Originally from Investment Treaty Arbitration and International Law - Volume 10

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I.    INTRODUCTION 

The topic for this panel and the subject matter of this paper raises a number of interesting and important questions regarding the application of a standard of investment protection which has become of central importance to investment arbitration. 

A large number of bilateral investment treaties (“BITs”), multilateral investment treaties (“MITs”) and other international legal instruments providing for the protection of foreign investments (together, “IIAs”) contain provisions guaranteeing to investors “fair and equitable treatment” (“FET”). 

The FET standard has been the subject of at least two significant debates in recent times. First, there is divergent practice and theory as to whether the FET standard is different from the customary international law concept of the minimum standard of treatment of aliens (“MST”). Second, FET has proven to be of great significance to claims made by investors under IIAs, and has therefore become a focal point for wider criticisms of the system of investor-state dispute settlement (“ISDS”), an issue which has come under public scrutiny in recent years. 

This paper seeks to address two questions which, between them, highlight both of these debates: first, where did the FET standard come from? And second, does it have a future? As will be seen, an analysis of the future of the FET standard must, to some extent, be placed within the broader context of the evolution of the ISDS system and the current calls for change to that system from some sectors, albeit this is not the topic directly implicated in this paper.

It is divided into three sections. Section II addresses the first debate: is the FET standard equivalent to, or additional to, the MST? Part (A) will briefly set out the historical context of the FET standard, while part (B) does the same for the MST. Part (C) then seeks to bring the analysis of the two standards together.

Section III addresses the second debate: is there a future for the FET standard? The first question posed by this overall challenge is whether, practically speaking, there is a real difference between the FET standard and the MST. This is addressed in Part (A). Part (B) identifies a number of criticisms that have been directed at the FET standard, seeking to put them in their proper context and to argue that they do not represent a significant problem for the continued existence of the standard. Finally, Part (C) argues the case for an autonomous FET standard, concluding that such a standard would better serve the interests of both State and private actors in the field of investment protection.

The paper concludes in Section IV with some final thoughts regarding the future of the FET standard.