The Fair and Equitable Treatment Standard in International Investment Law - Assignment Example

International Business Law Introduction Historical background of FET The aspect of modelling FET concept in the limelight of international investment proceeded in two significant ways, firstly, in the 1940-1960s due to unsuccessful State engagement in multilateral treaty making. Because of the states’ failure to align and sensor their public policy issues, the multilateral treaty-making attempts proved vital in the dissemination of the conception of FET. The FET could further show establishment of the bilateral treaty. The 1947 HCITO demonstrated the use of language and an idea of equitable treatment in numerous ways. FET was a necessity for the treatment of MFN concerning State trading and in the attempts to borrow from the practice of the USA inter-War treaties. The HCITO charter expressed the rules that needed establishment. Its negotiating materials provided an insight into the way the “just and equitable” in association with the relation to the law on investments received an understanding in the 1940s. However, just and equitable treatment received limited attentions in the public debates. It received treatment from the states as being an umbrella term that covered noble policies, which needed achievement by the conclusions made on the treaties1. Fundamentally, FET strives to strike a balance between protection of the international investment and the capability of the states to regulate the key public policies. The HCITO faced three consecutive failures. For instance, in 1948, the Bogota Economic Agreement treated the notion of just treatment as an obligation. Further, it displayed the notion as a hindrance to unreasonable, unjustified, and discriminatory measures of the government policies to the public, which might impair the rights and interests acquired legally. Secondly, in 1959, the Abs-Shawcross Draft drawing on both the international law principles and the US treaty practice indicated that the FET was an umbrella term. The term was inclusive of security and protection while excluding discriminatory measures taken in favour of the international investors and their investment. Consequently, in 1963 and 1967, the OECD drafts pertaining to the PFP needed action of the FET and explained it as customary in relation to the bilateral agreements and state policies. Moreover, it equated the FET contents with that of the IMS. Henceforth, the requirements of clear and simple rules rendered the international and the state policies in relation to international investments standards obsolete. In particular, the elasticity of FET as a concept seemed to outweigh its corresponding measure of subjectivity and vagueness. Hence, it was inappropriate in the definite contexts to pinpoint the actual concerns in relation to the international investments where they were not clearly identifiable. Finally, in the bid to offer protection to foreign investors and their investments, it was inescapable to alienate the failure of the multilateral treaties. The extreme conflicts of the interests and systems precluded the indispensable assent of the people concerned in the creation of the international law to protect the international investments. The second trend regarding making of the law came as bilateral treaties and the relations concerning failed multilateral struggles and successful bilateral efforts looked symbiotic. Essentially, the OECD and Abs-Shawcross drafts regarded the origin of FET clauses in the treaties as the mutual system. Predominantly, the latter explicitly mentioned agreements to do with certain US FCN. In the 1950 and 1960s, the US FCN offered an extensive coverage of the international investment and trade matters. It also included rules on FET in the BIT projects that had foci on the rules of investment protection. Hence, a primary reason for the inclusion of FET in the apparent BITs. Unless there is exclusion FET from the Tribunal’s jurisdiction, it is most likely to be available in most of the treaty disputes and in the MFN clauses2. GlamisGold. v. The United States and the FET ruling, for example, the foreign company received limited consent to operate in California open mines. The company got the award from chapter eleven of the NAFTA due its renewal of the unsettled discussion that engulfed the FET standards that related to the investments of the international treaty arbitrations. The opponents could argue that the mine will pose destruction to the portions regarding the trail of dreams and some areas used for education and ceremonial purposes. In addition to this controversy, the Indian Pass had protection within the CDCA in relation to the FLMPA as biologically and scenically vital public land. Despite these controversies, Glamis went ahead to execute its plans that received approval from the BLM. In this respect, the FET in question offered full protection to the Glamis case and permitted its operation in the foreign land. Nonetheless, article 1105 raises pertinent issues relating to the assent of FET interpretation under NAFTA that undermines its breach. Giving the award, it