Minimum Standard Of Treatment Research Articles

NAFTA’s FET Clause Is (Practically) Dead! Long Live Its Legacy!: An Empirical Survey of How Tribunals Have Interpreted FET Clauses Linked to the Minimum Standard of Treatment

The article examines how awards, outside NAFTA and CAFTA, have assessed fair and equitable treatment (FET) clauses where the standard of protection is expressly linked to the Minimum Standard of Treatment (MST). It shows that in the last ten years, tribunals have generally adopted a restrictive approach which is in line with NAFTA case law. They have defined the content of the standard similarly to NAFTA tribunals and have also referred to a high threshold of severity or seriousness to find a breach. The article argues that while the FET clause in the CUSMA (replacing NAFTA) will be of limited practical relevance in the North American context, what matters is that the legacy of NAFTA case law on the FET is likely going to be felt for decades to come.

An Empirical Study of How Tribunals Interpret Stand-Alone FET Clauses regarding Their Relationship with the MST and How It Impacts Findings on Liability

This article provides the first empirical survey since the 2012 UNCTAD Report of how tribunals have addressed a specific type of Fair and Equitable Treatment (FET) clause: stand-alone clauses containing no reference to international law or any other standard. The vast majority of awards did not take a position on the issue of whether that standard offers the same or different level of protection compared to the Minimum Standard of Treatment (MST) under custom. Yet, those that did have overwhelmingly concluded that the clause must be interpreted to have an autonomous character, not related to the MST. These tribunals have also given broad interpretation of the scope and content of the clause which, in turn, had an impact on how they have addressed matters of liability and compensation. The success rate of FET claims is higher for tribunals which have expressly stated that a stand-alone FET clause has an ‘autonomous’ character compared to others which did not take a position on this question (two-thirds versus 50%). Notably, the overall success rate of FET claims under a stand-alone clause (50%) is much higher compared to that of awards examining FET clauses where the standard is expressly linked to the MST.

As inconsistências da solução investidor-Estado na proteção internacional do investidor estrangeiro: análise das principais cláusulas substantivas dos BITs a partir dos casos arbitrais ad hoc, sob a perspectiva dos países receptores de capital

International investment law is historically structured by the unilateral protection of the foreign investor. The dissemination of the Bilateral Investment Treaty (BIT) model dates back to the second half of the twentieth century, and its expansion occurred only after the 1980s. BITs consist of an international agreement comprising substantive and procedural rules, defining the protection of foreign investment and investors in a territory other than their nationality, as well as establishing a dispute resolution model, with the adoption of the Investor-State solution system via ad hoc arbitration. In the 21st century, after decades of prevalence of BITs, there have been numerous criticisms of this model, characterized by subjective and controversial decisions, incongruous interpretations and, above all, by blocking the legitimate exercise of the State to dispose of its public interest, such as environmental protection, health and economic measures. The article analyzes these substantive rules from ad hoc arbitration cases: (i) National Treatment (NT); (ii) Most-Favored-Nation Treatment (MFN); (iii) Minimum Standard of Treatment (MST) principle; (iv) Fair and Equitable Treatment (FET); (v) Full Protection and Security (FPS); (vi) Direct and Indirect Expropriations and Compensation; and (vii) Umbrella Clause. Finally, the article concludes that the arbitral awards are inconsistent and inflict serious damage to the exercise of the States, especially to host States, which is evidenced by the recent amendments of the BITs by more restrictive models of international investment protection.

In Need of a Paradigm Shift: Reimagining Eco Oro v Colombia in Light of New Treaty Language

Abstract States are somehow stuck in a tension between going further and faster with legislation targeting environmental protection, as well as climate adaptation and mitigation, but also ensuring that they fully meet their legal obligations under international investment agreements (IIAs). This tension prompts the question whether reformed IIAs can address this challenge and secure the necessary policy space for States’ environmental and climate change related regulations. This question is explored by rewriting the Eco Oro v Colombia majority decision in the specific context of the minimum standard of treatment (MST) using a reformed treaty as a legal basis. Such a ‘rewriting’ exercise aims at envisaging the full potential of reformed treaty language for more balanced outcomes. Overall, clarifications to MST may assist States in reasserting a certain degree of control over the interpretation of their treaties. But more than piecemeal change is certainly needed to achieve a deeper paradigm shift in the international investment system.

