The Standard of Due Diligence in Full Protection and Security Obligation: A Pro-Investor Standard?

Abstract

Recently, a developing country was held liable to a foreign investor for not preventing acts of terrorism. This is not fiction, it is the ICSID case of Ampal v. Egypt. The basis for such responsibility in investment treaties is typically a legal obligation of host states called Full Protection and Security (“FPS”). An ICSID decision like Ampal obviously has wide-ranging implications on the Investment State Dispute Settlement (“ISDS”) system. Although it is often perceived as disastrous by many prominent scholars, it is indeed an eye-opener to the importance of defining the due diligence standard under the FPS. Neither Customary International Law nor ICSID Tribunals had provided for clear and concise borders of the due diligence standard required from host states to fulfill their FPS Obligation. This article aims to read into Customary International Law and ICSID Case Law to provide for specific thresholds that Tribunals can utilize to assess whether a host state complies with its FPS obligation or not.