Abstract
It is widely recognized that states receiving foreign direct investment (FDI) may greatly benefit from it, as it is one of the driving forces of economic development. Nevertheless, if FDI is not regulated properly, it may lead to environmental harm, social unrest, ‘race-to-the-bottom’ in regulatory standards as well as other negative consequences. As the world is approaching the end of the second decade of the twenty-first century, there is an increasing recognition of the need for a modern legal framework of FDI that provides not only for the protection of investors’ rights, but also properly addresses investments’ wider social, economic, and environmental effects. Although historically the emphasis of the investment law has been placed primarily on investment protection, such an asymmetrical treatment of FDI is slowly, but steadily giving way to the new generation legal framework of FDI, the objective of which is not only to protect investment, but also advance host states’ sustainable development. One way to promote such a legal framework is by reforming ‘old generation’ international investment agreements. This paper is focused on the analysis of the following major standards provided in most international investment agreements: (1) fair and equitable treatment, (2) national treatment, (3) most-favored-nation treatment, (4) full protection and security, and (5) observance of obligations or so-called “umbrella clause”. While in general these standards are important for the protection of investors’ rights, the broadly formulated and unbalanced versions of these standards are now being increasingly challenged for limiting host states’ legislative and regulatory powers and for being unclear which has thus far resulted in a number of inconsistent arbitral awards. The paper analyzes these investment protection standards via an examination of relevant arbitral awards and investment agreements and proposes ways how they can be better balanced so that both the interests of investors and states can be fully accommodated.
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Notes
- 1.
In this respect, as Gus Van Harten notes, “…investment treaties apply a range of standards of review designed to protect investors from regulation or interference by the state”. See Van Harten (2008), pp. 80–81. These treaties also “…authorize arbitrators to scrutinize virtually any sovereign act of the states that may affect the assets of a foreign investor”. See Ibid 93. For a comprehensive analysis of bilateral investment treaties see generally Vandevelde (2000), pp. 469–502; Salacuse and Sullivan (2005), pp. 67–129.
- 2.
Pritchard (2005), p. 85.
- 3.
UNCTAD (2019) International Investment Agreements. http://investmentpolicyhub.unctad.org/IIA. Accessed 3 March 2019.
- 4.
Maupin (2014), p. 382.
- 5.
- 6.
Wouters et al. (2013), p. 48.
- 7.
Sornarajah (2012), p. 234; See also Wouters et al. (2013), p. 69 (“The emerging new generation of BITs, perhaps evidencing a convergence in the interests of the community of States as alternatively home and host States, and resulting in a rebalancing of respective rights and responsibilities, hopefully involves just such a development”).
- 8.
A recent example is India, who has announced its decision to renegotiate more than 50 BITs. See Economic Times (2016) India to Renegotiate All Bilateral Investment Pacts. http://economictimes.indiatimes.com/news/economy/policy/india-to-renegotiate-all-bilateral-investment-pacts-nirmalasitharaman/articleshow/53385020.cms. Accessed 3 March 2019.
- 9.
U.S. Department of State. 2012 U.S. Model Bilateral Investment Treaty. https://www.state.gov/documents/organization/188371.pdf. Accessed 3 March 2019. Office of the United States Trade Representative. 2004 U.S. Model Bilateral Investment Treaty. https://ustr.gov/archive/assets/Trade_Sectors/Investment/Model_BIT/asset_upload_file847_6897.pdf. Accessed 3 March 2019.
- 10.
Patel (2016); India’s Model Bilateral Investment Treaty. https://investmentpolicyhubold.unctad.org/Download/TreatyFile/3560. Accessed 3 March 2019.
- 11.
Titi (2015), pp. 639–661.
- 12.
European Commission (2013) Investment Protection and Investor-to-State Dispute Settlement in EU agreements 1. http://trade.ec.europa.eu/doclib/docs/2013/november/tradoc_151916.pdf. Accessed 3 March 2019.
- 13.
Ibid.
- 14.
Ibid 2.
- 15.