represented a decisive shift in the case laws of NAFTA since it prohibits the space for Article 1105. Further, NAFTA assumes an evidentiary methodology that requires the claimant to figure out evidence of the international customary law in order to succeed. The Ground of the Problem To claim the economic international investment order, the League of Nations had to turn to the past. The situation meant to learn from failures and successes of the international investment acts and be in a position to put in context the lessons learned in the apparent government public policies. Thus, the commercial activities of the League reveal a perpetual effort to convince the party States about the need for collaborating beyond the borders. The move meant to restore the multilateral trade, strike a balance between the individual government policies with the international strategies. In addition, FET settles the international disputes by use of reason as opposed to forcing. Finally, it focused on building the international markets3. In this assent, the FET as a vital tool empowers and protects the states in the forms pertinent to domestic action, regardless of whether there is a breach of the treaty terms. The tool offers protection and empowerment where equality is suspicious. The empowerment brings into the limelight the government public policies that hinder the execution of the international investment protection. The transnational investors and their investments could be protected under the FET cognizant of its mandate to fulfil its obligation. There has been, in the recent past, minimal justification in relation to the arbitral awards that account for the usage of genuine anticipations in FET standards. In a recent case, for example, an arbitrator observed that, assertions that FET involves obligations to meet or frustrate legitimate prospects of investors is out of order. In essence, it is not fit to term the standards as equitable and fair. The arbitrator argued that, most Tribunals only refer to the prior arbitral awards that have endorsed such given concept, thus, buttressing the use of legitimately expected principles. Observations made by Anthea Robert showcases that the jurisprudence of the investment treaties resembles a casino that is dependent on the academic opinions and Tribunal awards. Consequently, he observed that the FET ignores the states’ practices or treaty parties, and it did not find better illustrations as opposed to regular arbitral references to the expectation of legitimate prospects4. Observations have it that there exist a mechanical in contrast to a thoroughly thought in reference to previous awards. Hence, the apparent Tribunals avoid their responsibility to elucidate the roots and the FET possible limits. Furthermore, there is a lackof the exact contours that regard the protection of the legitimate aspirations of the investors. For instance, the PPAS gained exposure to scrutiny after Hungary entered the EU in 2008 during the dispute between state of Hungary and the three arbitrations over the case of electricity in Electrabels. A. v. The Republic of Hungary. The typical market statutes were incompatible with the state aid thus Hungary had to terminate the involvement of the companies in the supply of electricity. The Hungary state forced the termination of the activities conducted by the German Electrabel, and the UK Summit Generation limited despite their renowned investments in the Hungarian PPAS. They then initiated arbitrations under Article 26 of the ECT and the ICSID. The companies sought compensation regarding the damages incurred due to their termination and the subsequent lowering of the tariffs the MVM had an obligation of paying pertinent to PPAS. At last, the AES Tribunal accorded an award with the acceptance of its jurisdiction without further discussions due to the premature decisions at the time of the proceedings. In this case, that is, Electrabel v. Hungary, the claimants anticipated the decisions made to extend their claims in connection with the damages incurred. Fortunately, the Tribunal granted the claimants a mandate to be compensated due to the breach of the alleged treaties. Therefore, it illustrates that the FET had no substantial reasons to apprehend the termination of the treaties entered by the Hungarian and the foreign companies. In this respect, the Tribunals came to the rescue of the international investors and their investments. Eminently, it is the obligation of the FET to ensure protection of the international investments and at all costs guard the investors against the unfair decisions made before or after signing the treaties.5 Moreover, the notion of the breach of the authentic expectations of the international investors can be relevant to the decisions made due to the violation of treaties of foreign investments. Potesta notes that, the picture emerging in conjunction to this jurisprudence is fragmented and contradictory. In addition, jurisdictions are proving to be reluctant in embracing the concept of FET. They argue that, protection of the international investments can be achievable pursuant to other legal ideologies. Hence, the