The minimum standard of treatment (“MST”) is a rule of customary international law.1 At least since the beginning of the 20th century, a large part of doctrine upheld the customary nature of the international minimum standard.2 The standard was endorsed by a majority of the States represented at the 1930 Hague Codification Conference. The 1962 Declaration on Permanent Sovereignty over Natural Resources also reaffirmed the standard.3
The landmark cases interpreting the standard at the beginning of the 20th century include: the Neer Claim,6 Roberts Claim,7 Hopkins Claim,8 and British Claims in the Spanish Zone of Morocco.9 More recently, tribunals have noted that the standard has evolved since the Neer case and a broader interpretation may be warranted.10 Yet, whether and to what extent the standard has evolved has been debated.11 It has been generally accepted, though, that evidence of bad faith is not necessary, but may be sufficient, to prove a violation of MST.12 And at the very least, bad faith must be considered by arbitral tribunals.13
Beyond the debate that has arisen over the existence and implications of the general customary rule, a number of international investment agreements (notably, NAFTA, Bilateral Investment Treaties (“BITs”) based on the successive US Model BITs and recent Free Trade Agreements (“FTAs”) concluded by Canada) include an obligation to accord to protected investors treatment in accordance with international law. Each of these treaty-specific formulations of the MST needs to be considered and interpreted in accordance with its own particular terms.14
Glamis Gold, Ltd. v. United States of America, UNCITRAL, Award, June 8, 2009, para. 615 (“The customary international law minimum standard of treatment is just that, a minimum standard. It is meant to serve as a floor, an absolute bottom, below which conduct is not accepted by the international community.”); Grand River Enterprises Six Nations, Ltd., et.al. v. United States of America, Award, January 12, 2011, para. 214 ; Joseph Charles Lemire c. Ukraine (II), ICSID Case No. ARB / 06/18, Decision on Jurisdiction and Liability, January 14, 2010, para. 253(“What the US and Ukraine agreed when they executed the BIT, was that the international customary minimum standard should not operate as a ceiling, but rather as a floor. Investments protected by the BIT should in any case be awarded the level of protection offered by customary international law. But this level of protection could and should be transcended if the FET standard provided the investor with a superior set of rights. ”); SD Myers, Inc. v. Government of Canada, Partial Award (Merits), 13 November 2000, para. 259(“The minimum standard of treatment provision of the NAFTA is similar to clauses contained in BITs. The inclusion of a 'minimum standard' provision is necessary to avoid what might otherwise be a gap. A government might treat an investor in a harsh, injurious and unjust manner, but do so in a way that is no different than the treatment inflicted on its own nationals. The 'minimum standard' is a floor below which treatment of foreign investors must not fall, even if a government were not acting in a discriminatory manner. ”); SunReserve Luxco Holdings SRL c. Italy , SCC Case No. 132/2016, Final Award, 25 March 2020, para. 673; OECD (2004), Fair and Equitable Treatment Standard in International Investment Law, OECD Working Papers, 2004/03, OECD Publishing, pp. 8-10.
The Neer Claim, Neer and Neer (U.S.A.) v. United Mexican States, U.S.-Mexico General Claims Commission, Decision, 15 October 1926, para. 4 (“[…][T]he propriety of governmental acts should be put to the test of international standards, and (second) 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. Whether the insufficiency proceeds from deficient execution of an intelligent law or from the fact that the laws of the country do not empower the authorities to measure up to international standards is immaterial.”).
Roberts Claim, Roberts (U.S.A.) v. United Mexican States, U.S.-Mexico General Claims Commission, Decision, 2 November 1926, para. 8 (“[…][F]acts with respect to equality of treatment of aliens and nationals may be important in determining the merits of a complaint of mistreatment of an alien. But such equality is not the ultimate test of the propriety of the acts of authorities in the light of international law. That test is, broadly speaking, whether aliens are treated in accordance with ordinary standards of civilization. We do not hesitate to say that the treatment of Roberts was such as to warrant an indemnity on the ground of cruel and inhumane imprisonment.”).
