1887

OECD Working Papers on International Investment

Selected studies on international investment and investment policy prepared for use within the OECD. They address such issues as investment agreements, dispute settlement, fair and equitable treatment, most favored nation treatment, and corruption.

English

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

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.

English

Keywords: customary international law, investment treaties, investor protection, fair and equitable treatment, bilateral investment treaties
JEL: F60: International Economics / Economic Impacts of Globalization / Economic Impacts of Globalization: General; F23: International Economics / International Factor Movements and International Business / Multinational Firms; International Business; H11: Public Economics / Structure and Scope of Government / Structure, Scope, and Performance of Government; K4: Law and Economics / Legal Procedure, the Legal System, and Illegal Behavior; F21: International Economics / International Factor Movements and International Business / International Investment; Long-term Capital Movements; F13: International Economics / Trade / Trade Policy; International Trade Organizations; K33: Law and Economics / Other Substantive Areas of Law / International Law; F53: International Economics / International Relations, National Security, and International Political Economy / International Agreements and Observance; International Organizations; H40: Public Economics / Publicly Provided Goods / Publicly Provided Goods: General; K29: Law and Economics / Regulation and Business Law / Regulation and Business Law: Other; F02: International Economics / General / International Economic Order and Integration; K23: Law and Economics / Regulation and Business Law / Regulated Industries and Administrative Law
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