UNCTAD (2010) Denunciation of the ICSID Convention and BITs: Impact on Investor-State Claims. http://unctad.org/en/Docs/webdiaeia20106_en.pdf. Accessed 3 March 2019; IISD (2017) Ecuador denounces its remaining 16 BITs and publishes CAITISA audit report. https://www.iisd.org/itn/2017/06/12/ecuador-denounces-its-remaining-16-bits-and-publishes-caitisa-audit-report/. Accessed 3 March 2019.
- 16.
South Africa decided to let its BITs lapse without extending them after a group of investors filed an arbitral claim against it, arguing that the new mining legislation requiring each mining company to achieve 26% ownership by historically disadvantaged South Africans constitutes expropriation and unfair and inequitable treatment. See Piero Foresti et al. v The Republic of South Africa, International Centre for Settlement of Investment Disputes [ICSID], ARB (AF)/07/1, Aug. 4, 2010, https://icsid.worldbank.org/en/Pages/cases/casedetail.aspx?CaseNo=ARB(AF)%2f07%2f1. Accessed 3 March 2019; See also Tajti (2015), p. 196; Hamzah (2018), pp. 135–177.
- 17.
UNCTAD (2015) World Investment Report on “Reforming International Investment Governance.” United Nations. xi. http://unctad.org/en/PublicationsLibrary/wir2015_en.pdf. Accessed 3 March 2019.
- 18.
As noted by Alvarez, “FET is not only the most frequently invoked claim by investors, it is also the most successful on their behalf”. See Alvarez (2011), p. 177; See also Muchlinski et al. (2012) (FET “has emerged as the most relied upon and successful basis for IIA claims by investors”); Shan (2012), pp. 23–25 (discussing the nature of FET standard); Dolzer (2005a), pp. 87–106; Lester (2015), p. 78.
- 19.
Agreement for the Promotion and Protection of Investments, United Kingdom of Great Britain and Northern Ireland - the Kyrgyz Republic, Dec. 8, 1994, Art. 2 (2). https://investmentpolicyhubold.unctad.org/Download/TreatyFile/1863. Accessed 3 March 2019.
- 20.
See generally Schill (2009b), p. 263 (“[F]air and equitable treatment does not have a consolidated and conventional core meaning as such nor is there a definition of the standard that can be applied easily”); Sornarajah (2012), p. 204 (FET is “…vague and is open to different interpretations” and “…has caused much anxiety”); Muchlinski (2007), p. 635 (“[T]he fair and equitable treatment standard is shrouded with considerable uncertainty”); Muchlinski et al. (2012), p. 1 (“…[T]he vague and broad wording of the obligation carries a risk of an overreach in its application,” since it “…may be applied in investor-State arbitration to restrict host-country administrative and governmental action to a degree that threatens the policymaking autonomy of that country”). For a comprehensive analysis of the FET standard see Kläger (2013).
- 21.
PSEG Global, Inc., Konya Ingin Electrik Üretim ve Ticaret Limited Sirketi v. Republic of Turkey. International Centre for Settlement of Investment Disputes [ICSID], ARB/02/5, Jan. 19, 2007, Sec. 239. http://www.italaw.com/sites/default/files/case-documents/ita0695.pdf. Accessed 3 March 2019.
- 22.
Jan de Nul N.V. Dredging International N.V. v. Arab Republic of Egypt. International Centre for Settlement of Investment Disputes [ICSID], ARB/04/13, Nov. 6, 2008, Sec. 188. http://www.italaw.com/sites/default/files/case-documents/ita0440.pdf. Accessed 3 March 2019. (“…the fair and equitable treatment standard encompasses the notion of denial of justice”); Compañía De Aguas Del Aconquija S.A., Vivendi Universal S.A. v. Argentine Republic. International Centre for Settlement of Investment Disputes [ICSID], ARB/97/3, Aug. 20, 2007, Sec. 7.4.11. http://www.italaw.com/sites/default/files/case-documents/ita0215.pdf. Accessed 3 March 2019. (noting that FET standard “… is commonly understood to include a prohibition on denial of justice”); Victor Pey Casado and others v. Republic of Chile. International Centre for Settlement of Investment Disputes [ICSID], ARB/98/2, May 8, 2008, http://www.italaw.com/sites/default/files/case-documents/ita0638.pdf. Accessed 3 March 2019; For a denial of justice claim see also Petrobart Limited v. The Kyrgyz Republic. Stockholm Chamber of Commerce [SCC], No. 126/2003, Mar. 29, 2005. http://www.italaw.com/sites/default/files/case-documents/ita0628.pdf. Accessed 3 March 2019.