Hopkins Claim, Hopkins (U.S.A.) v. United Mexican States, U.S.-Mexico General Claims Commission, Decision, 31 March 1926, para 16 (“If it be urged that under the provisions of the Treaty of 1923 as construed by this Commission the claimant Hopkins enjoys both rights and remedies against Mexico which it withholds from its own citizens under its municipal laws, the answer is that it not infrequently happens that under the rules of international law applied to controversies of an international aspect a nation is required to accord to aliens broader and more liberal treatment than it accords to its own citizens under its municipal laws. The reports of decisions made by arbitral tribunals long prior to the Treaty of 1923 contain many such instances. There is no ground to object that this amounts to a discrimination by a nation against its own citizens in favor of aliens. It is not a question of discrimination, but a question of difference in their respective rights and remedies. The citizens of a nation may enjoy many rights which are withheld from aliens, and, conversely, under international law aliens may enjoy rights and remedies which the nation does not accord to its own citizens.”).
British property in Spanish Morocco (Spain v. United Kingdom), Award, 1 May 1925, p. 642 (« le principe de la non-responsabilité n’exclut point le devoir d’exercer une certaine vigilance. Si l’État n’est pas responsable des événements révolutionnaires eux-mêmes, il peut être néanmoins responsable de ce que les autorités font ou ne font pas, pour parer, dans la mesure possible, aux suites. La responsabilité pour l’action ou l’inaction de la puissance publique est tout autre chose que la responsabilité pour des actes imputables à des personnes échappant à l’influence des autorités ou leur étant ouvertement hostiles. Le principe de la non-intervention dans les rapports entre un État et les étrangers établis sur son territoire, présuppose non seulement des conditions normales d’administration et de justice, mais aussi la volonté de l’État de réaliser son but primordial: le maintien de la paix intérieure et de l’ordre social. L’État est tenu à une certaine vigilance. Bien que ce soient les autorités du pays qui décident sur ce qu’il y a à faire ou à laisser en vue de la suppression d’une révolte, etc., un État ne pourra pas exiger qu’un autre État, lésé dans les intérêts de ses ressortissants, reste indifférent si des possibilités de secours sont, sans raison plausible, manifestement négligées, ou si les autorités, averties en temps utile, ne prennent aucune mesure de prévention, ou si, encore, la protection n’est pas accordée dans des conditions égales aux ressortissants de toutes les nations. »).
Mondev International Ltd. v. United States of America, ICSID Case No. ARB(AF)/99/2, Award, 11 October 2002, para. 123 (“A reasonable evolutionary interpretation of Article 1105(1) is consistent both with the travaux, with normal principles of interpretation and with the fact that, as the Respondent accepted in argument, the terms ‘fair and equitable treatment’ and ‘full protection and security’ had their origin in bilateral treaties in the post-war period. In these circumstances the content of the minimum standard today cannot be limited to the content of customary international law as recognised in arbitral decisions in the 1920s.”); ADF Group Inc. v. United States of America, ICSID Case No. ARB(AF)/00/1, Award, 9 January 2003, paras. 179-186 (“In considering the meaning and implications of the 31 July 2001 FTC Interpretation, it is important to bear in mind that the Respondent United States accepts that the customary international law referred to in Article 1105(1) is not ‘frozen in time’ and that the minimum standard of treatment does evolve. The FTC Interpretation of 31 July 2001, in the view of the United States, refers to customary international law ‘as it exists today.’ It is equally important to note that Canada and Mexico accept the view of the United States on this point even as they stress that ‘the threshold [for violation of that standard] remains high.’ Put in slightly different terms, what customary international law projects is not a static photograph of the minimum standard of treatment of aliens as it stood in 1927 when the Award in the Neer case was rendered. For both customary international law and the minimum standard of treatment of aliens it incorporates, are constantly in a process of development. […] It may be added that the Claims Commission in the Neer case did not purport to pronounce a general standard applicable not only with respect to protection against acts of private parties directed against the physical safety of foreigners while in the territory of a host State, but also in any and all conceivable contexts. There appears no logical necessity and no concordant state practice to support the view that the Neer formulation is automatically extendible to the contemporary context of treatment of foreign investors and their investments by a host or recipient State. […] We understand Mondev to be saying—and we would respectfully agree with it—that any general requirement to accord “fair and equitable treatment” and “full protection and security” must be disciplined by being based upon State practice and judicial or arbitral caselaw or other sources of customary or general international law. […] The Investor, of course, in the end has the burden of sustaining its charge of inconsistency with Article 1105(1). That burden has not been discharged here and hence, as a strict technical matter, the Respondent does not have to prove that current customary international law concerning standards of treatment consists only of discrete, specific rules applicable to limited contexts. It does not appear inappropriate, however, to note that it is not necessary to assume that the customary international law on the treatment of aliens and their property, including investments, is bereft of more general principles or requirements, with normative consequences, in respect of investments, derived from—in the language of Mondev — ‘established sources of [international] law.’”); Waste Management v. United Mexican States (II), ICSID Case No. ARB(AF)/00/3, Award, 30 April 2004, paras. 91-98 (“Both the Mondev and ADF tribunals rejected any suggestion that the standard of treatment of a foreign investment set by NAFTA is confined to the kind of outrageous treatment referred to in the Neer case, i.e. to treatment amounting to an ‘outrage, to bad faith, to willful neglect of duty, or to an in insufficiency of governmental action so far short of international standards that every reasonable and impartial man would readily recognize its insufficiency.’ […] The search here is for the Article 1105 standard of review, and it is not necessary to consider the specific results reached in the cases discussed above. But as this survey shows, despite certain differences of emphasis a general standard for Article 1105 is emerging. Taken together, the S.D. Myers, Mondev, ADF and Loewen cases suggest that the minimum standard of treatment of fair and equitable treatment is infringed by conduct attributable to the State and harmful to the claimant if the conduct is arbitrary, grossly unfair, unjust or idiosyncratic, is discriminatory and exposes the claimant to sectional or racial prejudice, or involves a lack of due process leading to an outcome which offends judicial propriety—as might be the case with a manifest failure of natural justice in judicial proceedings or a complete lack of transparency and candor in an administrative process. In applying this standard, it is relevant that the treatment is in breach of representations made by the host State which were reasonably relied on by the claimant.”); ; William Ralph Clayton, William Douglas Clayton, Daniel Clayton and Bilcon of Delaware, Inc. v. Government of Canada, PCA Case No. 2009-04, Award on Jurisdiction and Liability, 17 March 2015, para. 433 (“NAFTA Article 1105, is, then, identical to the minimum international standard. The crucial question – on which the Parties diverge – is what the content of the contemporary international minimum standard that the tribunal is bound to apply. NAFTA awards make it clear that the international minimum standard is not limited to conduct by host states that is outrageous. The contemporary minimum international standard involves a more significant measure of protection.”); International Thunderbird Gaming Corporation v. The United Mexican States, Arbitral Award, 26 January 2006, para. 194 (“The content of the minimum standard should not be rigidly interpreted and it should reflect evolving international customary law. Notwithstanding the evolution of customary law since decisions such as Neer Claim in 1926, the threshold for finding a violation of the minimum standard of treatment still remains high, as illustrated by recent international jurisprudence. For the purposes of the present case, the Tribunal views acts that would give rise to a breach of the minimum standard of treatment prescribed by the Nafta and customary international law as those that, weighed against the given factual context, amount to a gross denial of justice or manifest arbitrariness falling below acceptable international standards.”); Gold Reserve Inc. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB(AF)/09/1, Award, 22 September 2014, para. 567 (“Article II(2) of the BIT refers to the ‘principles of international law’ in accordance with which fair and equitable treatment is to be bestowed. To determine these principles the Tribunal must consider the present status of development of public international law in the field of investment protection. It is the Tribunal’s view that public international law principles have evolved since the Neer case and that the standard today is broader than that defined in the Neer case on which Respondent relies. As authoritatively held, the Neer award "had nothing to do with the treatment of foreign investors or investments. It did not address what is fair and equitable", noting "that Neer is far from what is fair and equitable". As held by the tribunal in Mondev when disregarding the Neer standard as controlling today, ‘both the substantive and procedural rights of the individual in international law have undergone considerable developments.’”); CC/Devas (Mauritius) Ltd., Devas Employees Mauritius Private Limited, and Telcom Devas Mauritius Limited v. Republic of India, PCA Case No. 2013-09, Award on Jurisdiction and Merits, 25 July 2016, para. 457 (“The Tribunal does not subscribe to the view that, today, a violation of the customary minimum standard was frozen as defined in Neer ‘to an outrage, to bad faith, to willful neglect of duty, or to insufficiency of governmental action so far short of international standards that every reasonable and impartial man would readily recognize its insufficiency.’ It is now generally recognized that customary international law has evolved since 1926, some awards giving the required minimum treatment a wider interpretation than others. FET in the Treaty, as in most other treaties, is not defined and the Treaty contains no wording limiting its scope and content to some external standard, whether it be international customary law or something else. In determining that scope and content, the Tribunal must rely on Article 31 of the VCLT, which requires a treaty to be ‘interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose.’”).
