Policy Brief 32, October 2016

Corporations, Investment Decisions and Human Rights Regulatory Frameworks: Reflections on the discussion pertaining to FDI flows and the impact of a potential International Legally Binding Instrument on Business and Human Rights

This brief explores the question pertaining to the impact of States’ participation in designing an Instrument on transnational corporations and other business enterprises in the area of human rights  on attracting foreign direct investment, which has been a persistent issue of discussion since the mandate of the inter-governmental group on the mentioned Instrument was established.

It is important to contextualize this question within an understanding of the role of investment policy as one of the development and economic policy tools available to States, including the role of both domestic and foreign investments, and within an understanding of the underlying determinants of foreign direct investment. For those purposes, this brief reviews empirical studies on the determinants of FDI, lessons learned from the experience of reforming investment treaties and reaction of investors, and evidence from research pertaining to attitudes of transnational corporations towards jurisdictions that are committed to actively adopting and promoting human rights.

Overall, the review presented by this brief describes a world where traditional perceptions of corporations, their investment decisions and its interface with human rights frameworks have significantly evolved and changed. Corporations are generally not averse to responsibilities in the field of human rights. Moreover, corporate decisions in regard to allocating investments are not pegged to actions that States take regarding regulatory frameworks, such as investment agreements or human rights regulations.

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