Peru FTA: “recognizing that states must maintainthe ability to preserve, develop and implement their cultural policies . . . given theessential role that cultural good and services play in the identity and diversity ofsocieties and the lives of individuals.”54

While CETA lists “cultural diversity” as a legitimate policy objective within theambit of States’ right to regulate, the CPTPP misses this opportunity in its invest-ment chapter and only lists other sectors such as public health, safety, the environ-ment, public morals, etc. In so doing, the CPTPP appears to suggest that more tradeand investment is likely to have a positive impact on culture and fails to expresslyacknowledge in the treaty the potential threats to cultural heritage imposed byforeign investors. The CPTPP also contains schedules to the investment chapter inwhich each contracting party has listed country-specific measures or sectors that areexempt from certain provisions (except expropriation). Australia, for example, hasreserved its right to adopt or maintain any measure with respect to the creative arts,indigenous cultural expressions, and other cultural heritage.

EU-Singapore FTA

The EU-Singapore FTA’s preamble reaffirms “each Party’s right to adopt and enforcemeasures necessary to pursue legitimate policy objectives such as social, environ-mental, security, public health and safety, promotion and protection of culturaldiversity.” Under the investment Chapter, Article 9.3(3)(c) on national treatmentprovides that:

3. Notwithstanding paragraphs 1 and 2, a Party may adopt or enforce measures that accord tocovered investors and investments of the other Party less favourable treatment than thataccorded to its own investors and their investments, in like situations, subject to therequirement that such measures are not applied in a manner which would constitute ameans of arbitrary or unjustifiable discrimination against the covered investors or invest-ments of the other Party in the territory of a Party, or is a disguised restriction on coveredinvestments, where the measures are: . . . (c) necessary for the protection of national treasuresof artistic, historic or archaeological value;55

54Canada-Peru Free Trade Agreement (in force since Aug 2009) http://www.international.gc.ca/trade-agreements-accords-commerciaux/agr-acc/peru-perou/preamble-preambule.aspx?lang=eng.Accessed 12 Sept 2016. Canada’s BITs with Jordan (2012), Panama (2013), and Honduras (2014)include similar formulations of the cultural exception.55Singapore-EU FTA, Art. 9.3(3)(c) (National Treatment).

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EU-Vietnam FTA

It might be that, when it comes to cultural heritage protection in IIAs, the situation isdifferent for developing countries, such as for Vietnam, in its bilateral negotiationswith the EU and its Members States. One author suggests that the cultural servicessector might be more sensitive issues for developing countries, both in the publicview and for the States concerned.56 In contrast to CETA, CPTPP, and the EU-Singapore FTA, the only reference to culture in the EU-Vietnam FTA reads asfollows:

Consistent with the provisions of this Title, each Party retains the right to adopt, maintain andenforce measures necessary to pursue legitimate policy objectives such as the protection ofsociety, the environment and public health, the integrity and stability of the financial system,the promotion of security and safety, and the promotion and protection of cultural diversity.57

Investment Disputes with a Cultural Heritage Aspect

Parkerings v. Lithuania

A pertinent example of an investor-State dispute, where cultural heritage norms donot necessarily form part of the applicable law to the dispute yet neverthelessinformed the applicable investment treaty norms interpreted by the arbitral tribunal,is the Parkerings v. Lithuania58 arbitration. This case involved a Norwegian inves-tor’s winning bid in a public tender to build a multistory car park under a cathedral,marked as a UNESCO World Heritage cultural site for its outstanding universalvalue, in the historic Old Town of Vilnius, Lithuania.59 The site’s UNESCO-pro-tected status required the approval of various administrative commissions in order toproceed with any construction.60 When cultural heritage impact assessmentsrequired by law indicated that the investor’s construction proposal, which requiredexcavation under the city, might negatively impact on Vilnius’ cultural heritage inthe protected area designated by the UNESCO, the Vilnius Municipality declined toaccept the investor’s project. When 6 months later, the municipality authorized aDutch company to build a car park on the same site, the Norwegian investor filed aninvestment treaty arbitration at ICSID, alleging that Lithuanian authorities hadbreached the MFN clause contained in the applicable BIT (the Norway-Lithuania

56Gagne G (2016) The trade and culture debate: evidence from US trade agreements. LexingtonBooks, xxi (Foreword by Christian Deblock)57EU-Vietnam FTA’s Investment Chapter (Chapter 8, I. General Provisions)58Parkerings v. Lithuania59UNESCO World Heritage List, Vilnius Historic Centre http://whc.unesco.org/en/list/541.Accessed 12 Oct 201660Parkerings v. Lithuania, [382]

Protecting Cultural Heritage in International Investment Law: Tracing the. . . 17

BIT) by discriminating against this investor, as compared to the Dutch company iteventually hired.