establishment of protection principles seems an unrealistic endeavour in the bid to guard the legit expectations of the international investors. In this case, the prerogative of the FET is limited given the conception of other legal Tribunals that can settle disputes. Evidently, the efforts made by FET in specific instances are not recognizable. The appropriate balance of FET on foreign investments and the state regulation of public policy issues The Regulatory Powers and the Individual Rights balance In respect to the 2011 resolution on the European future policy of the international investment, the parliamentarians stressed that the future agreements on international investment must recognize the capacities of the public interventions. Kleinheisterrkamp asserts that the Council of the EU ascertained that the policy investment in Europe should continue to permit the EU and its members to embrace and implement the necessary measures in pursuing the objectives of the public policy. For instance, the instruments reflected in the communication of the Council in light of a comprehensive international policy of investments in Europe. The Commission emphasized that the investment policy of the Union must fit the means by which the EU and its state members regulate the activities of the economy across the borders and in the Union6. The policies included were those of the environmental protection, cultural diversities, protection of the consumer rights and that of competition, besides the development policy. The early 1960s saw a declaration of an international Tribunal that based on its treaty of jurisdiction. It suggested that the treaty should possess a new legal system where there is an involvement of the international investment law. The subject must not encompass only the member states, but also the other nations. Subsequently, it should not be limited to obligations of the individuals but rather extrapolate to the rights that become a part of the legal heritage. In the Tribunal, Kleinheisterrkamp noted that the enterprise and personal interests get special protection when indulging in the international economic transactions. They obtain protection against the regulatory measures of nationals that might have adverse impacts on the value and viability of the commercial trans-border relations. Thus, the treaty allows applications and actionable rights whereby they can secure a uniform interpretation to evade exclusion of the international investors. The Metalclad v. Mexico dispute of 2000 Worthwhile, the reasons for denial of the permit to COTERIN was coherent to the Town Council of Mexico. The Mexican Council held that, the local population had rejected the operations of the COTERIN Company within their area of residence. Essentially, the ecological concerns that trail the environment coupled with the impacts to the site and the neighbouring communities are substantiating reasons for the denial of the permit. In reference to the denial of the operation permit, the State of Mexico resulted in a breach of FET under the jurisdiction of Article 1105 of the NAFTA. The eminent reasons to the violation of the treaty signed under FET for the international investments by Mexico encapsulated the legal framework that was in action long before the commencement of the Metalclad activities. In addition, the company was reliant on the federal official representations under which it operated its landfill construction. In essence, the Municipality did act with anecdotal authority due to the absence of clear procedures and guidelines that govern the construction permit. Later on, within the legal actions, the environmental concerns got no consideration. Concerning the NAFTA and Article 1105, parties must give fair treatment to the international investments and the investors as the international laws uphold. The language inherent in the provisions define the specificity of Article 1105.In this case, the NAFTA members must envisage the FET under the law of the international investment. Apparently, the explicit references to the international investment laws contrast with many BITS that have FET clauses thus fail in referring to the international law7. Agreements of the international investments Recently, the IIAs together with the limits of coverage and the international investments protection received numerous attentions. To start with, increased numbers of BITs and a growing invocation of resulting from the aggrieved international investors about the direct arbitrations against the hosting States have long shifted their foci. The focus directs at individual content provisions towards the general scope. Fundamentally, the crises of the economies have led to the renewal of the state interventions in their economies, which affects the international investors. The States suffer the consequences of the question that ringer, whether to grant the international investors a non-discriminatory and fair treatment. They hold that, this discretion may limit the governments in the adoption of anti-crisis measures, hence, entailing differential treatment to the creditors and their limitation to former benefits8. Numerous