Fair and Equitable Treatment

Abstract

Abstract This chapter asks how fair and equitable treatment (FET)—a legal standard that played, at best, a supporting role for much of history—has become foreign investors’ most popular weapon in investment treaty arbitration. FET is the most controversial and far-reaching standard under investment treaties, comprised of language that is particularly indeterminate. It is also the standard most often invoked by arbitral tribunals to find states in violation of an investment treaty. The chapter revisits the debates about the origins of the standard and outlines how current arbitral practice related to FET and the protection of foreign investment is guided by a value framework that projects suspicion towards state intervention going beyond market inducement and correction of market failures. Recent debates are highlighted on the standard’s elements that have proven controversial in scholarship, practice, and policy-making: legitimate expectations, legal stability, arbitrariness, and transparency. The chapter concludes with an analysis of related trends in treaty-making and arbitral practice. It is argued that treaty-making and ISDS practice should change with respect to FET, but that such change has been minimal and is unlikely to develop as needed due to the existing dispute settlement model.