INTERNATIONAL ECONOMIC LAW: WATER FOR MONEY’S SAKE?

The document analyzes the intersection of international economic law and water management, arguing that trade and investment agreements often prioritize foreign corporate rights over public welfare and environmental sustainability. It highlights the 'tripwire' risk where the commercialization of water may compel states to export freshwater and discusses how investor-state dispute settlement (ISDS) allows corporations to challenge domestic regulations that affect profitability. The author emphasizes the need for developing countries to establish robust domestic regulatory frameworks before privatizing water services to avoid 'locking in' weak governance through international legal obligations.

• There is significant legal uncertainty regarding whether trade law can compel states to export freshwater. While a 1993 NAFTA statement suggests water in its natural state is not a 'good', it acknowledges that water that has "entered into commerce and become a good or product" is covered, creating a risk that a single export permit could trigger non-discriminatory access for other foreign buyers.
• The General Agreement on Trade in Services (GATS) uses a 'bottom up' approach where only listed sectors are liberalized. While no country has yet listed water sectors in GATS schedules, the Doha Round negotiations suggest that "no sectors are to be a priori excluded from negotiations,", potentially exposing all public utility sectors to liberalization pressures.
• International investment agreements (IIAs) often include 'pre-establishment rights' that allow foreign investors to establish businesses in covered sectors. These rights can exceed domestic rights if they are not subject to national treatment or if only foreign firms possess the necessary resources for large-scale investment.
• The investor-state dispute settlement (ISDS) process allows private foreign investors to challenge government acts in international arbitration, bypassing domestic courts. These tribunals often prioritize the "legitimate or reasonable expectations" of the investor's economic profit over societal goals like human health or environmental protection.
• In the water services sector, ISDS has been used to challenge government measures that alter operating conditions or profitability, even during national crises. At least eight water-related arbitrations are known, including seven against Argentina and one against Bolivia regarding the Cochabamba privatization.
• Foreign investors in non-water sectors (such as agriculture or chemicals) may acquire international law rights to water quantities based on 'legitimate expectations'. This can allow foreign investors to protect their water allocations through mechanisms unavailable to domestic users, such as subsistence farmers or indigenous peoples.
• Environmental regulations, such as mandatory CO2 reductions or new pollution standards, may be challenged under IIAs as 'indirect expropriation' or breaches of national treatment, potentially forcing governments to pay investors to stop polluting.
• A critical failure in 'sequencing' occurs when international financial institutions promote water privatization before developing countries have established adequate domestic regulatory frameworks. This risks 'locking in' weak governance, as subsequent attempts to improve standards may be challenged as breaches of investment agreements.

APA

Mann, H. (2004). INTERNATIONAL ECONOMIC LAW: WATER FOR MONEY’S SAKE? International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/investment_water_economic_law.pdf

Chicago

Mann, Howard. INTERNATIONAL ECONOMIC LAW: WATER FOR MONEY’S SAKE? International Institute for Sustainable Development, 2004. https://www.iisd.org/system/files/publications/investment_water_economic_law.pdf.

Wikipedia

{{cite report |last1=Mann |first1=Howard |title=INTERNATIONAL ECONOMIC LAW: WATER FOR MONEY’S SAKE? |publisher=International Institute for Sustainable Development |date=September 2004 |url=https://www.iisd.org/system/files/publications/investment_water_economic_law.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{mann2004international, author = {Mann, Howard}, title = {{INTERNATIONAL ECONOMIC LAW: WATER FOR MONEY’S SAKE?}}, institution = {International Institute for Sustainable Development}, year = {2004}, month = sep, url = {https://www.iisd.org/system/files/publications/investment_water_economic_law.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }