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Author

Dr Ioana Knoll-Tudor

Local Partner - Jeantet

Editor

Ms Anastasiya Ugale

International Lawyer - Solo International Law Practice

Fair and Equitable Treatment

I. Origin of the FET standard: IIAs

1.

The fair and equitable treatment (FET) standard is included in most bilateral investment treaties (BITs) and regional investment agreements as well as in multilateral agreements.

2.

FET clauses are not uniformly drafted, and the drafting of the clause has an impact on its meaning and interpretation.1 The most frequent drafting models are the following:

i.

the standard alone,2

ii.

the standard together with the Full Protection and Security reference,3

iii.

the standard together with the National Treatment and the Most Favoured Nation treatment.4

3.

A new generation of Model BITs contains a new type of FET clauses including an exhaustive list of measures which are considered to breach the FET5.

II. FET, a customary international law norm

4.

The FET has long been assimilated to the International Minimum Standard,6 particularly in the CAFTA7 and the NAFTA context.8 A number of tribunals, however, disagree, thus effectively creating two approaches to the issue of assimilation between FET and the minimum standard of treatment under customary international law.9

5.

The increasing and uniform development of the FET standard as an autonomous standard, contained in a stand-alone clause, brings the question of whether it should be considered itself as a rule of customary international law10. The suggestion has, however, been rejected in the NAFTA context.11 Moreover, several tribunals ruled that even if FET is an autonomous standard, its content is similar or identical to that of the minimum standard of treatment under customary international law.12

III. Measures considered to be in breach of the FET standard by case-law

6.

There is no definition of the FET standard,13 but arbitral tribunals identified a number of recurrent situations in which the conduct of the State amounts to a violation of the FET standard. Among them:

i.

Lack of respect for the obligation of vigilance and protection;14 (see also Full Protection and Security)

ii.

Denial of Due Process or Denial of Justice.15 Notably, several tribunals cited lack of judicial or procedural propriety as evidence of fair and equitable treatment violation;16

iii.

Non-observance or frustration of the investors’ Legitimate Expectations;17

iv.

Coercion and harassment by the organs of the host State;18

v.

Failure to offer a stable and predictable legal framework;19

vi.

Unjust Enrichment;20

vii.

Evidence of Bad Faith.21 Several tribunals, however, noted that bad faith is not required to prove a violation of FET;22

viii.

Absence of Transparency;23

ix.

Arbitrary and Discriminatory Treatment.24

See also Proportionality.

IV. Relations with other IIAs provisions

7.

The coexistence of the FET developed into a stand-alone standard with other standards of treatment or principles in a clause may have an impact on its interpretation. It is often used in combination with the following standards:

i.

Full Protection and Security;25

ii.

Non-Discrimination;26

iii.

Most Favoured Nation;27

iv.

Pacta sunt servanda;28

v.

Standard of non-impairment.29

Bibliography

Articles

Rodriguez, Patrick J., International Contractualism Revisited: Non-Pecuniary Remedies under the Fair and Equitable Treatment StandardChicago Journal of International Law: Vol. 18: No. 2, Article 7 (2018). (link)

Sefriani, Fair and Equitable Treatment Standard in International Investment Agreements, Yustisia Vol. 7 No. 1 (January-April 2018). (link)

Dumberry, Patrick, Has the Fair and Equitable Treatment Standard Become a Rule of Customary International Law?, Journal of International Dispute Settlement, Volume 8, Issue 1, 1 March 2017, Pages 155-178. (link)

Dumberry, Patrick, Fair and Equitable Treatment: Its Interaction with the Minimum Standard and Its Customary Status, Brill Research Perspectives in International Investment Law and Arbitration, Volume 1, Issue 2 (2017), pp. 1-82. (link)

Leite, Kendra, The Fair and Equitable Treatment Standard: A Search for a Better Balance in International Investment Agreements, 32 Am. U. Int'l L. Rev. 363 (2016-2017). (link)

Barrera, Enrique B., The Case for Removing the Fair and Equitable Treatment Standard from NAFTA, CIGI Papers No. 128 (April 2017). (link)

Dumberry, Patrick, Shopping for a better deal: the use of MFN clauses to get ‘better’ fair and equitable treatment protection, Arbitration International, Volume 33, Issue 1, 1 March 2017, Pages 1–16. (link)

