Originally from the American Review of International Arbitration

I.   INTRODUCTION

The super-norm in the investment treaty regime  is the treatment standard of fair and equitable treatment (“FET”) —a standard that has no analogue in the trade regime.   FET features in nine out of ten investment treaties.  It also radiates out to the investment regime more generally.  The expression “fair and equitable” is found not only in FET provisions in investment treaties but also in other provisions such as free transfer of funds clauses.   The annulment committee in Standard Chartered Bank v. TANESCO held that it could review the arbitral tribunal’s assessment of the merits only for whether it was “fair and equitable”—language that is not found in article 52 of the ICSID Convention that sets out the grounds for annulment.   

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Since 2000, investment arbitration tribunals have construed the FET standard broadly compared to other treatment standards in investment agreements.   The wide application of FET has prompted concerns that this standard unduly restrains the host-State’s regulatory space.   Notably, in contrast to the treatment standard of indirect expropriation, a host-State may breach FET even if its conduct did not cause a substantial deprivation of the investment. Additionally, in contrast to national treatment and most-favored nation treatment, a host-State can breach even if its conduct is non-discriminatory.  The development of FET by investment tribunals is possible in part because FET provisions across investment treaties resemble each other. This common core of FET has allowed arbitral tribunals to interpret the FET standard in one treaty considering similar provisions in other treaties. 

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[…] this paper is structured as follows:  Section II explains the dataset and this article’s text-as-data-methodology.  Section III sets out the main types of FET provisions, drawing on the existing literature. Section IV examines the clusters that emerge from this paper’s text-as-data methodology and considers FET as a social network.  Section V contends the FET standard is a prominent example of a boilerplate provision.  Section VI argues that the character of FET as boilerplate suggests that investment tribunals ought to adopt a modified interpretive stance compared to negotiated provisions in treaties. Boilerplate provisions should be interpreted using the contra proferentem principle —with ambiguities resolved against the drafter of the FET provision—and considering the reasonable expectations of the contracting state that received a draft boilerplate FET provision from its counterparty.