Glamis Gold, Ltd. v. United States of America, UNCITRAL, Award, 8 June 2009, paras. 614-616 (“As regards the second form of evolution—the proposition that customary international law has moved beyond the minimum standard of treatment of aliens as defined in Neer— the Tribunal finds that the evidence provided by Claimant does not establish such evolution. This is evident in the abundant and continued use of adjective modifiers throughout arbitral awards, evidencing a strict standard. […] It therefore appears that, although situations may be more varied and complicated today than in the 1920s, the level of scrutiny is the same. The fundamentals of the Neer standard thus still apply today: to violate the customary international law minimum standard of treatment codified in Article 1105 of the NAFTA, an act must be sufficiently egregious and shocking—a gross denial of justice, manifest arbitrariness, blatant unfairness, a complete lack of due process, evident discrimination, or a manifest lack of reasons—so as to fall below accepted international standards and constitute a breach of Article 1105(1). The Tribunal notes that one aspect of evolution from Neer that is generally agreed upon is that bad faith is not required to find a violation of the fair and equitable treatment standard, but its presence is conclusive evidence of such. Thus, an act that is egregious or shocking may also evidence bad faith, but such bad faith is not necessary for the finding of a violation. The standard for finding a breach of the customary international law minimum standard of treatment therefore remains as stringent as it was under Neer, it is entirely possible, however that, as an international community, we may be shocked by State actions now that did not offend us previously.”); Cargill, Incorporated v. United Mexican States, ICSID Case No. ARB(AF)/05/2, Award, 18 September 2009, para. 286 (“The Tribunal holds that the current customary international law standard of "fair and equitable treatment" at least reflects the adaptation of the agreed Neer standard to current conditions, as outlined in the Article 1128 submissions of Mexico and Canada. If the conduct of the government toward the investment amounts to gross misconduct, manifest injustice or, in the classic words of the Neer claim, bad faith or the willful neglect of duty, whatever the particular context the actions take in regard to the investment, then such conduct will be a violation of the customary obligation of fair and equitable treatment.”).
Merrill & Ring Forestry L.P. v. The Government of Canada, ICSID Case No. UNCT/07/1, Award, 31 March 2010, para. 208; Mondev International Ltd. v. United States of America, ICSID Case No. ARB(AF)/99/2, Award, 11 October 2002, para. 116 (“To the modern eye, what is unfair or inequitable need not equate with the outrageous or the egregious. In particular, a State may treat foreign investment unfairly and inequitably without necessarily acting in bad faith.”); Loewen Group, Inc. and Raymond L. Loewen v. United States of America, ICSID Case No. ARB(AF)/98/3, Award, 26 June 2003, para. 132 (“Neither State practice, the decisions of international tribunals nor the opinion of commentators support the view that bad faith or malicious intention is an essential element of unfair and inequitable treatment or denial of justice amounting to a breach of international justice. Manifest injustice in the sense of a lack of due process leading to an outcome which offends a sense of judicial propriety is enough, even if one applies the Interpretation according to its terms.”); Glamis Gold Ltd. v. United States of America, Award, 8 June 2009, para. 22 (“The Tribunal emphasizes that, although bad faith may often be present in such a determination and its presence will certainly be determinative of a violation, a finding of bad faith is not a requirement for a breach of Article 1105(1).”); Cargill, Incorporated v. United Mexican States, ICSID Case No. ARB(AF)/05/2, Award, 18 September 2009, para. 286 (“If the conduct of the government toward the investment amounts to gross misconduct, manifest injustice or, in the classic words of the Neer claim, bad faith or the willful neglect of duty, whatever the particular context the actions taken in regard to the investment, then such conduct will be a violation of the customary obligation of fair and equitable treatment.”); Waste Management v. United Mexican States (II), ICSID Case No. ARB(AF)/00/3, Award, 30 April 2004, para. 138 (“The Tribunal has no doubt that a deliberate conspiracy—that is to say, a conscious combination of various agencies of government without justification to defeat the purposes of an investment agreement—would constitute a breach of Article 1105(1). A basic obligation of the State under Article 1105(1) is to act in good faith and form, and not deliberately to set out to destroy or frustrate the investment by improper means.”)
