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Author

Mr Borja Alvarez

L.L.M., esq. / Principal Associate, International Arbitration Group - Cuatrecasas, Gonçalves Pereira

Minimum Standard of Treatment (MST)

I. Definition

1.

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

2.

This standard provides a “floor” to the treatment that States must afford to aliens in the form of a set of essential rights that States are obliged to respect vis-à-vis foreign nationals and their property.4 5

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

4.

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

II. MST under customary international law

5.

The customary MST has been generally understood to comprise rights, guarantees and obligations:

  1. with respect to the administration of justice in cases involving aliens (which evolved in the standard of denial of justice now also embodied under the Fair and Equitable Treatment (“FET”) formulations of most BITs);15
  2. concerning the protection of aliens and their property from specific disturbances caused within the State’s territory16;
  3. regarding the treatment of aliens under detention in accordance with an “ordinary standard of civilization”17; and
  4. in case of expulsion of aliens.18
6.

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

7.

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

III. MST in investment treaty practice – specific formulations of MST

8.

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:

  1. the MST provision prescribed the customary rule as a minimum standard of treatment;
  2. references to the FET and Full Protection and Security (FPS) standards do not require treatment “in addition to or beyond” that required under MST; and
  3. a determination of a breach of any other standard of protection does not per se establish a breach of the MST. Such reference does not create additional substantive rights.

IV. Possibility to elevate the MST standard of protection by recourse to MFN treatment

9.

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

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