International Economic Law Might Improve Water Governance in Peru

Book chapter by Christian Häberli in El Derecho Humano al Agua, el Derecho de las Inversiones y el Derecho Administrativ

ABSTRACT: This book looks sheds new light on the well-known and often debated fragmentation between Human Rights and Water and Investment Law. This chapter asks whether it has been exacerbated by the protection offered to foreign investors under Peru’s recently signed Regional Trade Agreements (RTA) and under WTO rules, two sets of rights and obligations enforceable under their specific dispute settlement procedures. Does this mean that foreign operators can negotiate water rights at the expense of local users with a government hungry for economic growth, foreign investment (FDI), and foreign exchange?

We try to show that economic treaties could actually contribute to improving water governance in Peru. Trade-distorting social and environmental dumping can now be addressed under the new, comprehensive treaties. This means that, regardless of the relative economic impact of different water uses, Peru can no longer trade away its international obligations by condoning “water grab” investments and violations of fundamental human rights and environmental norms. The only caveat is the unilateral smell even of well-meant standards “made in Washington”. At the multilateral level WTO does not prevent self-discrimination (e.g. through incentives for foreigners only), but it ensures non-discriminatory treatment of all foreign operators. Hence traders and investors can still trust arbitrators to safeguard their legitimate interests. But neither RTAs or WTO will systematically protect investment treaties and contracts with “regulatory freeze” clauses in cases of serious violations of peremptory social and environmental law (so-called ius cogens), including water grabbing. And developing countries accepting higher standards in bilateral or mega-regional treaties can count on their developed trading partners to enforce equivalent standards in countries with competing producers.