LAWS6916 International Investment Law - Essay

Introduction 

The international law which protects investors and investments, has maintained key focus on fair and equitable treatment. The standards of fair and equitable treatment (FET) is highly debated topic among investors as well as host states. The host states consider it as fearful that noncompliance of fair and equitable treatment standards might cause an issue for them, by grasping them in the eyes of law. It is an important concern for host states that they should adopt universal standard of fair and equitable treatment, with an aim of avoiding any breach in the law. FET provisions are supported by International Investment Agreements (IIAs) and it is considered as obligation in all investment agreements. The governance structures of host states are considered as important for assuring smooth implementation of FET standards and provisions. FET standards are integrated with customary international law and different Bilateral Investment Treaties (BITs) assure that fair and equitable standards are implemented substantially by host nations. 

The underlying essay has focused on the extent to which states are obligated for fair and equitable treatment. Likewise, the focus is also maintained on the differences of treatment of foreign investors in developed as well as developing countries. In order to fulfil purpose of essay, the discussion has been divided in different sections. Firstly, the focus is maintained on explaining the origin of fair and equitable treatment, which is being followed by defining and explaining the fair and equitable treatment standard. The essay has also focused on scope of FET which is considered to set foundation for defining the obligations of host states. Likewise, legitimate expectations for host nations’ obligations regarding FET are also detailed and principles of breach by host states are mentioned. In order to assess FET standards and treatment of host states with foreign investors in developed and developing nations, the BITs for regulations of FET are detailed. Along with this, issues of developing host states are also discussed in the essay and current situation of BITs and FET standards in both nations are detailed. Overall, the attempt is made to critically answer the essay question and thus host nation’s obligation and extent of compliance with fair and equitable standard can be assessed in effective manner. 

Origin of fair and equitable treatment

Prior to embarking upon the states’ responsibilities about fair and equitable treatment standard, it is important to explore its origin. The notion of equitable treatment has initially been used in Havana Charter in 1948, in the context of International Trade Organization (ITO). In the Havana Charter, ITO has been empowered to suggest develop and foster bilateral and multilateral trade agreements, along with assuring fair and equitable treatment with investors and investments from one country to another. In addition to it, the Economic Agreement of Bogota was also embraced by American states. The focus of this agreement was on assuring that foreign investments are treated with fairness and states were obligated to take measures through which any discriminatory treatment is discouraged, thus enhancing rights of foreign investors. Followed by this, the OECD has also adopted protection policies in 1967, which has focused on protection of rights of other countries’ nationals, thus encouraging just and equitable treatment of foreign investments. In the subsequent years, the standard of fair and equitable treatment has been widely embraced and adopted by different nations and now it is considered as universal standard. 

Definition and Explanation of Fair and Equitable Treatment

Based on the arbitral interpretations of FET, the ‘fair’ is considered as just and unbiased, while ‘equitable’ is considered as in compliance with regulations and rules. Based on the views of different researchers, the notion of fair and equitable can be used interchangeably. The main focus of FET is on assuring that a balancing process is being followed for protection of investments, which is considered as right is all contexts and circumstances. FET is embedded into international law and thus it is linked with adoption of governance attitude, which is based on un-just rules and has the intention to offer fair treatment to all parties involved in an investment agreement. FET might be influenced by the decision of state and specific context of the state. 

As discussed by researchers, FET is considered as an unconditional standard of protection. It is substantially applied to investment in specific situation, without being affected by the treatment of entities and investment by specific host nation. Under the FET standard, any host state is not able to say that treatment of foreign investors in their state is not different from the treatment of their nationals. The protection of foreign investors is thus considered as core concern in FET standard and host state is obligated to maintain the standards of fairness and equity. 

Moreover, the further explanation of FET unveils that within the context of Bilateral Investment Treaties (BITs), the core intent of FET was to offer protection against different types of circumstances in which unfairness might be manifested. For instance, it might encompass the arbitrary cancellation of licenses, aggravation of a specific investor by unjust fines and creation of hurdles through which business of investors can be disrupted. With respect to these aspects of FET standard, it can be seen as a gap filling instrument, which addresses the gaps left by unfairness of governance regarding property protection. Therefore, FET is considered as inclusive standard which is purported to assure fairness and equity in all circumstances and offers huge protection to investors.