While the fair and equitable treatment standard is often described as an open-ended treaty norm,1 there is now a clear consensus that, among other things, the standard operates to protect foreign investors from abusive treatment, such as harassment, coercion, intimidation, duress and/or abuse of power by the host State.2 This has been widely affirmed in arbitral jurisprudence, and is increasingly reflected in contemporary investment treaty practice.3
II. Distinction with full protection and security
The protection against harassment and coercive conduct afforded by the fair and equitable treatment standard may at times overlap with, but should be distinguished from, the forms of ill-treatment covered by the full protection and security standard.
The fair and equitable treatment standard is primarily concerned with the State’s own actions which cause direct harm (e.g. State officials’ obstruction of the investor’s daily business operations and activities),4 while full protection and security is properly concerned with the State’s failure to exercise its police powers or establish systems and procedures in order to prevent harm to the investor/investment (e.g. the State’s failure to exercise, to a reasonable extent, due diligence in order to prevent third parties or State officials from harassing or otherwise injuring protected investors).5 Thus, while both standards regulate the abusive conduct of officials/organs of the State,6 the full protection and security standard may also be engaged by third parties whose conduct may not be directly attributable to the host-State.
III. Prohibited conduct
The question of whether specific State conduct constitutes impermissible harassment will turn on the facts of each case.7 While there is no typology of prohibited conduct in this area, a review of arbitral awards suggests that the following non-exhaustive list of abusive conduct may contravene the fair and equitable treatment standard:
IV. Authorized conduct
Not all actions causing distress or prejudice to an investor will engage state responsibility under the fair and equitable treatment In particular, it should be noted that:
Tribunals will often distinguish legitimate (albeit sometimes overzealous) State action from impermissible abuse,20 by reference to any one or more of the following factors:
V. Questions of evidence and standard of proof
An investor will need cogent evidence in order to establish serious misconduct by a State entity, such as intimidation or harassment.25 The same applies where claims based on the fair and equitable treatment standard are advanced on the basis of an alleged “conspiracy” or “campaign” by the host State.26 See also Burden of proof.
There is an on-going jurisprudential debate about whether claims alleging bad faith, harassment or conspiracy require a heightened standard of proof. Whereas some tribunals have embraced an elevated standard in these cases,27 others have insisted on retaining the ‘balance of probabilities’ standard,28 while adopting, in some cases, a “more nuanced” approach to standard of proof where very grave allegations are at issue.29
A. Provisional measures
Harassment claims, particularly those concerning criminal investigations and incarceration of investors, have prompted a number of investors to seek orders for provisional measures of relief from tribunals, pending final determination of the dispute.30 However, the high threshold for such interim relief means that investors have only rarely secured orders restraining the host State’s criminal investigations or prosecutorial actions.31 The majority of such requests have been dismissed.32
Like other elements of the fair and equitable treatment standard, the primary remedy for harassment claims is compensatory damages (i.e., restitutio in integrum).33 However, where the impact of harassment is non-pecuniary, an investor may seek compensation for moral injury (i.e., for shock or distress). Such claims for “moral damages” are generally only awarded in exceptional circumstances.34 Despite a possible basis for such a remedy under general international law, arbitral tribunals have been reluctant to expand this area of investment law.35
Dolzer, R. and Schreuer, C., Principles of International Investment Law, Oxford University Press, 2nd ed., 2012, pp.130-160.
Dolzer, R. and Lowe, V., Fair and Equitable Treatment in International law, in Proceedings of the Annual Meeting (American Society of International Law), Cambridge University Press, 2006, Vol. 100, pp. 69-74.
Goh, N., The Power of Tribunals to Enjoin Criminal Proceedings: A Widening Power or Converging High Bar? Italba Corporation v Oriental Republic of Uruguay, Hydro Srl and others v Republic of Albania, Teinver and others v Argentine Republic, in ICSID Review – Foreign Investment Law Journal, Vol. 33, Issue 1, Winter 2018, pp. 88-102.
McLachlan, C., Shore, L. and Weiniger, M., International Investment Arbitration: Substantive Principles, Oxford University Press, 2nd ed., 2017, 7.102-7.239.
McLachlan, C., Shore, L. and Weiniger, M., International Investment Arbitration: Substantive Principles, Oxford University Press, 1st ed., 2008, 7.76-7.140.
Sabahi, B. and Rubins, N., XIX – Fair and Equitable Treatment, Full Protection and Security, and War Clauses, in Sabahi, B., Rubins, N. and Wallace, D., Jr. (eds.), Investor-State Arbitration, Oxford University Press, 2nd ed., 2019, pp. 631-689.
Salacuse, J.W., The Law of Investment Treaties, Oxford University Press, 2nd ed., 2014, pp. 228-283.
Yannaca-Small, K., Part IV Guide to Key Substantive Issues, 20 Fair and Equitable Treatment: Have its Contours Fully Evolved?, in Yannaca-Small, K. (ed.), Arbitration Under International Investment Agreements: A Guide to the Key Issues, Oxford University Press, 2nd ed., 2018, pp. 501-531.
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