- 23.
Dan Cake (Portugal) S.A. v. Hungary. International Centre for Settlement of Investment Disputes [ICSID], ARB/12/9, Aug. 24, 2015, Sec. 3. https://www.italaw.com/sites/default/files/case-documents/italaw4457.pdf. Accessed 25 March 2019.
- 24.
Ibid Sec. 2.
- 25.
Ibid.
- 26.
Ibid Sec. 94–102.
- 27.
Ibid Sec. 146.
- 28.
Ibid Sec. 29.
- 29.
Ibid Sec. 30.
- 30.
Ibid Sec. 146.
- 31.
Ibid Sec. 162; For further analysis of the concept of denial of justice see Robert Azinian, Kenneth Davitian, & Ellen Baca v. The United Mexican States. International Centre for Settlement of Investment Disputes [ICSID], Additional Facility Rules, ARB (AF)/97/2, Nov. 1, 1999, Sec. 102. https://www.italaw.com/sites/default/files/case-documents/ita0057.pdf. Accessed 25 March 2019. (“A denial of justice could be pleaded if the relevant courts refuse to entertain a suit, if they subject it to undue delay, or if they administer justice in a seriously inadequate way”); See also Mondev International ltd. v. United States of America. International Centre for Settlement of Investment Disputes [ICSID], Additional Facility Rules, ARB (AF)/ 99/2, Oct. 11, 2002. http://www.italaw.com/sites/default/files/case-documents/ita1076.pdf. Accessed 25 March 2019; The Loewen Group, Inc. and Raymond L. Loewen v. United States of America. International Centre for Settlement of Investment Disputes [ICSID], Additional Facility Rules, ARB (AF)/ 98/3, June 26, 2003. http://www.italaw.com/sites/default/files/case-documents/ita0470.pdf. Accessed 25 March 2019.
- 32.
Dan Cake (Portugal) S.A. v. Hungary, Sec. 117.
- 33.
Ibid Sec. 142.
- 34.
Novák (2016).
- 35.
For the consequences regarding bankruptcy cases see Kökényesi (2016) (“The Dan Cake decision “…will not be without considerable affect on numerous domestic insolvency cases on a day-by-day basis…[and it]…will be subject to extensive legal debate among scholars and practitioners both at a domestic and international level in the upcoming years”).
- 36.
de Matos and Leitão (2016).
- 37.
For further analysis of the notion of investors’ legitimate expectations see Téllez (2012), pp. 432–442.
- 38.
Occidental Exploration and Production Company v. The Republic Of Ecuador (I), London Court of International Arbitration [LCIA], No. UN 3467, July 1, 2004. http://www.italaw.com/sites/default/files/case-documents/ita0571.pdf. Accessed 25 March 2019.
- 39.
Occidental Exploration and Production Company v. The Republic Of Ecuador (I), Sec. 2–3.
- 40.
Ibid Sec. 184.
- 41.
Ibid Sec. 191.
- 42.
CMS Gas Transmission Company v. The Argentine Republic. International Centre for Settlement of Investment Disputes [ICSID], ARB/01/8, May 12, 2005, Sec. 274. https://www.italaw.com/sites/default/files/case-documents/ita0184.pdf. Accessed 25 March 2019 (noting that “…a stable legal and business environment is an essential element of fair and equitable treatment”); LG&E Energy Corp., LG&E Capital Corp., LG&E International Inc. v. Argentine Republic. International Centre for Settlement of Investment Disputes [ICSID], ARB/02/1, Oct. 3, 2006, Sec. 124. https://www.italaw.com/sites/default/files/case-documents/ita0460.pdf. Accessed 25 March 2019 (noting that “…stability of the legal and business framework is an essential element of fair and equitable treatment in this case”); Enron Corporation, Ponderosa Assets, L.P v. Argentine Republic. International Centre for Settlement of Investment Disputes [ICSID], ARB/01/3, May 22, 2007. http://www.italaw.com/sites/default/files/case-documents/ita0293.pdf. Accessed 25 March 2019; Sempra Energy International v. Argentine Republic. International Centre for Settlement of Investment Disputes [ICSID], ARB/02/16, Sep.28, 2007. https://www.italaw.com/sites/default/files/case-documents/ita0770.pdf. Accessed 25 March 2019; Marvin Feldman v. Mexico. International Centre for Settlement of Investment Disputes [ICSID], Additional Facility Rules, ARB (AF)/ 99/1, Dec. 16, 2002. https://www.italaw.com/sites/default/files/case-documents/ita0319.pdf. Accessed 25 March 2019.
