The exemption provisions deal with, among other things, morality , environmental considerations and national security. In the childhood of the Norwegian oil industry, Norway demanded that the oil companies use Norwegian suppliers. Undoubtedly, it was a great help for the emergence of today’s thriving Norwegian oil industry and new jobs in Norway.
4: Political stability and security of investment
Most companies will be wary of investing heavily in countries where there is a high risk that war or conflict may complicate production. Here, too, there are significant differences between different sectors. Oil production requires extensive investments and involves great risk. However, extracting diamonds from rivers and lakes or other minerals that are readily available requires less.
According to BEHEALTHYBYTOMORROW, the World Bank has its own lending business, MIGA ( Multilateral Investment Guarantee Agency ). This insures investments against losses due to violent currency fluctuations (weak currencies can in a short time lose tens of percent against the dollar), war, terrorist acts, political and social unrest, as well as default on government debt obligations.
In addition, there are a number of opportunities to sue a host country if a company believes that a state intervention represents an expropriation – a state takeover. Among other things, environmental regulations have been found to constitute an expropriation. Companies have claimed that environmental regulation has reduced their future profits.
In the case of investment disputes (conflict, disagreement, fig. 3), separate tribunals can be established to resolve a dispute. Most often, a body under the World Bank is used to establish such tribunals, but also a body under UNCTAD (UN Committee on Trade and Development) has adopted rules for how tribunals are to be established – and how they are to operate.
Such tribunals for dispute resolution are based on so-called investment agreements between two or more states. There are over 3100 such investment agreements, and most were entered into in the 1990s. It is not necessary that the dispute has been before national courts first. It is, so to speak, only companies that sue states . Nevertheless, it is the states that have prevailed in most disputes that have so far been settled.
Many recent investment agreements allow for regulation to protect public welfare and health . Other investment agreements provide companies with full protection and security for their investments, which is ensured through so-called ” stabilization clauses “. This means that new laws and regulations will not apply to the companies. These investment agreements go a long way in providing concessions and relief to the companies – they thus avoid obligations since the states go further than far to attract new establishments. The number of investment disputes is far greater in the last decade than in the previous decade (Fig. 3).
5: Poor working and environmental conditions, low wage level
For some investments and especially in some industries characterized by relatively labor-intensive (use of many workers) production, low standards (ie poor working conditions), weak law enforcement and low wage levels play a role in the decision to invest. Thus, investors / companies save costs and can be stronger in the competition in the market – in sum: increase profits.
Among other things, the production of textiles and shoes can be quickly moved from one country to another. This can especially happen if the wage level in a host country has increased sharply in a short time and thus reduced profits a lot. When states compete to attract investment from outside, what is often referred to as a ” race to the bottom ” arises . States undercut each other.
It is possible to point out three main explanations for the fact that investments in labor-intensive industry have different consequences for human rights in different countries: Individual, institutional and structural:
Individual explanations say that different attitudes at management level result in different corporate behavior. For example, companies headquartered in the West must take into account a weakened reputation and a possible consumer boycott if a company is found to exploit its employees. This threat is not as real for companies headquartered in Asia, but this does not mean that Indians and Chinese are not concerned about human rights.
The main explanation for weaker human rights standards is often found in institutional conditions , such as weak trade unions and weak law enforcement, and in structural conditions , such as the fact that there are many competing for work. Thus, there will always be someone who will accept worse conditions.