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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

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  • David Gaukrodger

Abstract

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.

Suggested Citation

  • David Gaukrodger, 2017. "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," OECD Working Papers on International Investment 2017/3, OECD Publishing.
  • Handle: RePEc:oec:dafaaa:2017/3-en
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    File URL: http://dx.doi.org/10.1787/0a62034b-en
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    More about this item

    Keywords

    bilateral investment treaties; customary international law; fair and equitable treatment; investment treaties; investor protection;

    JEL classification:

    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations
    • F60 - International Economics - - Economic Impacts of Globalization - - - General
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H40 - Public Economics - - Publicly Provided Goods - - - General
    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law
    • K29 - Law and Economics - - Regulation and Business Law - - - Other
    • K33 - Law and Economics - - Other Substantive Areas of Law - - - International Law
    • K4 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior

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