- 43.
Parkerings-Compagniet AS v. Republic of Lithuania. International Centre for Settlement of Investment Disputes [ICSID], ARB/05/8, Sep.11, 2007, Sec. 330-331. https://www.italaw.com/sites/default/files/case-documents/ita0619.pdf. Accessed 25 March 2019. In this case investors reached an agreement with Vilnius Municipality, whereby they were to build car parks in the city. As investors proposed to have the car parks in the inner part of the Old Town, a UNESCO heritage site, the proposal was declined.
- 44.
Ibid Sec. 335–336. In this regard, it is interesting to note the findings of the AES v. Hungary tribunal, which stated that “…legitimate expectations can only be created at the moment of the investment”. See AES Summit Generation Limited and AES-Tisza Erömü Kft. v. Republic of Hungary. International Centre for Settlement of Investment Disputes [ICSID], ARB/07/22, Sep. 23, 2010, Sec. 9.3.8. https://www.italaw.com/sites/default/files/case-documents/ita0014_0.pdf. Accessed 25 March 2019.
- 45.
It is important to underscore that awards taking into account the special context of developing states or states in transition are in minority. See Alexander (2008), p. 823 (“…[I]international investment law tribunals generally do not consider the context of a country’s individual capabilities or needs in judging the country's compliance with investment obligations”).
- 46.
Alex Genin, Eastern Credit Limited, Inc. and A.S. Baltoil v. The Republic of Estonia. International Centre for Settlement of Investment Disputes [ICSID], ARB/99/2, June 25, 2001. http://www.italaw.com/sites/default/files/case-documents/ita0359.pdf. Accessed 25 March 2019.
- 47.
Id. at Sec. 367. But see Total S.A. v. Argentine Republic. International Centre for Settlement of Investment Disputes [ICSID], ARB/04/1, Dec. 27, 2010, Sec. 125, http://www.italaw.com/sites/default/files/case-documents/ita0868.pdf. Accessed 25 March 2019 (The tribunal in this case did not equate FET with the international minimum standard of treatment, noting that “…the phrase “fair and equitable in conformity with the principles of international law” cannot be read as “treatment required by the minimum standard of treatment of aliens/investors under international law”).
- 48.
Alex Genin, Eastern Credit Limited, Inc. and A.S. Baltoil v. The Republic of Estonia, Sec. 348.
- 49.
Ibid.
- 50.
International Thunderbird Gaming Corporation v. the United Mexican States. International Centre for Settlement of Investment Disputes [ICSID], Jan.26, 2006, Sec. 147. https://www.italaw.com/sites/default/files/case-documents/ita0431.pdf. Accessed 25 March 2019. The tribunal decided this case in favor of Mexico, as it did not find that the investor had legitimate expectations. For a case, where the FET standard breach was determined based on the violation of investors’ expectations arising out of specific representations made by the Government see MTD Equity Sdn. Bhd. and MTD Chile S.A. v. Republic of Chile. International Centre for Settlement of Investment Disputes [ICSID], ARB/01/7, May 25, 2004. http://www.italaw.com/documents/MTD-Award_000.pdf. Accessed 25 March 2019.
- 51.