Fair and Equitable Treatment Standard in International Investment Law: The Customary Status

Fair and equitable treatment (FET) is an important standard in international investment law. However, this standard is not free of controversy among governments, scholars and in arbitral tribunals. The historical challenge of FET is its relation with international minimum standard of treatment under customary international law. In recent times, a new challenge arose asking whether FET itself has entered into the family of customary international law or not. This inquiry is important because if the standard has, in fact, become a part of customary international law, then even where States exclude reference to FET for foreign investors in their treaty arrangements, this level of treatment will come into effect by operation of law to such investors. This paper seeks to find an answer for this question. In this respect, the paper first went through the opinions of different scholars. As observed, a few of them supported such a recognition by basing their ideas mostly on the inclusion of FET in the majority of for instance BITs. While the rest of scholars has opposed such an idea by backing the conventional status of FET or pointing on the lack of uniformity of State practice plus the absence of opinio juris among countries. In the second step, the paper analyzed the arbitral cases dealing with such a question. It found, that except a few cases, the rest have not agreed to such a recognition. Finally, the paper looked for the requirement of State practice and opinio juris to see if FET has become part of customary international law. It found that although State practice is general and representative but it is not uniform and consistent. In addition, there was no opinio juris or legally binding believe to accept the customary status of FET. In short, the majority of scholars, arbitral practice, as well as the practice of state and opinio juris does not confirm that FET has entered into the corpus of customary international law. Keywords: Fair and Equitable Treatment, Customary International Law, Multilateral Agreements, BITs, Arbitral Practice, State Practice DOI: 10.7176/JLPG/105-14 Publication date: January 31 st 2021

The Right to Be Heard in European Union Law and the International Minimum Standard- Due Process, Transparency and the Rule of Law

The right to be heard is well known as a fundamental right of the European Union legal order. Less well known is its relation to customary international law predating international human rights law. This paper sets forth two arguments. First, the right to be heard enshrined in the Charter of Fundamental Rights of the EU must be interpreted in conformity with the right to be heard as protected under the customary international minimum standard of treatment of aliens. Second, the latter standard implies that the right to be heard is an emanation of the broader concept of adjudicatory transparency, which is a primary aspect of the rule of law, with the extended implication that the right to be heard serves to enable individuals to participate in and influence adjudicatory decision-making by engaging in a rational dialogue with the decision-making authority.

Eli Lilly v. Canada: A Patently Clear-Cut Dismissal on the Facts, but Opening the Door for Future Claimants on the Law

In March 2017, the Tribunal in Eli Lilly v. Canada issued a unanimous final Award, dismissing all claims on the basis that the claimant ‘failed to establish the factual premise of its case’. Despite finding against Eli Lilly on the facts, the Lilly decision appears to have opened the door (at least slightly) for investors on two novel points of law. First, the Tribunal suggested that a judicial decision which does not constitute a denial of justice may nonetheless qualify as a breach of the North American Free Trade Agreement's (NAFTA's) minimum standard of treatment (Article 1105) and/or protection against expropriation (Article 1110). Second, the Tribunal did not reject – and indeed appeared willing to consider – the proposition that an investor may support its investment arbitration claims by relying on a host state’s international commitments on the treatment of intellectual property rights. Given the potential importance of these issues in future arbitrations, this article first provides an overview of the Lilly decision. It then explores in greater depth the two legal issues raised above, examining the arguments put forward by the parties, the view expressed by the Tribunal and the potential effect on the development of international investment law, with a particular focus on how these issues may come into play in any future claims arising from the issuance of a compulsory license.

Fair and Equitable Treatment: Its Interaction with the Minimum Standard and Its Customary Status

Abstract The book addresses two questions which have been debated by scholars in the last 20 years regarding the fair and equitable treatment (‘fet’) standard found in bits. It examines the interaction between the ‘minimum standard of treatment’ (mst) and the fet standard. It first analyses the fascinating story of how the concept of the mst emerged in the early 20th Century, its subsequent decline from 1960s until the 1990s and its surprising recent ‘resurrection’ in the year 2000. This evolution has had a direct impact on the emergence and subsequent development of the fet standard and explains why States started referring to that standard instead of the mst in their investment treaties. One question addressed in this book, is whether fet is an autonomous standard of protection to be accorded to foreign investors, or is a mere reference to the mst under customary international law. Given the fact that the fet standard is found in the overwhelming majority of bits, another question which arose is whether or not it should now be considered in and of itself as a rule of customary international law.

