Foreign investors can form legitimate expectations on the basis of the legal framework and the factual situation in the host State, as well as specific representations or commitments given by the State authorities.1 Given that the relationship between the State and the foreign investor usually spans a number of years, it is important to determine the point in time at which the tribunal should assess the investor’s expectations. At first blush it appears that the predominant view in the investor-State jurisprudence is that the assessment must be limited to the relevant facts as they stand at the time of the making of the investment. However, on a closer analysis, the situation is more nuanced. Given that the implementation of a foreign investment can sometimes comprise several steps, one of the challenging aspects of this temporal analysis is to determine when exactly the investment was “made”. This has been subject to divergent approaches in the case law.
II. Critical dates and difficulties in identifying the time of the making of the investment
BIT provisions do not indicate the time at which expectations must exist in order to merit protection. The guidance on this issue is thus derived from case law. The vast majority of tribunals have consistently ruled that protected expectations must rest on the conditions prevalent at the time of the investment.2
Several tribunals have determined that the legitimacy of the investor’s expectations should be determined at the moment of the investor’s decision to invest.3 However, these tribunals have not taken into account that the investor’s decision and the acts of implementation of this decision could occur at two separate moments of time.4
A number of tribunals have deemed it necessary to ascertain the existence of the investor’s legitimate expectations at the time of each individual decision/transaction. The tribunal in Frontier Petroleum ruled that: “[W]here investments are made through several steps, spread over a period of time, legitimate expectations must be examined for each stage at which a decisive step is taken towards the creation, expansion, development, or reorganisation of the investment."7 However, the tribunal in Novenergia v. Spain II adopted a different view, acknowledging that although “in larger projects …the investment phase transcends through various stages”, the timing of the investor's decision to invest “sets a backstop date for the evaluation of legitimate expectations”.8
A few tribunals have decided to consider events that occurred after the realization of the investment in assessing the legitimate expectations.9 In Tethyan v Pakistan, for instance, the tribunal decided to take into account Pakistan’s conduct after the implementation of the investment in 2006, because the “Claimant incurred the major part of its exploration expenditures only after [that]”. The tribunal ultimately found that the host State’s actions encouraged the claimant to continue to invest into the mine in question.
An overview of the jurisprudence suggests that the starting point in the assessment of the investor’s expectations would be the moment when the investment was made. However, the precise timing would depend on the specifics of the project in question. When the investment is made in several stages, tribunals may need to assess the grounds that could give rise to the expectations at each separate stage. Where the circumstances warrant, tribunals may also take into account facts that took place after the initial step of investing.
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