Suez, Sociedad General de Aguas de Barcelona S.A., and Vivendi Universal S.A. v. Argentine Republic. International Centre for Settlement of Investment Disputes [ICSID], ARB/03/19, July 30, 2010, Sec. 228. https://www.italaw.com/sites/default/files/case-documents/ita0826.pdf. Accessed 25 March 2019 (The tribunal noted the need to examine whether violation of FET took place or not by analyzing the case “…from an objective and reasonable point of view” via consideration of “… the concession’s legal framework and bearing in mind…[the] country’s history and its political, economic, and social circumstances…”); Duke Energy Electroquil Partners & Electroquil S.A. v. Republic of Ecuador. International Centre for Settlement of Investment Disputes [ICSID], ARB/04/19, Aug. 18, 2008, Sec. 340. https://www.italaw.com/sites/default/files/case-documents/ita0256.pdf. Accessed 25 March 2019 (“To be protected, the investor’s expectations must be legitimate and reasonable at the time when the investor makes the investment. The assessment of the reasonableness or legitimacy must take into account all circumstances, including not only the facts surrounding the investment, but also the political, socioeconomic, cultural and historical conditions prevailing in the host State”); Edf (Services) Limited v. Romania. International Centre for Settlement of Investment Disputes [ICSID], ARB/05/13, Oct. 8, 2009, Sec. 217. http://www.italaw.com/sites/default/files/case-documents/ita0267.pdf. Accessed 25 March 2019 (“The idea that legitimate expectations, and therefore FET, imply the stability of the legal and business framework, may not be correct if stated in an overly-broad and unqualified formulation. The FET might then mean the virtual freezing of the legal regulation of economic activities, in contrast with the State’s normal regulatory power and the evolutionary character of economic life. Except where specific promises or representations are made by the State to the investor, the latter may not rely on a bilateral investment treaty as a kind of insurance policy against the risk of any changes in the host State’s legal and economic framework. Such expectation would be neither legitimate nor reasonable”).
- 52.
Eureko B.V. v. Republic of Poland. Ad Hoc Arbitration, Aug. 19, 2005, at Sec. 233, http://www.italaw.com/sites/default/files/case-documents/ita0308_0.pdf (last visited Mar. 25, 2019) (finding that Poland “…acted not for cause but for purely arbitrary reasons linked to the interplay of Polish politics and nationalistic reasons of a discriminatory character); Waste Management, Inc. v. United Mexican States. International Centre for Settlement of Investment Disputes [ICSID], Additional Facility Rules, ARB(AF)/00/3, Apr. 30, 2004 Sec. 98. https://www.italaw.com/sites/default/files/case-documents/ita0900.pdf. Accessed 25 March 2019 (noting that “…fair and equitable treatment is infringed by conduct attributable to the State and harmful to the claimant if the conduct is arbitrary, grossly unfair, unjust or idiosyncratic, is discriminatory and exposes the claimant to sectional or racial prejudice…”); Biwater Gauff ltd. v. United Republic Of Tanzania. International Centre for Settlement of Investment Disputes [ICSID], ARB/05/22, July 24, 2008, Sec. 602. https://www.italaw.com/sites/default/files/case-documents/ita0095.pdf. Accessed 25 March 2019 (noting that FET “…implies that the conduct of the State must be…consistent and non-discriminatory, that is, not based on unjustifiable distinctions or arbitrary”); S.D. Myers, Inc. v. Canada. Ad Hoc Arbitration, Nov. 13, 2000, Sec. 263, 266. http://www.italaw.com/sites/default/files/case-documents/ita0747.pdf. Accessed 25 March 2019; Continental Casualty Company v. Argentine Republic. International Centre for Settlement of Investment Disputes [ICSID], ARB/03/9, Sep. 5, 2008, Sec. 261. http://www.italaw.com/documents/ContinentalCasualtyAward.pdf. Accessed 25 March 2019; Bayindir Insaat Turizm Ticaret Ve Sanayi A.Ş. v. Islamic Republic of Pakistan. International Centre for Settlement of Investment Disputes [ICSID], ARB/03/29, Aug. 27, 2009, Sec.178, https://www.italaw.com/sites/default/files/case-documents/ita0075.pdf. Accessed 25 March 2019 (holding that the obligation to refrain from taking arbitrary or discriminatory measures is a constitutive element of FET); Desert Line Projects LLC v. The Republic of Yemen. International Centre for Settlement of Investment Disputes [ICSID], ARB/05/17, Feb. 6, 2008. https://icsid.worldbank.org/ICSID/FrontServlet?requestType=CasesRH&actionVal=showDoc&docId=DC791_En&caseId=C62. Accessed 25 March 2019; Tokios Tokelės v. Ukraine. International Centre for Settlement of Investment Disputes [ICSID], ARB/02/18, July 26, 2007. http://www.italaw.com/documents/TokiosAward.pdf. Accessed 25 March 2019.