The key issue in this arbitration was therefore whether the Claimant’s investmenthad been accorded less favorable treatment than that of another foreign investor in“like circumstances.” The respondent argued that the Claimant’s project was funda-mentally different from the car park built by the Dutch investor in two ways: (i) theClaimant’s project was considerably larger than that of the other investor, and theClaimant’s project extended into the Old Town more than the car park constructed bythe other investor.61

In rejecting the claim, the Tribunal concluded that the Claimant and chosen Dutchinvestor were not “in like circumstances,” as thus the Claimant had failed to establisha breach of the MFN provision under the BIT. In particular, the Tribunal found thatthe Claimant had failed to show that the other investor had benefited from morefavorable treatment in terms of administrative requirements. While the Tribunalconsidered that the Claimant was in the same business sector and also a foreigninvestor within the meaning of the BIT, a comparison of the respective car parkconstruction plans revealed that the Claimant’s proposal extended “significantly inthe Old Town as defined by UNESCO and especially near the historical site of theCathedral,”62 which, in the Tribunal’s view, was “decisive.”63 On this basis, theTribunal found that the Claimant’s car park proposal was not similar to thatconstructed by the other investor,64 and thus the Municipality “did have legitimategrounds to distinguish between the two investors.”65 The Tribunal further noted thatvarious administrative commissions in Lithuania opposed the car park as planned bythe Claimant and cited excerpts from four such reports. The Tribunal ultimatelyfound that the opposition raised against the Claimant’s car park “were important andcontributed to the Municipality decision to refuse such a controversial project.”66

The Tribunal gave considerable weight to the historical, archaeological, and envi-ronmental impact of the Claimant’s project and held that these factors could be, andwere in this case, “a justification for the refusal of the project.”67

Several commentators agree that this arbitral award is highly instrumental inintroducing cultural heritage considerations as legitimate concerns that the host Statemay advance in adopting or enforcing regulatory measures that might impact on

61Parkerings v. Lithuania [378]62Ibid. [385]63Ibid. [392]64Ibid.65Ibid. [410]66Ibid.67Ibid.

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investors’ economic rights.68 While the Tribunal did not elaborate upon the hierar-chy among various international law obligations, it recognized the 2005 UNESCOConvention as part of the applicable law to this dispute (despite this Convention notbeing explicitly mentioned in the applicable BIT) and attempted to balance thecompeting cultural heritage protection and investment treaty obligation norms.This trend was later reflected in the 2009 Glamis Gold (discussed next) and 2011Grand River69 NAFTA arbitration awards.

Glamis Gold Ltd. v. the United States of America

Some investor-State arbitrations have contended with the issue of whether a State’sregulatory measures purportedly aimed at protecting indigenous cultural heritageamount to an indirect expropriation.70 The Glamis Gold NAFTA arbitration71

involved a US$50 million claim brought in 2003 by a Canadian mining companyagainst the USA for actions taken by the State of California which were intended toprotect the environment and cultural heritage of local indigenous communities fromthe negative impacts of open-pit mining. When an environmental impact studyconcluded that no mining action should be allowed in this area, the Federal Depart-ment of the Interior rejected the Claimant’s mining project.72 In 2002, California