Statess Reassertion of Control Over International Investment Law - (Re)Defining Fair and Equitable Treatmentt and Indirect Expropriationn

‘Fair and equitable treatment’ (FET) without doubt is the most invoked standard in investment treaty arbitration, and its importance as a standard of investment protection cannot be underestimated. The prohibition of indirect expropriation commonly found in international investment treaties is less frequently successful as a stand-alone claim in investment disputes, but it constitutes nevertheless one of the most invoked provisions in investment disputes. Both investment protection provisions share many common principles, such as their standardly vague formulation or definition in the vast majority of international investment agreements. They also share the reputation of being generally considered as detrimental impediments to the States’ right to regulate and to take measures in the public interest. This is precisely why both FET and the prohibition of indirect expropriation have attracted much criticism over recent years. This chapter investigates how States, through definitions of the FET standard and the prohibition of indirect expropriation, have sought to assert or reassert control over investment law. Indeed, there are clear differences in the formulation of the FET standard and the prohibition of indirect expropriation. ‘Western hemisphere’ bilateral investment treaties (BITs) used in Western European States tend to include FET as a stand-alone standard of treatment, whereas North American investment treaties, as exemplified, inter alia , in the North American Free Trade Agreement (NAFTA) and the US Model BIT 2012, tend to equate FET with the customary norm on the minimum standard of treatment. Similarly, distinctions in the formulation of what constitutes a prohibited indirect expropriation are widespread, and here again, the contrast between the practice of North American treaties and those based on the ‘western hemisphere’ BITs show that the former tend to more precisely define what constitutes a prohibited indirect expropriation and which regulatory measures cannot amount to an expropriation, while the latter more generally contain a generic definition of the term. These differences highlight one important issue: States generally have full discretion in how to formulate these provisions in their treaties. And while ‘tradition’ has in the past influenced the choice of one model or formulation over the other, increasingly policy-related arguments now define the precise formulation of FET and the prohibition of indirect expropriation, provided, of course, that all States parties to the treaty agree on the terminology.

Too Low a Threshold: Bilcon v Canada and the International Minimum Standard of Treatment

AbstractTreaty obligations to afford foreign investors a minimum standard of treatment (MST) and/or fair and equitable treatment (FET) are hallmarks of international investment law. However, the relationship between such treaty-based obligations and customary international law has been the subject of considerable debate. In the North American Free Trade Agreement (NAFTA) context, the majority tribunal decision and dissenting opinion in Clayton and Bilcon of Delaware Inc. v Government of Canada (Bilcon) reflect ongoing disagreement regarding the threshold for breach of the MST under NAFTA Article 1105. This article charts NAFTA investment tribunals’ decisions regarding FET claims under Article 1105 and the development of the customary international MST on which that provision is based, in particular, the prohibition on arbitrary treatment. It argues that the majority in Bilcon applied an inappropriately low threshold in finding a breach of Article 1105, which could represent a new and unwelcome direction in NAFTA Chapter 11 jurisprudence.