Abengoa, S.A. and COFIDES, S.A. v. United Mexican States, ICSID Case No. ARB(AF)/09/2, Award, 18 April 2013, para. 643 (“El Tribunal Arbitral estima también que el nivel mínimo de trato acorde con el derecho internacional consuetudinario es una expresión y parte constitutiva del principio de buena fe. El principio de buena fe forma parte de la costumbre internacional en el sentido del artículo 38.1(b) del Estatuto de la Corte lnternacional de Justicia. Como decidió la Corte lnternacional de Justicia en el caso Anglo-Norvegian Fisheries:’the principle of good faith requires that every right be exercised honestly and loyally. Any fictitious exercise of a right for the purpose of evading either a rule of law or a contractual obligation will not be tolerated. Such an exercise constitutes an abuse of the right, prohibited by law.’”); TECO Guatemala Holdings, LLC v. Republic of Guatemala, ICSID Case No. ARB/10/23, Award, 19 December 2013, para. 456 (“The Arbitral Tribunal also considers that the minimum standard is part and parcel of the international principle of good faith. There is no doubt in the eyes of the Arbitral Tribunal that the principle of good faith is part of customary international law436 as established by Article 38.1(b) of the Statute of the International Court of Justice, and that a lack of good faith on the part of the State or of one of its organs should be taken into account in order to assess whether the minimum standard was breached.”); ADF Group Inc. v. United States of America, ICSID Case No. ARB(AF)/00/1, Award, 9 January 2003, para. 191 (“An assertion of breach of a customary law duty of good faith adds only negligible assistance in the task of determining or giving content to a standard of fair and equitable treatment.”).
Within investment jurisprudence, most of MST cases decided so far have applied Article 1105 of the NAFTA treaty. This includes (among others) the cases cited and highlighted above: Glamis Gold, Ltd. v. United States of America, UNCITRAL, Award, 8 June 2009; Grand River Enterprises Six Nations, Ltd., et.al. v. United States of America, Award, 12 January 2011; S.D. Myers, Inc. v. Government of Canada, Partial Award (Merits), 13 November 2000; Mondev International Ltd. v. United States of America, ICSID Case No. ARB(AF)/99/2, Award, 11 October 2002; ADF Group Inc. v. United States of America, ICSID Case No. ARB(AF)/00/1, Award, 9 January 2003; Waste Management v. United Mexican States (II), ICSID Case No. ARB(AF)/00/3, Award, 30 April 2004, Merrill & Ring Forestry L.P. v. The Government of Canada, ICSID Case No. UNCT/07/1, Award, 31 March 2010; William Ralph Clayton, William Douglas Clayton, Daniel Clayton and Bilcon of Delaware, Inc. v. Government of Canada, PCA Case No. 2009-04, Award on Jurisdiction and Liability, 17 March 2015; International Thunderbird Gaming Corporation v. The United Mexican States, Arbitral Award, 26 January 2006; Loewen Group, Inc. and Raymond L. Loewen v. United States of America, ICSID Case No. ARB(AF)/98/3, Award, 26 June 2003.