68Francioni F (2013) Plurality and interaction of legal orders in the enforcement of cultural heritagelaw. In: Francioni F, Gordley J (eds) Enforcing international cultural heritage law. Oxford Univer-sity Press, 54: “This award breaks new ground in introducing cultural heritage concerns aslegitimate aims that the host State may pursue in adopting regulation or taking measures thathave an impact on the economic interests of an investor and may constitute a prima facie violationof its obligations under international investment law”; Vadi V (2014) Cultural heritage in interna-tional investment law and arbitration. Cambridge University Press, 128: “Not only did the Tribunalpay due attention to cultural heritage matters, but it also stated that compliance with the obligationsflowing from the WHC [World Heritage Convention] justified the refusal of the project.” [Emphasisin original.]69Grand River Enterprises Six Nations Ltd Et al. v. United States of America, NAFTA Award (12Jan 2010) (Grand River): This case involved a claim by a Canadian indigenous community that theUS Federal compensation scheme on tobacco to redress the victims of smoking-related diseasesamounted to a breach of their investor rights under NAFTA. In rejecting the claim, the Tribunalreferred to relevant international standards on cultural heritage as potentially applicable law ininvestor-State arbitration, namely, the 2007 UN Declaration on the Rights of Indigenous Peoples.However, cultural claims need to be substantiated. The Tribunal stated that it required evidence ofwritten and unwritten laws of indigenous peoples for establishing an enterprise for the purposes ofNAFTA (“mere assertions of the existence of Seneca law and custom, just as mere assertions ofother forms of law are not enough”) [103]. The Tribunal noted that customary international lawevinces “the strong international policy and standards articulated in numerous written instrumentsand interpretative decisions that favour State action to promote [. . . the] rights and interests ofindigenous peoples” [186].70E.g., Grand River71Glamis Gold72Ibid. [152]

Protecting Cultural Heritage in International Investment Law: Tracing the. . . 19

adopted several measures which required the Claimant to backfill the open-pit minesfor environmental protection reasons. The Claimant complained that regulationsimplemented by California breached the NAFTA, specifically the prohibition onexpropriation of an investment (Article 1110 NAFTA) and FET standard (Article1105 NAFTA), and that they had been subjected to discrimination as the project wassubject to more onerous regulations than projects by other operators. In dismissingthe claim, the Tribunal ultimately found that the backfilling legislation did notsubstantially deprive the Claimant of the value of its investment. The 2009 awardconfirms, among other things, that arbitral tribunals may base their decisions on theassumption that cultural heritage protection may be relevant to the question of thelegality of the host State’s regulatory measures alleged to impact on the investors’economic interests.

The Claimant planned to mine for gold at a site located within the CaliforniaDesert Conservation Area. The Native American Quechan Indian Nation opposedthe mining project, arguing that the site was sacred, ancestral land, and thus heldspecial cultural interest for their tribe. They submitted that the area was used byprecontact Native Americans as a travel route and that, in present day, was known asthe “Trail of Dreams,” which was used to perform ceremonial practices.73 TheQuechan Indian Nation and NGO Friends of the Earth applied to submit nonpartyand amici curiae submissions, respectively.74 A strong focus of these submissionsfocused on whether the Claimant’s investment and the impugned regulatory mea-sures taken in the State in response were consistent with indigenous rights, whichthey argued were part of the wider applicable public international law to be consid-ered by the Tribunal. While the site was not listed on the UNESCO World HeritageList, the Quechan Indian Nation likened its cultural significance to that of Mecca orJerusalem for other cultural groups.75 The Conservation Area was supposed to begoverned by balancing the principles of multiple use, sustainable yield and themaintenance of environmental quality in assessing the competing interests of inves-tors with the other potential uses for the land, and the need to protect federalresources.76

The Glamis Gold award reflects the general principle that if the host Stateengaged in an investor-State dispute is a party to a relevant UNESCO Conventions,these will become relevant in the arbitral tribunal’s interpretation and application ofthe relevant IIA in determining whether a treaty breach has occurred. The fact that

73Ibid. [107]. Application for Leave to File a Non-Party Submission and Submission of theQuechan Indian Nation (19 Aug 2005); Non-Party Supplemental Submission of the QuechanIndian Nation (16 Oct 2006); Amicus curiae submissions of Friends of the Earth Canada andFriends of the Earth United States (30 Sept 2005)74Ibid. [286]75Ibid. [103–108]76Ibid. [46, 48]

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the USA is a party to the 1972 World Heritage Convention77 was relevant to theTribunal in considering the protection that the USA extended to indigenous culturalheritage, particularly to cultural heritage sites not listed on the World Heritage List,pursuant to Article 12 of the Convention.78 In this regard, the Tribunal observed thatthe Convention provides that a heritage site’s noninclusion on the list does notsignify its failure to possess “outstanding universal value.”