BITs that France concluded on consisted of a peculiar clause that received questionable applications and interpretations in the activities of the EDF International v. Argentina. In addition, the Arif v. Moldova that allowed the alleged claimants to benefit via the MNF clause, arising from the umbrella clauses enshrined in the BITs in association with the third States. Apparently, there is no tribunal with rigorous interpretations relevant to the provisions of the underlying treaty. Anecdotal evidence displays non-compliance with the principle of ejusdem generis. This principle is detrimental to the States and the international investments. Hence, the states concerned need to take necessary measures to offer clarity to the obligations and provisions that stem from them9. Differences between IMS and FET, and their effects on international investments FET is a legal term used in the protection of overseas investments. It helps in the dissolution of the international disputes that arise due to the breach of treaties signed by the party states. It bears the most invocations due to its breach because of awarding reparations. In spite of its importance and pedigree, its formulation is not a coherent example of the recommendation in relation to the norms applied when resolving international investment disputes10. The international treaties encompassing FET needs contextualization in the process of making the law and in accepting both discontinuities and continuities pertinent to the traditional remedies and rules. In its entirety, FET requires the investor to get mutual and fair treatment in the host country. Principally, this protection offers profound impacts to the international investments since the investors feel secure to invest in any member states to the treaties. The result is that more firms engage in international investments cognizant of the protection that covers them11. The IMS, on the other hand, assumes the jurisdiction of the international customary law and combines it with FET to offer a legal protection. The circumstance provides the minimum treatment accorded to a foreign investor. Paragraph one of the IMS ascertains that, aliens need coverage of their investments. On the contrary, the IMS claim that the conceptions of security and full protection together with FET do not need additional treatment besides the one it offers. The IMS in the basic terms offers the foundational treatments to the international investors. It also facilitates the establishment of many businesses and organizations that offer services beyond the borders12. In essence, FET being an international term that offers protection to the international investors and their investments also remains domineering in enhancing international relations. The concept facilitates establishment of more organizations beyond sole state boundaries. The model of FET is essential in the resolution of the international investments disputes, for instance; it helped in resolving the disputes that involved the Glamis, Electrabel, Metalclad, and the Arif cases. The companies in this regard were able to achieve their compensations as outlined in the FET and IMS. References Buerki, T., et al. (2014). International Minimum Standards: Market Selection Criteria for Emerging Markets. IUP, 2014. Dumberry, P. (2014). “The prohibition against arbitrary conduct and the fair and equitable treatment standard under NAFTA article 1105.” The Journal of World Investment & Trade, 15(2014) 117-151. Gazzin, T. & Tanzi, A. (2013). “International Law: Mr. Frank Charles Arif v. Republic of Moldova.”The Journal of World Investment & Trade, 14(6) 980 Kleinheisterrkamp, J. (2012). “NOTE: European Policy Space in International investment Law.” ICSID Review, 27(2) 416, 417. Kulick, A. (2014). “Case Comments: Electrabels. A. v. The Republic of Hungary; ICSID Case NO. ARB/07/19, Decision of Jurisdiction, Applicable Law and Liability, 30 November 2013 (Gabrielle Kaufmann-Kohler, Brigitte Stern v. v. Veeder).” The Journal of World Investment & Trade, 15(2014) 273, 274 Paparinskis, M. (2013). The international minimum standard, fair, and equitable treatment. Oxford, United Kingdom: Oxford University Press. Pinchis, M. (2014). “The Ancestry of Equitable Treatment in Trade: Lessons from the League of Nations during the Inter-War period.” The Journal of World Investment & Trade, 15(2014) 14. Potesta, M. (2013). “Legitimate expectations in Investment Treaty Law: Understanding the Roots and Limits of a Controversial Concept.”ICSID Review, 28(1) 90. Rogowski, R. (2015). “Emergence of reflexive global labour laws.” Industrelle Beziebungen, 22(1) 80. Ryan, M. C. (2011). “Glamis Gold, Ltd. v. The United States and the Fair and Equitable Treatment Standard.” McGill Law Journal, 56(4) 923 Sacerdoti, G. (2013). Article: BIT protections and Economic Crises; Limits to Their Coverage, the Impact of Multilateral Financial regulation and the Defence of Necessity. ICSID, 28(2) 352 Stein, P. R. (2014). Fair lending Laws and UDAAP: New Developments, Compliance Strategies, and Risk Management. Journal of Taxation and Regulation of Financial Institutions, 28(2) 43. Read More