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Fair and Equitable Treatment on Foreign Investment and its Effects - Essay Example

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(ii) Jurisprudence under investment treaties The considerable debate of NAFTA awards surrounding the relationship between the FET standard and IMS has also found a place within international investment agreements. When investment treaties outside NAFTA expressly refer to international law, tribunals under these treaties obviously apply the equating approach in order to interpret the FET standard.1 This approach has clearly been adopted in several awards.2 For instance, in Railroad Development Corporation v Guatemala,3 a recent award, the claimant alleged that the respondent did not treat it fairly and equitably contrary to Article 10.5 of the Central America Free Trade Agreement (CAFTA), beca…
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Download file to see previous pages xposes the claimant to sectional or racial prejudice, or involves a leak of due process”.7 However, the jurisprudential doctrine of understanding the international law minimum standard has also been developed under international investment agreements.8 Essentially, there have been two views surrounding the understanding of the minimum standard of treatment, wherein breaches lead to violations of the FET standard. Firstly, the traditional view, understands the customary international law minimum standard as was reflected in the Neer case in the 1920s.9 For instance, in Alex Genin v Estonia,10 where the respond authorities revoked the claimant’s bank licence, the tribunal illustrated the conducts that would violate the minimum standard; they concluded that they “would include acts showing a wilful neglect of duty, an insufficiency of action falling far below international standards, or even subjective bad faith”.11 Thus, it appears clear that the tribunal deals with the traditional view because it believes that the FET standard would be breached in case State acts in bad faith. Secondly, the evolutionary view, considers that the customary international law minimum standard has been evolved since the Neer case. For example, in Azurix case,12 after analysing some awards inside and outside NAFTA the tribunal believed that the minimum requirement to satisfy the FET standard has evolved, and held that “such intention and bad faith can aggravate the situation but are not an essential element of the standard. It is also understood that the conduct of the State has to be below international standards but those are not at the level of 1927s”.13 Furthermore, in the Railroad case,14 the tribunal also discussed the evolution of the minimum standard and adopted the conclusion that “the minimum standard of treatment is constantly in a process of development including since Neer’s formulation”.15 Therefore, after examining the ways of interpreting the FET standard, it is logical to say that the controversy between the equating and plain meaning approaches is constantly reviewed in most cases. This, without a doubt, appears in many arbitral awards both within and outside NAFTA, because tribunals are quite reluctant to resolve this controversy.16 In addition, investors almost adopt an expensive view, as in the case of the Pope & Talbot case, while host States seek to support the NAFTA FTC approach of interpreting FET. However, it seems that none of the advanced approaches are able to provide persuasive reasons for their construction of FET, due to the fact that “this controversy is misguided, and the dichotomy presented by ...Download file to see next pagesRead More
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