II. MST under customary international law
The customary MST has been generally understood to comprise rights, guarantees and obligations:
Violation of these rights would give rise to the State’s international responsibility under international law, which, in most cases, may lead to diplomatic protection by the alien’s state of nationality, on the alien’s behalf, and generally subject to the exhaustion of local remedies rule.19 The MST is not contingent upon the State’s domestic legislation or practices.20
It remains a matter of debate whether the FET standard currently reflects the MST or offers an autonomous standard that is additional to general international law.21 A number of investment tribunals suggest that the difference between FET and MST may well be “more apparent than real, when applied to the specific facts of a case.”22
Janes Claim in U.S.A. (Laura M.B. Janes et al) v. United Mexican States (1925), U.S.-Mexico General Claims Commission, Decision, 16 November 1925, para. 22 (“[…] [W]e have before us a case of denial of justice, which, but for some convincingly logical reason, should be judged in the same manner as any other case of the same category. Denial of justice, in its broader sense, may cover even acts of the executive and the legislative; in cases of improper governmental action of this type, a nation is never held to be liable for anything else than the damage caused by what the executive or the legislative committed or omitted itself. In cases of denial of justice in its narrower sense, Governments again are held responsible exclusively for what they commit or omit themselves. Only in the event of one type of denial of justice, the present one, a State would be liable not for what it committed or omitted itself, but for what an individual did. Such an exception to the general rule is not admissible but for convincing reasons. These reasons, as far as the Commission knows, never were given. One reason doubtless lies in the well-known tendency of Governments (Hyde, I, p. 515; Ralston, 1926, p. 267) to claim exaggerated reparations for nonpunishment of wrongdoers, a tendency which found its most promising help in a theory advocating that the negligent State had to make good all of the damage caused by the crime itself. But since international delinquencies have been recognized next to individual delinquencies, since damages for denial of justice have been assessed by international tribunals in many other forms, and since exaggerated claims from one Government as against another have been repeatedly softened down as a consequence of arbitral methods, it would seem time to throw off the doctrine dating from the end of the eighteenth century, and return to reality.”).
OECD (2004), Fair and Equitable Treatment Standard in International Investment Law, OECD Working Papers, 2004/03, OECD Publishing, note 43 (linking it to the full protection and security standard defined in BITs, which (in its most basic formulation, limited to physical protection) is “usually understood as the obligation for the host State to adopt all reasonable measures to physically protect assets and property from threats or attacks which may target particularly foreigners or certain groups of foreigners.”).
Roberts Claim, Roberts (U.S.A.) v. United Mexican States, U.S.-Mexico General Claims Commission, Decision, 2 November 1926, para. 8 (“Facts with respect to equality of treatment of aliens and nationals may be important in determining the merits of a complaint of mistreatment of an alien. But such equality is not the ultimate test of the propriety of the acts of authorities in the light of international law. That test is, broadly speaking, whether aliens are treated in accordance with ordinary standards of civilization. We do not hesitate to say that the treatment of Roberts was such as to warrant an indemnity on the ground of cruel and inhumane imprisonment.”).
Boffolo case, Italian-Venezuela Commission, Opinion of Ralston, umpire, 1 January 1903, pp. 531-534 (“[T]hat a general power to expel foreigners, at least for cause, exists in governments cannot be doubted. […] But it will be borne in mind that there may be a broad difference between the right to exercise a power and the rightful exercise of that power. […] Expulsion should only be resorted to in extreme instances and must be accomplished in the manner least injurious to the person affected.”).
OECD (2004), Fair and Equitable Treatment Standard in International Investment Law, OECD Working Papers, 2004/03, OECD Publishing, note 32 (“While the principle of national treatment foresees that aliens can only expect equality of treatment with nationals, the international minimum standard sets a number of basic rights established by international law that States must grant to aliens, independent of the treatment accorded to their own citizens.”).