Even though the award is, in result, favorable to the Quechan tribe’s rights,indigenous rights and concerns played a limited role in the Tribunal’s decision.79

While the Tribunal was aware that its decision was “awaited by private and publicentities concerned with environmental regulation, the interests of indigenous peo-ples, and the tension sometimes seen between private rights in property and the needof the State to regulate the use of property,” it did not find it necessary “to decidemany of the most controversial issues raised in this proceeding” and instead confineditself to the issues presented.80 In so doing, one commentator notes that the Tribunalspent little time addressing the question of indigenous cultural heritage and theextent to which a State is called upon to respect “wider public international law”when regulating FDI.81

Bilcon v. Canada

Bilcon v. Canada82 is best known for the arbitral tribunal’s analysis on legitimateexpectations and allegations of misleading representations by the government but isalso a useful case through which to consider the challenges to cultural heritageconcerns of an environmental nature. While assessing the cultural consequences of aforeign investor’s project before it is implemented by way of an EnvironmentalImpact Assessment (EIA) “may prevent the risk of damage and ensure the reconcil-iation of private and public interests” in a sustainable manner, EIAs “have come to

77Convention concerning the Protection of the World Cultural and Natural Heritage (16 Nov 1972,entered into force 17 Dec 1975), 1037 UNTS 151, 11 ILM 1358 http://whc.unesco.org/en/conventiontext/. Accessed 16 Oct 2016 [WHC]78Glamis Gold [fn 194]; see also Vadi V (2014) Cultural heritage in international investment lawand arbitration. Cambridge University Press, 254.79Binder C (2015) Investment, development and indigenous peoples. In: Schill SW, Tams CJ,Hofman R (eds) International investment law and development – bridging the gap. Edward ElgarPublishing, 423, 432.80Glamis Gold [8]81Binder C, Hofbauer JA (2016) Case study: Glamis Gold Ltd. (Claimant) v. United States ofAmerica (Respondent), NAFTA/UNCITRAL Award, 8 June 2009. (July 2016), annexed to the ILACommittee Report on the Implementation of Indigenous Cultural Rights (South Africa, 2016), 6https://ssrn.com/abstract=2810078. Accessed 16 Oct 201682William Ralph Clayton, William Richard Clayton, Douglas Clayton, Daniel Clayton and Bilcon ofDelaware, Inc. v. Government of Canada, Award On Jurisdiction and Liability, 17 March 2015

Protecting Cultural Heritage in International Investment Law: Tracing the. . . 21

the forefront of legal debate in investment disputes.”83 In Bilcon v. Canada, theClaimants (the Clayton family and their US Corporation, Bilcon) proposed to minebasalt in Nova Scotia, Canada, and then ship it by tanker from the Bay of Fundy toNew Jersey from a marine terminal they proposed to build. The province of NovaScotia conducted an EIA which recommended the rejection of the project due tosignificant adverse effects on the core values of the surrounding communities.84 TheClaimants objected to the manner in which the EIA was concluded, alleging that itwas unusually discretionary, politically motivated, and delayed and thus amountedto breaches of the national treatment standard (Article 1102), MFN clause (Article1103), and FET (Article 1105). They further alleged that the EIA’s reliance on “corecommunity values” was a “flagrant department from the rule of law.”85 In itsdefense, Canada claimed that the project was located in an extremely productiveecosystem at Digby Neck, Nova Scotia, which is part of a UNESCO-protectedbiosphere reserve.86 For Canada’s part, it argued that the regulatory measurescomplied with the EIA, and thus did not breach NAFTA, but that, in any event, itwas not the role of the Tribunal “to second-guess these heavily based and scientif-ically grounded decisions.”87

In finding, in a 2:1 majority, with a prominent dissent, that Canada’s conduct wasin breach of NAFTA’s minimum standard of FET standard, the arbitral tribunal madereference to several key facts which supported its conclusion that Canada hadmisleadingly induced the Claimant into making the investment, e.g., (i) the factthat Nova Scotia’s official public policy was to encourage investment in mining; (ii)the fact that Nova Scotia’s technical officials met with the investors’ representativesand encouraged them to invest and establish regional marine quarries; (iii) the factthat the Nova Scotia’s Natural Resources Minister confirmed his support for theWhite Point quarry; and (iv) the fact that Canada’s officials led the investors tobelieve that any potential environmental law concerns could be addressed through afair process whereby they would be given the opportunity to find ways to mitigateany potential environmental impact by adjusting their project design.