- 53.
Rumeli Telekom A.S. And Telsim Mobil Telekomikasyon Hizmetleri A.S. v. Republic of Kazakhstan. International Centre for Settlement of Investment Disputes [ICSID], ARB/12/9, July 29, 2008, at Sec. 609, http://www.italaw.com/documents/Telsimaward.pdf (last visited Mar. 25, 2019) (noting that the FET standard includes the State’s obligation to “…act in a transparent manner”); Metalclad Corporation v. United Mexican States. International Centre for Settlement of Investment Disputes [ICSID], Additional Facility Rules, ARB (AF)/ 97/1, Aug. 30, 2000, at Sec. 99, http://www.italaw.com/sites/default/files/casedocuments/ita0510.pdf (last visited Mar. 25, 2019) (finding Mexico to be in violation of the FET standard under NAFTA, as it “…failed to ensure a transparent and predictable framework for Metalclad’s business planning and investment”).
- 54.
Tecnicas Medioambientales TECMED S.A. v. The United Mexican States. International Centre for Settlement of Investment Disputes [ICSID], Additional Facility Rules, ARB (AF)/ 00/2, May 29, 2003. https://www.italaw.com/sites/default/files/case-documents/ita0854.pdf. Accessed 25 March 2019.
- 55.
Ibid Sec. 41.
- 56.
Ibid Sec. 43.
- 57.
Ibid Sec. 201.
- 58.
Ibid Sec. 154.
- 59.
Douglas (2006), p. 28.
- 60.
Eastern Sugar B.V. (Netherlands) v. The Czech Republic. Stockholm Chamber of Commerce [SCC], No. 126/2003, Mar. 27, 2007, Sec. 272. https://www.italaw.com/sites/default/files/case-documents/ita0259_0.pdf. Accessed 25 March 2019.
- 61.
Saluka Investments BV (The Netherlands) v. The Czech Republic. Permanent Court of Arbitration [PCA], Mar.17, 2006, Sec. 305. http://www.italaw.com/sites/default/files/case-documents/ita0740.pdf. Accessed 25 March 2019.
- 62.
Ronald Lauder v. Czech Republic. Ad Hoc Arbitration. Sep. 3, 2001. https://www.italaw.com/sites/default/files/case-documents/ita0451.pdf. Accessed 25 March 2019; CME Czech Republic B.V. (Netherlands) v. The Czech Republic. Ad Hoc Arbitration, Mar. 14, 2003. http://www.italaw.com/sites/default/files/case-documents/ita0180.pdf. Accessed 25 March 2019. For a comprehensive analysis of these two cases see Dimsey (2008), pp. 93–96.
- 63.
Ibid Sec. 42. The claim was brought under the BIT between the United States of America and the Czech and Slovak Federal Republic.
- 64.
Ibid Sec. 289.
- 65.
Ibid page 74.
- 66.
CME Czech Republic B.V. (Netherlands) v. The Czech Republic. The claimant in this case—CME Czech Republic B.V., a Dutch company—was the wholly owned subsidiary of CME Media Enterprises B.V., a Dutch company controlled by Ronald Lauder.
- 67.
CME Czech Republic B.V. (Netherlands) v. The Czech Republic, Sec. 19.
- 68.
Ibid Sec. IX.
- 69.
Reinisch (2008), p. 116.
- 70.
Glamis Gold, Ltd. v. United States of America. International Centre for Settlement of Investment Disputes [ICSID], June 8, 2009, at paras. 612, 616, 828–829. https://www.italaw.com/sites/default/files/casedocuments/ita0378.pdf. Accessed 25 March 2019.
