UNESCO IHP-HELP Centre for Water Law, Policy & Science Resilient and flexible water regulation versus predictable rules for international investment protection Ana Maria Daza VargasJuly 7, 2011 IUCN Academy of Environmental Law 2001 Colloquium South Africa 3-7uly 2011

IHP-HELP Centre for Water Law, Policy and Science | under the auspices of UNESCO Slide | 2 Interaction between international investment law and water regulation Do they interact? Do they share values? Are there common or conflicting interests? Mutually cautious: Regulatory chill Political/regulatory risk Two divergent obligations: water management may affect investor’s property right investment protection may hinder water management

IHP-HELP Centre for Water Law, Policy and Science | under the auspices of UNESCO Slide | 3 Overview of international investment law  Source of obligations: International Investment Agreements (IIAs), Arbitral Clauses, Investment Laws  Standards of treatment:  National treatment  Most-favoured nation treatment  Full protection and security  Fair and equitable treatment  No-expropriation without compensation Direct or indirect expropriation

IHP-HELP Centre for Water Law, Policy and Science | under the auspices of UNESCO Slide | 4 Dispute settlement mechanism Washington Convention on the Settlement of Investment Disputes -ICSID (1965) Investor – State arbitration and conciliation of investment disputes (Procedures) Jurisdiction of the Centre (Article 25) Legal dispute arising directly out of an ‘investment’ Applicable law (Article 42) -Law as agreed by the parties -Law of the host-state -International law Award(Article 53) Binding effect

IHP-HELP Centre for Water Law, Policy and Science | under the auspices of UNESCO Slide | 5 Factors shaping property rights in water NatureOwnershipright to use management Challenges

IHP-HELP Centre for Water Law, Policy and Science | under the auspices of UNESCO Slide | 6 Investor’s property rights and their protection ‘regulatory frameworks’ Adaptable v Predictable Municipal law: Defines acquisition and scope of property rights. International law: Provides protection to property rights (once acquired) Standards of protection provided for in IIAs Conditions provided for in permits and licenses

IHP-HELP Centre for Water Law, Policy and Science | under the auspices of UNESCO Slide | 7 Bayview Irrigation District et al v Mexico, Award (ICSID Additional Facility) The Tribunal does not accept that the Claimants own water in Mexico, in the sense of the ownership of personal property rights in the physical waters of rivers flowing in Mexican territory (para. 114) There is an evident and inescapable conceptual difficulty in positing the existence of property rights in water up-river in Mexico in a context where the entitlement of each Claimant depends upon the apportionment of a certain volume of water (para. 115) One owns the water in a bottle of mineral water, as one owns a can of paint. If another person takes it without permission, that is theft of one's property. But the holder of a right granted by the State of Texas to take a certain amount of water from the Rio Bravo / Rio Grande does not 'own', does not 'possess property rights in', a particular volume of water … (para. 116)

IHP-HELP Centre for Water Law, Policy and Science | under the auspices of UNESCO Slide | 8 Legal Frameworks Water resources: securely unpredictable Access Variability Resilience Property rights in water: predictably insecure Prioritization Reallocation Quality standards

IHP-HELP Centre for Water Law, Policy and Science | under the auspices of UNESCO Slide | 9 Balancing adaptable and rigid legal frameworks Adaptability to uncertainty and variability Predictability of water property rights Economic impact & duration Transfer of welfare Non – discrimination Legitimate expectations TransparencyDiscretionProportionality Water legal frameworks Investment legal frameworks

Thank you