Amicus Curiae Submission Eli Lilly and Company v. The Government of Canada

This amicus brief was submitted to the North American Free Trade Agreement (NAFTA) arbitral tribunal in Eli Lilly v. Canada (ICSID Case No. UNCT/14/2) by Amici. Amici are scholars whose research and teaching focus is intellectual property law (Dr. Burcu Kilic, Professor Brook Baker, HU Yuanqiong, Professor Cynthia Ho, Dr Luke McDonagh, Pratyush Upreti and Yaniv Heled, J.S.D.). The brief was accepted by the Tribunal with respect to Dr. Burcu Kilic (Washington DC, United States), Professor Brook K. Baker (Boston, United States), Professor Cynthia Ho (Chicago, United States), and Mr. Yaniv Heled J.S.D. (Atlanta, United States), denied with respect to the other academics for lack of standing.In September 2013, the Claimant Eli Lilly and Company (Lilly) launched a CDN $ 500 million claim against the Government of Canada under the North American Free Trade Agreement’s (NAFTA) investment chapter. The Claimant is challenging Canada’s invalidation of secondary patents related to the previously-known and patented active ingredients atomoxotine (Strattera) and olanzapine (Zyprexa), drugs used to treat attention deficit hyperactivity disorder, schizophrenia and bipolar disorder. Lilly is challenging the decision of Canadian courts to invalidate two patents for failing to comply with Canada’s requirement of usefulness after failing to prevail in Canadian courts. The challenge is under the “investment” chapter of NAFTA, rather than the IP chapter. Lilly argues that this “improper” and “discreditable” invalidation of its patents constitutes a NAFTA-prohibited “indirect expropriation” and a breach of NAFTA’s guarantee of a “minimum standard of treatment” for foreign investors. This case against Canada is a case of first impression and the first case pursuing investor-state dispute resolution (ISDS) with respect to intellectual property rights affecting pharmaceuticals, the case has heightened significance. The outcome of this case will be instructive about whether other foreign investors pursue future attacks on substantive policies embedded in national patent systems through the arbitral proceedings challenging differences in patentability standards that frustrate their “expectations”.Of particular concern is that this challenge may make countries hesitant to use legitimate flexibilities under the Agreement on Trade Related Aspects of Intellectual Property (TRIPS). In addition, the invalidated patents are secondary patents that Eli Lilly seeks to use to extend its patent term after initial patents expired, but without substantial evidence that these new inventions are in fact useful. Although Canada bars such patents under the “promise of a patent” for usefulness that is unique, other countries similarly bar such patents, under different patentability doctrines.The Brief addresses, amongst other issues: • NAFTA Chapter 17 patentability standards • Patentability standards in Canada and their judicial interpretation• Secondary patents and patent evergreening • Evolving nature of patent law• Abuse of the system of international investment protection and misuse of the system• Adverse chilling effect of the case on efforts to enhance access to medicines globally

Development of Rule-Based Investment Protection Provisions in Mega-FTAs: A Manifestation or a Negation from Customary International Law Principles?

Customary international law affirms the obligation of the host state to protect foreign investors by according the minimum standard of treatment of foreign investors. These become well-established principles of fair and equitable treatment and full protection and security in foreign investment law. Led by the North American Free Trade Agreement (NAFTA), investment protection provisions are heavily negotiated in modern FTAs. The jurisprudence of investment protection in early FTAs, namely NAFTA, relied on principles of customary international law as the texts of agreements did not contain definitions or exemplification to the principles. A number of mega-FTAs, including the Trans-Pacific Partnership (TPP) and the Trans-Atlantic Trade and Investment Partnership (TTIP) bring about changes in the minimum standard of treatment of foreign investors. In contrast to a principle-led approach, the minimum standard of treatment terms are more clearly defined in recent mega-FTAs. The fair and equitable treatment term in the TPP, for example, includes the obligation not to deny justice in criminal, civil or administrative adjudicatory proceedings in accordance with the principle of due process embodied in the principal legal systems of the world. The proposed TTIP provides that a breach of the fair and equitable include a targeted discrimination on manifestly wrongful grounds, such as gender, race or religious belief. The paper proposes that there has clearly been a shift in the minimum standard of treatment clause from the principle-based approach to the rule-based approach in recent mega-FTAs. On the one hand, the rule-based provisions in the new mega-FTAs could limit the scope of ordinary principles of customary international law and negate from a long-held jurisprudence in foreign investment law. On the other, the rule-based provisions could manifest the intention of parties to be bound by obligations provided by agreements and limit the expansive view of tribunals in applying the principle.

Canute Confronts the Tide: States versus Tribunals and the Evolution of the Minimum Standard in Customary International Law

“Fair and equitable treatment” and “the minimum standard of treatment”, as quintessential “evaluation rules”, require those who apply such rules to take account of changing cultural values. These values develop in a dynamic and increasingly democratic customary international law process, which now incorporates, in addition to States, many non-State actors. Once States insert an evaluation rule in a treaty with a jurisdictional clause, they must share custody of its evolution with arbitral tribunals, whose mandate includes customary international law. State efforts to recapture control of the evolving content of “fair and equitable treatment” and “the minimum standard of treatment” have proved ineffective and will probably continue so.

Comparing the Function of National Treatment in WTO & International Investment Law

National treatment is a basic component of both investment treaties and WTO Law. It guarantees a minimum standard of treatment of foreign investments in like circumstances and like products vis-a-vis their domestic counterparts. The focus of this essay will be to illustrate the point that whereas national treatment clauses in WTO law and in international investment law are aimed at ensuring non-discrimination based on the nationality of the subject matter, there are fundamental differences which are incapable of being infused from one regime to another.

