What is the Fair and Equitable Treatment Standard? Content and Sources - WAMR 2015 Vol. 9, No. 1

Author(s):

Marta de Sousa Nunes Vicente

Page Count:

34 pages

Media Description:

1 PDF Download

Published:

July, 2015

Jurisdictions:

International

Practice Areas:

Arbitral Process,

BITS,

International Institutions and Rules,

Investment Disputes,

Arbitrators and Arbitral Tribunals

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Description:

Originally From World Arbitration and Mediation Review (WAMR)

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I. INTRODUCTION

The proliferation of arbitration awards on foreign investment

has given rise to some critical questions.

Investor-State arbitration is typically based on the offer by a

State under a bilateral investment treaty (BIT) to submit a dispute

under the BIT to international arbitration. Investment treaties,

which have been growing since the last quarter of the 20th

century, are international agreements between two or more

States by means of which each party is bound to treat the

investments of nationals of the other party in accordance with

some procedural and substantive standards. Investors are

normally given the power to directly bring an action against host

States before arbitral tribunals.

From the point of view of a State, investment treaties open the

host State’s legal system to “international arbitration risk,” which

may result in high monetary compensation. In CME v. Czech

Republic, for instance, the arbitral tribunal condemned the Czech

Republic to pay reparation of US$ 353 million; an amount that

exceeded the country’s health care budget.

In fact, disputes that can be resolved by international

arbitration range from the host State’s allegedly outrageous

behaviour towards an investor, to other less straightforward

situations involving regulatory changes in financial distress

scenarios. Not surprisingly, many questions have swiftly emerged

regarding the content of these international standards as well as

the legitimacy and standard of review adopted by arbitral

tribunals. The Fair and Equitable Treatment (FET) standard, in

compliance with which each party is bound to treat the other

party’s investments in a fair and equitable manner, is, by virtue of

its conceptual abstraction, the standard within which the

problems outlined above resonate the most.