Addressing the balance of interests in investment treaties

The fair and equitable treatment (FET) provision has leapt to prominence in the last 15 years as the principal ground of liability at issue in many if not most investment treaty arbitration claims. In debates about the impact of investment treaties on the right to regulate, FET is second only to investor-state dispute settlement (ISDS) as the most-cited provision. This paper examines government action to address the balance between investor protection and the right to regulate by limiting fair and equitable treatment provisions to the minimum standard of treatment under customary international law (MST-FET). The paper reviews the distinction between MST-FET clauses and autonomous FET clauses, and notes growing use of an express MST-FET approach in many regions. NAFTA governments’ views about the nature of the MST-FET standard, how it is identified, and its content are then examined in detail. An initial focus on NAFTA, while limited, is justified due to many singularities in NAFTA, including numerous government interpretations of MST-FET since 1994, their availability to the public and the comparatively higher success rate of NAFTA governments in defending FET claims. The paper concludes with brief comparisons between the government views and the views of ISDS tribunals and commentators.

OECD Working Papers on International Investment

Addressing the balance of interests in investment treaties

The limitation of fair and equitable treatment provisions to the minimum standard of treatment under customary international law