- 71.
William Ralph Clayton, William Richard Clayton, Douglas Clayton, Daniel Clayton and BILCON of Delaware, Inc v. Government of Canada. Permanent Court of Arbitration [PCA], Case No. 2009-04, March 17, 2005, at paras. 442–444, 591–592. https://www.italaw.com/sites/default/files/case-documents/italaw4212.pdf. Accessed 25 March 2019.
- 72.
BILCON v. Canada, para 444.
- 73.
Muchlinski et al. (2012), p. 2.
- 74.
Ibid 11.
- 75.
Ibid 2; See also Cordonier Segger et al. (2011), p. 779 (“…[A]n overly broad interpretation of this standard may not favour host State attempt to enact effective measures to achieve sustainable development objectives”).
- 76.
Kläger (2010), p. 443.
- 77.
Singapore—Australia Free Trade Agreement, Feb. 17, 2003. https://investmentpolicyhubold.unctad.org/Download/TreatyFile/2649. Accessed 25 March 2019.
- 78.
An instructive example in this regard is the USA—Rwanda BIT which provides that the fair and equitable treatment concept does “…not require treatment in addition to or beyond that which is required by that standard and do[es] not create additional substantive rights”. See United States of America—Rwanda Treaty concerning the Encouragement and Reciprocal Protection of Investment, Feb. 19, 2008, Art. 5. https://investmentpolicyhubold.unctad.org/Download/TreatyFile/2241. Accessed 25 March 2019.
- 79.
For a comprehensive analysis on the use of interpretative statements for the purpose of qualifying investment protection standards see Lise Johnson and Merim Razbaeva, State Control over Interpretation of Investment Treaties, 2014. http://ccsi.columbia.edu/files/2014/04/State_control_over_treaty_interpretation_FINAL-April-5_2014.pdf. Accessed 25 March 2019; Roberts (2013), pp. 59–61; Roberts (2010), pp. 179–225.
- 80.
NAFTA Free Trade Commission, North American Free Trade Agreement Notes of Interpretation of Certain Chapter 11 Provisions, July 31, 2001. http://www.sice.oas.org/tpd/nafta/Commission/CH11understanding_e.asp. Accessed 25 March 2019. A number of international investment agreements currently tie the FET standard to the customary international law minimum standard of treatment of aliens. See Agreement for the Promotion and Protection of Investments, Canada—Republic of Latvia, May 5, 2009, Art. 2. http://investmentpolicyhubold.unctad.org/Download/TreatyFile/618. Accessed 25 March 2019 (“Each Contracting Party shall accord investments or returns of investors of the other Contracting Party treatment in accordance with the customary international law minimum standard of treatment of aliens, including fair and equitable treatment…”). For similar clauses see also Agreement for the Promotion and Reciprocal Protection of Investments, Canada—Romania, May 8, 2009, Art. 2. http://investmentpolicyhubold.unctad.org/Download/TreatyFile/3503. Accessed 25 March 2019; Free Trade Agreement, Republic of Korea—Socialist Republic of Viet Nam, May 5, 2015, Art. 9.5. http://investmentpolicyhubold.unctad.org/Download/TreatyFile/3584. Accessed 25 March 2019; Agreement on Investment under the Framework Agreement Establishing a Free Trade Area, the Republic of Korea—the Republic of Turkey, Feb. 26, 2015, Art. 1.6. http://investmentpolicyhubold.unctad.org/Download/TreatyFile/4729. Accessed 25 March 2019; Agreement on the Reciprocal Promotion and Protection of Investments, The Belgium-Luxembourg Economic Union—The Republic of Colombia, Feb. 4, 2009, Art. 3. https://investmentpolicyhubold.unctad.org/Download/TreatyFile/342. Accessed 25 March 2019; Free Trade Agreement, Canada—The Republic of Korea, Sep. 23, 2014, Art. 8.5. http://investmentpolicyhubold.unctad.org/Download/TreatyFile/3076. Accessed 25 March 2019.
- 81.
Magraw et al. (2011), p. 46.
- 82.
