AND PROTECTION AGAINST UNLAWFUL EXPROPRIATION -
1. Each Contracting Party shall accord to investments in its Area of investors of the other Contracting Party fair and equitable treatment
No indication of the meaning of FET or when treatment is unfair or inequitable
Combination with FPS
1. The Principle of Fair and Equitable Treatment (FET)
1.1 The concept and scope of FET
• What are FET formulations?
• Qualified FET clause
(1) With reference to international law
• E.g. Croatia – Oman BIT 2004, Art 3.2
Investments or returns of investors of either Contracting Party in the territory of the other Contracting Party shall be accorded fair and equitable treatment in accordance with international law and provisions of this Agreement.
• E.g. Bahrain-United States BIT 1999, Art 2.3.a
Each Party shall at all times accord to covered investments fair and equitable treatment and full protection and security, and shall in no case accord treatment less favorable than that
1. The Principle of Fair and Equitable Treatment (FET)
1.1 The concept and scope of FET
• What are FET formulations?
• Qualified FET clause
(2) With reference to minimum standard of treatment in CIL
• E.g. CPTPP Chapter 9, Art 9.6
Article 9.6: Minimum Standard of Treatment
1. Each Party shall accord to covered investments treatment in accordance with applicable customary international law principles, including fair and equitable treatment and full protection and security.
2. For greater certainty, paragraph 1 prescribes the customary international law minimum standard of treatment of aliens as the standard of treatment to be afforded to covered investments. The concepts of “fair and equitable treatment” and “full protection and security” do not require treatment in addition to or beyond that which is required by that standard, and do not create
1. The Principle of Fair and Equitable Treatment (FET)
1.1 The concept and scope of FET
• What are FET formulations?
• Qualified FET clause
(3) With reference to a list of state conducts
• E.g. EVIPA Chapter 2, Art 2.5
1. Each Party shall accord fair and equitable treatment and full protection and security to investors of the other Party and covered investments in accordance with paragraphs 2 to 7 and Annex 3 (Understanding on the Treatment of Investments).
2. A Party breaches the obligation of fair and equitable treatment referred to in paragraph 1 where a measure or series of measures constitutes:
(a) a denial of justice in criminal, civil or administrative proceedings;
(b) a fundamental breach of due process in judicial and administrative proceedings;
(c) manifest arbitrariness;
(d) targeted discrimination on manifestly wrongful grounds, such as gender, race or religious belief;
1. The Principle of Fair and Equitable Treatment (FET)
1.1 The concept and scope of FET
• The relationship between FET and customary international law
• The question of whether FET reflects minimum standard of treatment contained in customary international law OR offers an autonomous standard?
• Approach 1: Customary international law
• E.g. NAFTA Art 1105: Minimum Standard of Treatment: “1. Each Party shall accord to investments of investors of another Party treatment in accordance with international law, including fair and equitable treatment and full protection and security.”
The heading of the clause: “MST”
The reference to international law: “including FET”
FET is part of customary international law, specifically its rules on MST
1. The Principle of Fair and Equitable Treatment (FET)
1.1 The concept and scope of FET
• The relationship between FET and customary international law
• Approach 1: Customary international law
• NAFTA Free Trade Commission (FTC) issued a note of interpretation (2001 binding interpretation): The concept of FET does not require treatment in addition to or beyond that which is required by the customary international law minimum standard of treatment of aliens in Article 1105(1) of NAFTA
Equivalent to MST under customary international law (and not more)
1. The Principle of Fair and Equitable Treatment (FET)
1.1 The concept and scope of FET
• The relationship between FET and customary international law
• Approach 1: Customary international law
• The Neer v. Mexico (1926) test: Mexico/United States Claims Commissioners held that:
“the treatment of an alien, in order to constitute an international delinquency, should amount to an outrage, to bad faith, to wilful neglect of duty, or to an insufficiency of governmental action so far short of international standards that every reasonable and impartial man would readily recognize its insufficiency.” (para. 4)
• A very high threshold for a violation of international law A very weak level of protection of aliens under customary international law (i.e. extreme cases of mistreatment)
1. The Principle of Fair and Equitable Treatment (FET)
1.1 The concept and scope of FET
• The relationship between FET and customary international law
• Approach 2: Autonomous standard
• In the absence of a clear indication to the contrary, the FET standard contained in IIAs is an autonomous concept
• Pope Talbot v. Canada: “compliance with the fairness elements must be ascertained free of any threshold that might be applicable to the evaluation of measures under the minimum standard of international law” (Award of 10 Apr 2001, para. 111)
• Tribunal in Mondev v. US rejected the standard in the Neer case: “the content of the minimum standard today cannot be limited to the content of customary international law as recognised in arbitral decisions in 1920s.” (Award of 11 Oct 2002, para. 123)
• The trend towards increasing investor protection against state conduct:
Neer case (1926) ICJ Elsi case (1989) Pope Talbot case (2001) Mondev case
1. The Principle of Fair and Equitable Treatment (FET)
1.1 The concept and scope of FET
• The relationship between FET and customary international law
• The question of whether FET reflects minimum standard of treatment contained in customary international law OR offers an autonomous standard?
Does it matter if FET does or does not refer to the MST? The content of MST is also “as little defined as the BIT’s FET standard” (El Paso v. Argentina)
1. The Principle of Fair and Equitable Treatment (FET)
1.2 The application of FET
• Normative content of FET in international arbitration
• In S.D. Myers v. Canada: “…when it is shown that an investor has been treated in such an unjust and arbitrary manner that the treatment rises to the level that is unacceptable from the international perspective” (Award of 13 Nov 2000, para. 263)
paralleling the FET standard with the international minimum standard.
• In Metalclad v. Mexico: a certain degree of transparency is included in the concept of FET in the NAFTA. (Award of 30 Aug 2000, para. 70, 76)
1. The Principle of Fair and Equitable Treatment (FET)
1.2 The application of FET
• Normative content of FET in international arbitration
• Saluka Investments v. Czech Republic
The “fair and equitable treatment” standard in Article 3.1 of the Treaty is an autonomous Treaty standard and must be interpreted, in light of the object and purpose of the Treaty, so as to avoid conduct of the Czech Republic that clearly provides disincentives to foreign investors. The Czech Republic, without undermining its legitimate right to take measures for the protection of the public interest, has therefore assumed an obligation to treat a foreign investor’s investment in a way that does not frustrate the investor’s underlying legitimate and reasonable expectations. A foreign investor whose interests are protected under the Treaty is entitled to expect that the Czech Republic will not act in a way that is manifestly inconsistent, non-transparent, unreasonable (i.e. unrelated to some rational policy), or discriminatory (i.e. based on unjustifiable distinctions). (Award of 17 Mar 2006, para. 309)
1. The Principle of Fair and Equitable Treatment (FET)
1.2 The application of FET
• Normative content of FET in international arbitration
• Invesmart v. Czech Republic
The content of the FET obligation has been variously and not consistently described as including the different strands of protection of an investor’s legitimate expectations, protection against manifestly arbitrary or grossly unfair treatment, requiring consistency of governmental decision-making, transparency, due process and adequate notice, protection against discrimination that does not amount to a breach of the national treatment standard and protection against acts of bad faith. (Award of 26 Jun 2009, para. 200)
1. The Principle of Fair and Equitable Treatment (FET)
1.2 The application of FET
• Normative content of FET in IIAs
• US and Canada’s IIAs: Introducing language to clarify the scope of FET (as linked with customary international law)
• EU’s IIAs (e.g. CETA, EVIPA, EU-Singapore IPA): Introducing a list of behavior that may violate FET