Santa Elena v. Costa Rica and SPP v. Egypt

The 2000 Santa Elena and 1992 SPP arbitral awards embody two differentapproaches to the valuation of property for the purposes of compensating forexpropriation. Santa Elena focuses on the protection of property over culture, and

83Vadi VS (2012) Culture, development and international law: the linkage between investment rulesand the protection of cultural heritage. In: Borelli S, Lenzerini F (eds) Cultural heritage, culturalrights, cultural diversity. Martinus Nijhoff Publishers, Chapter 19, 42984Bilcon v. Canada, Notice of Arbitration (30 Jan 2009) [21]85Ibid. Canada’s Counter-Memorial [378]86Ibid. Canada’s Statement of Defense (4 May 2009)87Ibid. Canada’s Counter-Memorial [17]

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SPP takes into account cultural considerations. In these two cases, the parties agreedthat an expropriation had taken place, but they disagreed on the amount of compen-sation owed. While both cases involved cultural and natural heritage protected by the2005 UNESCO Convention (albeit in SPP, this designation was given after theexpropriation), the relevance accorded by the Tribunal to the Convention on thequestion of compensation differed, with one tribunal giving it weight and the otherdisregarding it completely.

The SPP arbitration (sometimes referred to as the Pyramids case) involved thedevelopment of tourist complexes at the pyramids in Giza, Egypt. During construc-tion, precious cultural artifacts were uncovered, and thus the project became a threatto yet undiscovered antiquities.88 Consequently, Egypt enacted a series of measures,World Heritage List status was requested for the area (which was declared a “publicproperty/antiquity”), and the previous government approvals for the project werecancelled.89 The Claimant did not challenge Egypt’s right to cancel the project butrather claimed that the measure amounted to an expropriation of its investment underboth Egyptian and international law.90

The Tribunal took into account the 2005 UNESCO Convention in calculatingcompensation. Interestingly, the Tribunal concluded that no compensation was duefor the period after the entry of the pyramids’ site to the World Heritage List, becausefrom that moment forward, the Claimant’s investment would have conflicted withthe Convention and thus violated international law.91 In considering the timesequence of the conflicting obligations, the Tribunal held that “any profits thatmight have resulted from such activities are consequently non-compensable.”92

One commentator points out that the SPP award thus “illustrates the fact that eventhough an expropriation to be compensated may be identified by the tribunal, thecultural interests in hand can be taken into account at the stage of the assessment ofthe compensation to be paid.”93 In other words, the compensation for the allegedeconomic loss suffered as a result of the expropriation should be reduced (albeitsubjectively) because of the public purpose of the State’s impugned measure.Another commentator asserts that this case also stands for the proposition “thatStates may lawfully regulate and/or expropriate private property to protect culturalheritage,” particularly where “the cultural heritage in question has outstanding anduniversal value for mankind as a whole.”94 That said, Pierre-Marie Dupuy and JorgeE. Viñuales suggest that investment arbitral tribunals might not yet be ready to treatinternational environmental law (and one could argue, cultural heritage law as well)

88Ibid. [62]89Ibid. [63–65, 82–83, 153]90Ibid. [158]91Ibid. [191]92Ibid.93Radi, supra note 1894Vadi V (2014) Cultural heritage in international investment law and arbitration. CambridgeUniversity Press, 123

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“on the same footing with investment treaties.”95 Employing a rather interestingmetaphor, these authors further observe that, “international environmental lawwould at best be an ‘immigrant’ in the land of international investment law.”96

Further, the SPP Tribunal’s analysis shows the importance arbitral tribunals willattach to examining whether the government’s measure was genuinely motivated bythe desire to comply with environmental protections. There are commentators thatcontend that the nuanced approach adopted by the SPP Tribunal has been furtherdeveloped in recent cases.97