Dumberry, Patrick, The Practice of States as Evidence of Custom: An Analysis of Fair and Equitable Treatment Standard Clauses in States’ Foreign Investment Laws, McGill Journal of Dispute Resolution, Vol. 2 (2015-2016). (link)

Gourgourinis, Anastasios, Fair and Equitable Treatment in International Investment Law: The Art of Watching Out for Both the ‘Elephants’ and the ‘Fleas’ in the (Normative) ‘Room’ of Investment Protection, The Journal of World Investment and Trade, Volume 16, Issue 2 (2015), pp. 335-359. (link)

Hauksdóttir, Dagbjört, The Fair and Equitable Treatment Standard in International Investment Agreements, Thesis Master of Law, Reykjavik University (May 2015). (link)

Judge Stephen M. Schwebel, Is Neer Far from Fair and Equitable?, Arbitration International, Volume 27, Issue 4 (1 December 2011), pp. 555-562. (link)

Vesel, Scott, A 'Creeping' Violation of the Fair and Equitable Treatment Standard?Arbitration International, Volume 30, Issue 3, 1 September 2014, Pages 553–564. (link)

Dumberry Patrick, The Prohibition against Arbitrary Conduct and the Fair and Equitable Treatment Standard under NAFTA Article 1005, 15 Journal of World Investment & Trade (2014), p. 117-151. (link)

Dolzer, Rudolf, Fair and Equitable Treatment: Today’s Contours, 12 Santa Clara J. Int(l L. 7 (2014). (link)

Haynes, Jason, The Evolving Nature of the Fair and Equitable Treatment (FET) Standard: Challenging Its Increasing Pervasiveness in Light of Developing Countries’ Concerns - The Case for Regulatory Rebalancing, The Journal of World Investment & Trade 14 (2013), pp. 114-146. (link)

Stone, Jacob, Arbitrariness, the Fair and Equitable Treatment Standard, and the International Law of Investment, Leiden Journal of International Law, 25(1) (2012), pp. 77-107. (link)

Tyler, Drew, Fair, Equitable and Reasonable Treatment: the Concept of Reasonableness within the Fair and Equitable Treatment Standard, LL.M Research Paper, University of Ottawa (2011).

Haeri Hussein, A Tale of Two Standards: Fair and Equitable Treatment and the Minimum Standard in International Law, 27(1) Arbitration International (2011), pp. 27-46. (link)

Ryan, Margaret Clare, Glamis Gold, Ltd. v. The United States and the Fair and Equitable Treatment Standard, 56(4) McGill Law Journal 919 (2011). (link)

Vandevelde, Kenneth J., A Unified Theory of Fair and Equitable TreatmentNYU Journal of International Law and Politics 43.1 (2010): 43–106. (link)

Tuck, Andrew P., The "Fair and Equitable Treatment" Standard Pursuant to the Investment Provisions of the U.S. Free Trade Agreements with Peru, Colombia and Panama, 16 Law & Bus. Rev. Am. 385 (2010). (link)

Kläger, Roland, Fair and Equitable Treatment: A Look at the Theoretical Underpinnings of Legitimacy and Fairness, 11:3 J World Investment & Trade 435 (2010), pp. 435–455. (link)

Alvarez-Jiménez, Alberto, Minimum Standard of Treatment of Aliens, Fair and Equitable Treatment of Foreign Investors, Customary International Law and the Diallo Case Before the International Court of Justice, Journal of World Investment & Trade 9 (2008): 1.

Kalicki, Jean & Medeiros, Suzanne, Fair, Equitable and Ambiguous: What is Fair and Equitable Treatment in International Investment Law, 22 ICSID Rev. – Foreign Investment Law Journal 24 (2007), pp. 24-54. (link)

Schill, Stephan W., Fair and Equitable Treatment under Investment Treaties as an Embodiment of the Rule of Law, IILJ Working Paper 2006/6 (2006) (link)

Reinisch, August, Necessity in International Investment Arbitration – An Unnecessary Split of Opinions in recent ICSID Cases? Comments on CMS v. Argentina and LG&E v. Argentina, 3 Transnational Disputes Management 5 (2006). (link)

Choudhury, Barnali, Evolution or Devolution ? Defining Fair and Equitable Treatment in International Investment Law, Journal of World Investment and Trade 297 (2006). (link)

Dupuy, Pierre-Marie, Les émanations engagent-elles la responsabilité des Etats?, Etude de droit international des investissements, EUI Working Paper #7 (2006). (link)