Glamis Gold, Ltd. v. The United States and the Fair and Equitable Treatment Standard

This article critiques the arbitral tribunal’s decision in Glamis Gold, Ltd. v. The United States of America on the basis of its interpretation of the fair and equitable treatment standard (FET) owed by state parties to foreign investors under NAFTA article 1105. Part I outlines the post-WWII development of the FET standard in relation to the restrictive, customary international law of minimum standard of treatment (MST). The author traces the expansive treatment of the FET standard by tribunals in both bilateral investment treaty and NAFTA disputes. Despite a binding Free Trade Commission Note of Interpretation limiting the scope of article 1105, NAFTA tribunals had consistently interpreted the FET standard more broadly until the award in Glamis. Part II evaluates the tribunal’s reasoning in Glamis, arguing that it departs from a growing body of jurisprudence on the FET standard under NAFTA without sufficient justification. The author also criticizes the tribunal’s decision to place an unprecedented evidentiary burden on the claimant by requiring proof of both state practice and opinio juris of the FET standard. The conclusion suggests that the decision of the tribunal in Merrill & Ring Forestry L.P. v. Canada may provide a better approach to balancing governments’ legitimate regulatory objectives and foreign investors’ treaty rights.

Legal Issues Regarding Foreign Investment and the Implementation of the Japan-Indonesia Economic Partnership Agreement

The entry into force of the Japan-Indonesia Economic Partnership Agreement on July 1, 2008, is highly expected to boost Japan’s investment in Indonesia due to the fact that it is the most comprehensive bilateral agreement between the two countries. The JIEPA covers most areas of economic cooperation, including: taxation, trade in goods, trade in services, movement of natural persons, government procurement, intellectual property, investment etc. Some potential legal issues are anticipated during the implementation of the JIEPA due to some differences between the JIEPA and the Indonesian legal system. This article focuses on issues related to foreign investment related law, namely: instrument of ratification and its legal implications; review mechanism; legal certainty; continuation of business activities; termination of business activities; protection and guarantee of foreign investment such as minimum standard of treatment; investment risks; and disputes settlement mechanism.

Neer-ly Misled?

One of the most heated debates concerning the standards of protection for foreign investment seems to have taken the wrong track and never looked back. The lapse relates to the question whether the concepts of “fair [or ‘just’] and equitable” treatment and “full protection and security” are synonymous with, or part of, the customary-law “minimum standard for the treatment of aliens.” This issue has given rise to now-familiar sub-questions: (i) whether treatment compliant with the customary-law minimum standard is by definition fair and equitable (and consistent with the duty to ensure protection and security); and (ii) whether the customary-law standard of treatment is frozen in time. But a more basic matter seems to have been eluded by a hasty assumption, namely that the minimum standard of treatment looks to a single, generally applicable standard of review with respect to all types of state conduct, and that the test was set forth in the 1926 Neer decision of the United States– Mexico General Claims Commission.The record shows that this assumption is unsustainable. The Neer criterion of “outrage, … bad faith, … willful neglect of duty” and glaring “insufficiency of governmental action” applied only to what the Commission regarded as denial of justice claims. In all other cases, and in particular with respect to “direct responsibility for acts of executive officials,” the elements of the Neer formulation were “aggravating circumstances,” and not necessary to constitute an international wrong.

The Quest to Define "Fair and Equitable Treatment" for Investors under International Law

This article critically analyses the latest Awards in the NAFTA Chapter 11 Pope & Talbot case. The Final Award in Respect of Damages, issued on 31 May 2002, contains very interesting developments in the proper interpretation to be given to the concept of "fair and equitable treatment" included in the "minimum standard of treatment" clause of NAFTA Article 1105. Is "fair and equitable treatment" a concept which should be applied in addition to the minimum standard of treatment of investors under international law? Is there a threshold limitation whereby governmental conduct complained against by foreign investors must be "egregious" or "outrageous" in order to breach this minimum standard? The Award also tackles the question of the validity and effect of the Nafta Commission's "Interpretation" of Article 1105, issued on 31 June 2001, as well as the interaction of this Interpretation with the "most-favoured-nation" clause contained in NAFTA Article 1103.