The Santa Elena arbitration is slightly different than SPP but also represents aninstance where an arbitral tribunal was called upon to consider the obligation andmeasure of compensation for a direct expropriation motivated by an internationalnon-investment obligation.98 However, unlike the tribunal’s award in SPP, whichconsidered the relevant non-investment treaties, the tribunal here refused to examinethe evidence concerning the Respondent’s obligations under international non-investment law.99 This case involved an expropriation by Costa Rica of an Americaninvestor’s land so as to secure and enlarge the Guanacaste Conservation Area (abeautiful, tropical dry forest habit, with unique flora and fauna). At the time of theexpropriation, the area was listed as a World Heritage site, due to its biological andgeological significance. The investor rejected Costa Rica’s offer of compensation astoo low and brought its claim before the ICSID. The Tribunal ordered that CostaRica pay to the Claimant USD 16 million by way of compensation for the expro-priation, based on the property’s fair market value.100

In reaching its conclusion, the Tribunal stated that the fact that the property wasexpropriated for the legitimate public purpose of protecting the environment did “notaffect either the nature of the measure of the compensation to be paid for the taking. . . .the international source of the obligation to protect the environment makes nodifference.”101 Prompt, adequate, and effective compensation was still owed. TheTribunal held that the “expropriatory environmental measures – no matter howlaudable and beneficial to society as a whole . . . are similar to any other expropriatorymeasure . . . and where a property is expropriated even for environmental purposes,whether domestic or international, the state’s obligation to pay compensation

95Dupuy P-M, Viñuales JE (2015) International environmental law. Cambridge University Press,38896Ibid.97Vadi V (2014) Cultural heritage in international investment law and arbitration. CambridgeUniversity Press, 123; See also Hirsch M (2008) Interactions between investment and non-invest-ment obligations in international investment law. In: Muchlinski P, Ortino F, Schreuer C (eds) TheOxford handbook of international investment law. Oxford University Press.98Hirsch M (2008) Interactions between investment and non-investment obligations in internationalinvestment law. In: Muchlinski P, Ortino F, Schreuer C (eds) The Oxford handbook of internationalinvestment law. Oxford University Press, 16899Ibid. 169100Santa Elena [111]101Ibid. [71]

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remains.”102 Some commentators have criticized this award as unduly “pro-investor”for its apparent support of the “sole effect doctrine”. Applying the sole effect doctrine,the arbitral tribunal examines the effects of the impugned measure on the economicvalue of investment in order to determine whether an expropriation has taken place.103

The Tribunal further noted that it did not feel necessary to analyze the evidencesubmitted by Costa Rica regarding what it referred to as its international legalobligation to preserve the unique ecological site.104 Recalling that the Santa Elenacase was adjudicated from 1995 to 2000, it might be that, if decided in present day,the Tribunal’s analysis would have been more comprehensive with respect to CostaRica’s right to regulate.

Conclusion

The interplay between international cultural heritage considerations and interna-tional investment law has increasingly come to the fore in investor-State arbitration.Particularly where the cultural heritage-related non-investment obligation is exter-nally imposed on a respondent State, arbitral tribunals in investor-State cases tend tobe more likely to consider the nonvoluntary obligation in determining whether theState has breached the treaty or regarding the appropriate measure of compensa-tion.105 Some arbitral tribunals have shown significant sensitivity to the occasionalcultural heritage issues which arise in disputes of an otherwise international eco-nomic nature. While this private judiciary might be “far from what would be requiredof a body to which cultural heritage authority could be entrusted,” arbitral tribunalssimply cannot avoid dealing with cultural heritage in some instances.106 It has beennoted that a country which values the protection of its own cultural heritage againstexports and degradation might be more receptive to similar restraints imposed byother States.107 In this way, the emerging trend in recent FTAs with regard to theinclusion of cultural considerations is a step to the right direction.

102Ibid. [72]103Radi, supra note 18; Vadi V (2014) Cultural heritage in international investment law andarbitration. Cambridge University Press, 120; Mostafa B (2008) The sole effects doctrine, policepowers and indirect expropriation under international law. Aust Int Law J 15:267104Ibid. fn 32105Hirsch M (2008) Interactions between investment and non-investment obligations in interna-tional investment law. In: Muchlinski P, Ortino F, Schreuer C (eds) The Oxford handbook ofinternational investment law. Oxford University Press, 175106Vadi V (2015) Crossed destinies: international economic courts and the protection of culturalheritage. J Int Econ Law 18:51, 52107Gagne G (2016) The trade and culture debate: evidence from US trade agreements. LexingtonBooks, 109

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