Schreuer, Christoph, Fair and Equitable Treatment in Arbitral PracticeJournal of World Investment & Trade 6.3 (2005), pp. 357–386. (link)

Dolzer, Rudolf, Fair and Equitable Treatment: A Key Standard in Investment TreatiesInternational Lawyer 39.1 (2005): 87–106. (link)

Gallus, Nick, The Influence of the Host State's Level of Development on International Investment Treaty Standards of Protection, 6 J. World Investment & Trade 711 (2005). (link)

Yannaca-Small, Catherine. Fair and Equitable Treatment Standard in International Investment Law. OECD Working Papers on International Investment 2004 3. Paris: Organisation for Economic Co-operation and Development, 2004. (link)

Dumberry, Patrick, The Quest to Define "Fair and Equitable Treatment" for Investors under International Law, The Case of the NAFTA Chapter 11 Pope & Talbot Awards, 3 (4) The Journal of World Investment 657 (2002). (link)

Vasciannie, Stephen, The Fair and Equitable Treatment Standard in International Investment Law and Practice, British Yearbook of International Law 70 (2000): 99–164. (link)

Boed, Roman, State of Necessity as a Justification for Internationally Wrongful Conduct, 3(1) Yale Human Rights and Development Law Journal 1 (2000). (link)

Vasciannie, Stephen, The Fair and Equitable Treatment Standard in International Investment Law and Practice, 17 BYBIL 99 (1999).

Franck, T.M., Fairness in the international legal and institutional system, General course on Public International Law, 240(III) Recueil des Cours de l'Académie de la Haye 13 (1993).

 

Chapter in Books

Ian A. Laird, Borzu Sabahi, Frédéric G. Sourgens, Todd J. Weiler (eds), Kabir Duggal (associate ed.), Part III: Fair and equitable Treatment – An Evolutionary International Standard or Artificial Legal Fiction?, in Investment Treaty Arbitration and International Law, Volume 10 (Juris Publishing, 2017)

Stevens, Margrete and Bishop, Raymond D., Chapter 21: Fair and Equitable Treatment: Denial of Justice, in Kinnear, Meg, Fischer, Geraldine R., et al. (eds), Building International Investment Law: The First 50 Years of ICSID (2015), pp. 295-306. (link)

Weiler, Todd, Chapter Seven Fair and Equitable Treatment and Arbitrary or Discriminatory Measures, in Weiler, Todd (ed.), The Interpretation of International Investment Law; Equality, Discrimination and Minimum Standards of Treatment in Historical Context (BRILL, International Ligitation in Practice, Volume 6, 2013), pp. 287-332. (link)

Weiler, Todd, Chapter Six Fair and Equitable Treatment versus the CILMSTA: ‘Bureaucrats Run Amok’, in Weiler, Todd (ed.), The Interpretation of International Investment Law; Equality, Discrimination and Minimum Standards of Treatment in Historical Context (BRILL, International Ligitation in Practice, Volume 6, 2013), pp. 241-286. (link)

Weiler, Todd, Chapter Five Fair and Equitable Treatment: A ‘True Story’, in Weiler, Todd (ed.), The Interpretation of International Investment Law; Equality, Discrimination and Minimum Standards of Treatment in Historical Context (BRILL, International Ligitation in Practice, Volume 6, 2013), pp. 183-240. (link)

Dolzer R. and Schreuer C., Chapter 11 ‘Fair and Equitable Treatment‘, in Principles of International Investment Law (Oxford University Press, 2nd ed., 2012). (link)

Angelet, Nicolas, Fair and Equitable Treatment, in Max Planck Encyclopedia of Public International Law 1094 (R. Wolfrum ed., OUP, 2012) (link)

Gallus, N., The Fair and Equitable Standard of Treatment and the Circumstances of the Host State, in Brown, C. & Miles, K. (eds.) Evolution in Investment Treaty Law and Arbitration (Cambridge University Press, 2011).

