A/70/301 representatives from national Governments negotiate, draft and agree on investment agreements, which are often conducted in strict privacy. The Special Rapporteur is not aware of representatives of indigenous peoples and/or officials from recognized indigenous self-governing structures being invited to participate in the formal negotiation and drafting of investment and free trade agreements that will have direct impacts on them. Given that such agreements are formally binding on all levels of government and that many investment projects have significant impact on indigenous peoples, that situation is, in and of itself, a violation of the rights to free, informed and prior consent, participation, consultation and self -determination. 32. The free, prior and informed consent of indigenous people s has not been obtained in many projects funded by foreign investors within the framework of international investment agreements. Good faith consultations with indigenous peoples should be completed when undertaking all investment projects that directly affect them, as required by articles 19 and 32, paragraph 2, of the United Nations Declaration on the Rights of Indigenous Peoples and article 6, paragraph 2, of ILO Convention No. 169. The application of those articles to investment and free trade agreements provide opportunities to integrate the needs and perspectives of indigenous peoples into the provisions of the agreements, and prevent future abuses of their human rights. When such opportunities are lost, the chances for conflicts, discontinuation of projects and loss of profits increase. 33. The violations are exacerbated by the fact that there is the potential risk for financial liability for damages awarded against the State party to be passed on to indigenous governments. For example, some national Governments, including Canada and Mexico, have sought to reclaim the costs of damages awarded to corporations through withholding funds from local governments. In Mexico, a municipal government refused to give a permit for a toxic waste dump and the state government declared the area a special ecological zone. The Government of Mexico was subsequently sued by a United States investor under the North American Free Trade Agreement and required to pay $16 million. 13 The Government of Mexico attempted to withhold federal funds from the state-level authorities who had withheld the permit in an effort to force them to accept financial liability for the investor-State dispute settlement award. The state-level authorities challenged that and the Supreme Court of Mexico found that the national Government could not claim the damages back from the state-level authorities. While that case demonstrates that States cannot automatically pass the financial liability of investor State dispute settlement awards to local authorities, there are other cases in which such agencies have had to pay damages relating to investment and free trade agreements. While the Special Rapporteur is not aware of any States passing on financial liability to autonomous indigenous governments, it is a potential issue of serious concern in relation to the right to free, informed and prior consent. 34. Violations of the right to free, informed and prior consent also have the potential to contribute to further abuses of the rights of indigenous peoples in the context of international investment and free trade agreements. Application of the principle of free, informed and prior consent to investment and free trade agreements provides an opportunity to integrate the needs and perspectives of indigenous peoples into the provisions of such agreements and investments and __________________ 13 12/24 Public Citizen, “NAFTA chapter 11 investor-State cases: lessons for the Central America Free Trade Agreement”, Public Citizen’s Global Trade Watch, No. E9014 (February 2005). 15-12526