In November 2023, an article published in the Business and Human Rights Journal explores how human rights due diligence (HRDD) can be used by businesses to identify and address the potential adverse human rights impacts of investor-state dispute settlements (ISDS). It looks at how businesses can contribute to three examples of potential human rights impacts of ISDS: the chilling effect on human rights regulation, crippling mega-awards, and direct impacts on third-party rights.

The article begins by analysing the concept of ‘adverse human rights impacts’ under the UNGPs, including the extension of the concept of ‘impacts’ to actions that are legal if they remove or reduce the enjoyment of rights.

The article goes on to explore how ISDS can adversely impact human rights. On the ‘regulatory chilling’ effect of ISDS, the article notes that states can refrain from taking action that could protect human rights that may trigger ISDS proceedings. On crippling mega awards (large compensation awards given by investment tribunals), the article highlights the high costs of ISDS means states may prioritise investment treaty obligations over human rights protection. The article also flags the high costs of defence of ISDS claims. Further, the article discusses the direct impacts of ISDS awards on the human rights, including on the provision of remedy. The article goes on to explore whether these issues are being addressed by reforms to investment law, and suggests significant challenges remain.

The article then explores how HRDD can be used by businesses to identify, prevent, and mitigate these issues. The article suggests businesses engaging in ISDS may be considered to 'contribute' to adverse human rights impacts. It argues HRDD and human rights impact assessments can be used to mitigate these adverse human rights impacts.