Saluka v. Czech Republic, PCA Case No. 2001-04, Partial Award, 17 March 2006, para. 291 (“Whatever the merits of this controversy between the parties may be, it appears that the difference between the Treaty standard laid down in Article 3.1 and the customary minimum standard, when applied to the specific facts of a case, may well be more apparent than real. To the extent that the case law reveals different formulations of the relevant thresholds, an in-depth analysis may well demonstrate that they could be explained by the contextual and factual differences of the cases to which the standards have been applied.”); Azurix v. Argentina, ICSID Case No. ARB/01/12, Award, 14 July 2006, paras. 361 (“Turning now to Article II.2(a), this paragraph provides: "Investment shall at all times be accorded fair and equitable treatment, shall enjoy full protection and security and shall in no case be accorded treatment less than required by international law." The paragraph consists of three full statements, each listing in sequence a standard of treatment to be accorded to investments: fair and equitable, full protection and security, not less than required by international law. Fair and equitable treatment is listed separately. The last sentence ensures that, whichever content is attributed to the other two standards, the treatment accorded to investment will be no less than required by international law. The clause, as drafted, permits to interpret fair and equitable treatment and full protection and security as higher standards than required by international law. The purpose of the third sentence is to set a floor, not a ceiling, in order to avoid a possible interpretation of these standards below what is required by international law. While this conclusion results from the textual analysis of this provision, the Tribunal does not consider that it is of material significance for its application of the standard of fair and equitable treatment to the facts of the case. As it will be explained below, the minimum requirement to satisfy this standard has evolved and the Tribunal considers that its content is substantially similar whether the terms are interpreted in their ordinary meaning, as required by the Vienna Convention, or in accordance with customary international law.”), 364 (“The question whether fair and equitable treatment is or is not additional to the minimum treatment requirement under international law is a question about the substantive content of fair and equitable treatment and, whichever side of the argument one takes, the answer to the question may in substance be the same.”); Duke Energy v. Ecuador, ICSID Case No. ARB/04/19, Award, 18 August 2008, paras. 332-337 (“The Tribunal will first address whether the standard contained in the Treaty is an autonomous standard or merely reflects customary international law (i). It will then determine its content (ii). As to this first aspect, the Tribunal is of the opinion that the discussion about the autonomous character of the standard is irrelevant given the circumstances of the case. It also appears overtaken by the evolution in the latest ICSID decisions. As a first element, the Respondent's reliance on Occidental v. Ecuador, in which the same provision of the US-Ecuador BIT was at stake, is of little assistance. The Occidental tribunal found Ecuador in breach of Article II(3)(a) of the US-Ecuador BIT for not refunding VAT whilst such refund was a legitimate expectation of the Claimant. The Occidental tribunal further determined whether the relevant legal and business framework met the requirements of stability and predictability under international law. It found that "there is certainly an obligation not to alter the legal business environment in which the investment has been made" leaving aside the question of whether a treaty standard may be more demanding than customary law. The Respondent's arguments based on Occidental are therefore of no help.”); Impregilo v. Argentina, ICSID Case No. ARB/07/17, Award, 21 June 2011, paras. 287-289 (“The first approach is that "fair and equitable treatment" has to be equated with the minimum standard of treatment provided for by general international law. This has been, for example, the position adopted by the CMS tribunal: "In fact, the Treaty standard of fair and equitable treatment and its connection with the required stability and predictability of the business environment, founded on solemn legal and contractual commitments, is not different from the international law minimum standard and its evolution under customary law." The second approach deals with “fair and equitable treatment" as an autonomous standard, considered in general as more demanding and more protective of the investors’ rights than the minimum standard of treatment provided for by general international law. The Azurix tribunal, for example, adopted this position: "The clause, as drafted, permits to interpret fair and equitable treatment and full protection and security as higher standards than required by international law. The purpose of the third sentence is to set a floor, not a ceiling in order to avoid a possible interpretation of these standards below what is required by international law." However, the distinction between the two interpretations is not decisive in the consideration of the present case, for the reasons stated below.”); El Paso v. Argentina, ICSID Case No. ARB/03/15, Award, 31 October 2011, para. 335 (“The Tribunal considers this discussion to be somewhat futile, as the scope and content of the minimum standard of international law is as little defined as the BITs’ FET standard, and as the true question is to decide what substantive protection is granted to foreign investors through the FET. The issue is not one of comparing two undefined or weakly defined standards; it is to ascertain the content and define the BIT standard of fair and equitable treatment.”).
III. MST in investment treaty practice – specific formulations of MST
The most salient formulations of MST in current treaty practice are found in NAFTA (Article 1105), the US Model BIT (Article 5), and several FTAs recently concluded by Canada (e.g., CPTPP or the Canada-Colombia FTA).23 These treaty formulations clarify that:
NAFTA (1992), Article 1105; Official interpretation by the NAFTA Free Trade Commission, FTC Note of Interpretation of 31 July 2001; US Model BIT (2012), Art. 5 and Annex A; Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) (2018), Art. 9.6, Annex 9-A; Canada-Colombia FTA (2008), Art. 805.