Kläger, Roland, Chapter 11: ‘Fair and Equitable Treatment’ and Sustainable Development, in Cordonier Segger, Marie-Claire, Gehring, Markus W., et al., Sustainable Development in World Investment Law, Global Trade Law Series, Volume 30 (Kluwer Law International, 2011), pp. 241 – 259. (link)

Alvarez, José E. (ed.), Chapter III: Fair and equitable treatment: the heart of the investment regime, in The Public International Law Regime Governing International Investment (The Hague Academy of International Law, 2011), pp. 177-246. (link)

Schill, Stephan, Chapter 5: Fair and Equitable Treatment, the Rule of Law and Comparative Public Law, in Schill, Stephan (ed.) International Investment Law and Comparative Public Law (Oxford University Press, 2010). (link)

Hober, K., Chapter 22: Compensation: a Closer Look at Cases Awarding Compensation for Violation of the Fair and Equitable TreatmentStandard, in Yannaca-Small, Katia (ed.) Arbitration under International Investment Agreements: a Guide to the Key Issues (Oxford University Press, 2010). (link)

Benedict Kingsbury and Stephan W. Schill, Investor-State Arbitration as Governance: Fair and Equitable Treatment, Proportionality and the Emerging Global Administrative Law, in Albert Jan van den Berg (ed), 50 Years of the New York Convention: ICCA International Arbitration Conference, ICCA Congress Series, Volume 14 (2009) pp. 5 – 68. (link)

Kinnear, Meg, The Continuing Development of the Fair and Equitable Treatment Standard, in Investment Treaty Law – Current Issues III – Remedies in International Investment Law; The Emerging Jurisprudence of International Investment Law 209 (Andrea K. Bjorklund, Ian A. Laird & Sergey Ripinsky eds., 2009)

Knahr, Christina, Chapter V: Investment Arbitration - Fair and Equitable Treatment and its Relationship with other Treatment Standards, in Klausegger, Christian, Klein, Peter, et al. (eds), Austrian Yearbook on International Arbitration (2009), pp. 493-513. (link)

Wallace, Don, Fair and Equitable Treatment and Denial of Justice: Loewen v. US and Chattin v. Mexico, in International Investment Law and Arbitration: Leading Cases from the ICSID, Nafta, Bilateral Treaties and Customary International Law (ed. by Tod Weiler) (Cameron May, 2005).

 

Books

Palombino, Fulvio M., Fair and equitable Treatment and the Fabric of General Principles (Asser Press, 2018), p. 189. (link)

Matteotti, S., & Payosova, T., The Role of the Fair and Equitable Treatment Standard: Regulatory Coherence for Trade and Investment in Renewable Energy, in T. Cottier & I. Espa (Eds.), International Trade in Sustainable Electricity: Regulatory Challenges in International Economic Law (Cambridge University Press, 2017), pp. 428-456. (link)

Dromgool T., Enguix D.Y., The Fair and Equitable Treatment Standard and the Revocation of Feed in Tariffs—Foreign Renewable Energy Investments in Crisis-Struck Spain, in Mauerhofer V. (eds) Legal Aspects of Sustainable Development (Springer, Cham, 2016). (link)

United Nations Conference for Trade and development (UNCTAD), Fair and Equitable Treatment (2012). (link)

Paparinskis, Martins, The International Minimum Standard and Fair and Equitable Treatment, Oxford Monographs in International Law (Oxford University Press, 2013). (link)

Dumberry, Patrick, The Fair and Equitable Treatment Standard: A Guide to NAFTA Case Law on Article 1105, Alphen aan den Rijn, The Netherlands (Kluwer Law International, 2013). (link)

Diehl, Alexandra, The Core Standard of International Investment Protection: Fair and Equitable Treatment. International Arbitration Law Library 26 (Alphen aan den Rijn, The Netherlands: Kluwer Law International, 2012). (link)

Kläger, Roland, “Fair and Equitable Treatment” in International Investment Law, Cambridge Studies in International and Comparative Law 83 (Cambridge University Press, 2011). (link)

Paulsson, Jan, Denial of Justice in International Law (Cambridge University Press, 2005).

Brownlie, Ian, Principles of Public International Law, 6th edition, Oxford University Press, 2003).

Kolb, Robert, La bonne foi en droit international public (PUF, 2000).

United Nations Conference for Trade and development (UNCTAD), Fair and Equitable Treatment, UNCTAD/ITE/IIT/11 (Vol. III., 1999). (link)

Favre, Jean-Michel, Essai sur la notion de standard dans la jurisprudence internationale, Law Department, Paris I Sorbonne (PhD, 1994).

Freeman, Alwyn Vernon, The International Responsibility of States for Denial of Justice (Vaillant-Carmanne, 1938).

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