IV. Possibility to elevate the MST standard of protection by recourse to MFN treatment
The possibility to elevate the protection offered by MST by importing ― through Most Favored Nation provisions ― other standards of substantive protection still remains a matter unaddressed in international investment jurisprudence despite having been proposed by a number of claimant investors.24
ADF Group Inc. v. United States of America, ICSID Case No. ARB(AF)/00/1, Award, 9 January 2003, para. 199 (“[…] (5) The Tribunal does not find it necessary to resolve the issue of whether the U.S.-Albania and the U.S.-Estonia bilateral investment treaties accord treatment more favorable than the treatment available under NAFTA Article 1105(1). The Investor is not entitled to the benefits claimed under NAFTA Article 1103, which Article is inapplicable by virtue of NAFTA Article 1108(7)(a) in case of procurement by a Party. The Investor's claim concerning Article 1103 is, accordingly, denied.”); Italba Corporation v. Oriental Republic of Uruguay, ICSID Case No. ARB/16/9, Award, 22 March 2019, paras. 124 (“The Claimant added that Uruguay accorded it a treatment less favorable than that accorded, in like circumstances, to other investors, in breach of Articles 3 and 4 of the Treaty. Based on Article 5 of the Treaty, it also contended that Uruguay failed to provide its investment with full protection and security.64 Furthermore, on the basis of Article 4 of the Treaty, which contains the Most Favored Nation clause, Italba relied on the Agreement between the Government of the Oriental Republic of Uruguay and the Government of the Republic of Venezuela for the Encouragement and Reciprocal Protection of Investments, which is not limited to police protection like the Treaty.”), 126 (“Furthermore, the Respondent stated that Article 5 of the Treaty enshrines a minimum standard of treatment, which Italba purports to extend in its claim, although it has failed to show grounds for such a broad interpretation. Uruguay asserted that Trigosul was not treated less favorably than any other company in like circumstances, and stated: "[n]one of the alleged adjusted or adapted licenses was issued to any of the companies mentioned by the Claimant."”); Italba Corporation v. Oriental Republic of Uruguay, ICSID Case No. ARB/16/9, Claimants’ Memorial, 16 September 2016, paras. 168-171 (“Article 4 of the Treaty also contains an MFN clause that requires Uruguay to extend to U.S. investors, such as Italba, the same benefits that it grants to investors from third States. […] MFN clauses like that contained in Article 4 of the Treaty not only ensure that a host State’s actions and policies do not favor some investors over others, but also imports substantive guarantees made in bilateral treaties between the host State and other States. The MFN standard guarantees the beneficiary that it will receive all benefits within its scope that the host State grants any third-State investor and its investments. As such, the MFN standard “forms one of the basic standards of international law” and can be “traced back to the dawn of international law.” MFN clauses are interpreted broadly, and “this approach has led arbitrators routinely to accept the ‘importation’ of substantive rights into an applicable investment treaty from treaties that the host State has ratified with other countries.” […] Because Uruguay has expressly guaranteed Venezuelan investors “full legal protection and security,” U.S. investors in Uruguay are entitled to the same treatment pursuant to the MFN clause in Article 4 of the Treaty.”); Italba Corporation v. Oriental Republic of Uruguay, ICSID Case No. ARB/16/9, Uruguay’s Counter Memorial, 30 January 2017, paras. 199-203 (“Based on this interpretation of Article 5, Italba invokes the BIT between Uruguay and Venezuela and, specifically, the obligation in that treaty to provide “full protection and security” which, according to Italba, requires the exercise of “due diligence and vigilance to ensure both the physical and legal protection and security of investments by foreign investors.” This argument suffers from several fatal defects. First, even in the case—quod non—that the definition of “full protection and security” in the BIT with Venezuela takes precedence over the definition agreed upon by Uruguay and the United States, Italba cannot demonstrate that not granting a new license had an adverse effect on its “legal certainty” because it was not entitled to this license and did not need it to provide the telecommunication services that had been authorized previously. Second, Article 5 does not allow Italba to substitute the BIT standard with Venezuela with the standard agreed upon by Uruguay and the United States because, in the interpretation of a standard, the intention of the Parties of the treaty, indicated in the text, is paramount. […]”); Italba Corporation v. Oriental Republic of Uruguay, ICSID Case No. ARB/16/9, Uruguay’s Rejoinder, 11 August 2017, para. 304 “In the Reply, the Claimant continues to insist on applying a legal standard that does not exist. The fatal flaw in its argument is that Article 5 of the Treaty requires only the minimum standard of treatment recognized under customary international law.555 That is what the two Parties to the Treaty, Uruguay and the United States, agreed to, a key point that even the Claimant has felt bound to acknowledge. As such, the failure of Italba’s forced attempt to apply a higher standard based on a cocktail of obligations over and above the minimum standard comes as no surprise. What is even worse for the Claimant, even if one were to assume, quod non, the existence of such a fictitious standard, there is no evidence that Uruguay in any way violated any of its obligations under Article 5.”).