Ibid. For the full text of the Neer case see L. F. H. Neer and Pauline Neer (U.S.A.) v. United Mexican States. Oct. 15, 1926, Sec. 4. http://legal.un.org/riaa/cases/vol_IV/60-66.pdf. Accessed 25 March 2019 (The Commission in this case held that an international minimum standard of treatment means the following: “…[T]he treatment of an alien, in order to constitute an international delinquency, should amount to an outrage, to bad faith, to wilful neglect of duty, or to an insufficiency of governmental action so far short of international standards that every reasonable and impartial man would readily recognize its insufficiency”).
- 83.
Cargill, Incorporated v. United Mexican States. International Centre for Settlement of Investment Disputes [ICSID], Additional Facility Rules, ARB (AF)/05/2, Sep. 18, 2009, Sec. 286. http://www.italaw.com/sites/default/files/case-documents/ita0133_0.pdf. Accessed 25 March 2019; See also International Thunderbird Gaming Corporation v. the United Mexican States, Sec. 194 (“Notwithstanding the evolution of customary law since decisions such as Neer Claim in 1926, the threshold for finding a violation of the minimum standard of treatment still remains high…For the purposes of the present case, the Tribunal views acts that would give rise to a breach of the minimum standard of treatment prescribed by the NAFTA and customary international law as those that, weighed against the given factual context, amount to a gross denial of justice or manifest arbitrariness falling below acceptable international standards.”).
- 84.
Mondev International ltd. v. United States of America, Sec. 116. See also Pope & Talbot Inc. v. Canada. Ad Hoc Arbitration, Apr. 10, 2001, at Sec. 108, 111. http://www.italaw.com/sites/default/files/case-documents/ita0678.pdf. Accessed 25 March 2019 (The tribunal held that “…compliance with the fairness elements [FET] must be ascertained free of any threshold that might be applicable to the evaluation of measures under the minimum standard of international law” despite Canada’s argument in this case that FET can be found to be breached in case the state’s conduct toward the investor is egregious.).
- 85.
ADF Group Inc. v. United States of America. International Centre for Settlement of Investment Disputes [ICSID], Additional Facility Rules, ARB (AF)/00/1, Jan. 9, 2003, Sec. 179. https://www.italaw.com/sites/default/files/case-documents/ita0009.pdf. Accessed 25 March 2019 (The tribunal further noted that “[t]here appears no logical necessity and no concordant state practice to support the view that the Neer formulation is automatically extendible to the contemporary context of treatment of foreign investors and their investments by a host or recipient State”. See Ibid Sec. 181).
- 86.
Free Trade Agreement, Malaysia-Australia, May 22, 2012. https://investmentpolicyhubold.unctad.org/Download/TreatyFile/2634. Accessed 25 March 2019.
- 87.
Ibid Art. 12.7.
- 88.
European Union—Canada Comprehensive Trade and Economic Agreement, Art. 8.10. https://investmentpolicyhubold.unctad.org/Download/TreatyFile/3593. Accessed 25 March 2019.
- 89.
European Union—Singapore Comprehensive Free Trade Agreement, Art. 2.4. https://investmentpolicyhubold.unctad.org/Download/TreatyFile/5714. Accessed 25 March 2019 (“To comply with the obligation to provide fair and equitable treatment …neither Party shall adopt measures that constitute: (a) Denial of justice in criminal, civil and administrative proceedings; (b) A fundamental breach of due process; (c) Manifestly arbitrary conduct; (d) Harassment, coercion, abuse of power or similar bad faith conduct…”); European Union—Viet Nam Free Trade Agreement (Draft Version), Art. 14. https://investmentpolicyhubold.unctad.org/Download/TreatyFile/3563 Accessed 25 March 2019.
- 90.
Southern African Development Community, July 2012, Art. 5. https://investmentpolicyhubold.unctad.org/Download/TreatyFile/2875. Accessed 25 March 2019.
- 91.
Agreement concerning the Reciprocal Promotion and Protection of Investment, Republic of Colombia—Republic of Turkey, July 28, 2014, Art. 4. https://investmentpolicyhubold.unctad.org/Download/TreatyFile/3249. Accessed 25 March 2019.
- 92.
Agreement concerning the Reciprocal Promotion and Protection of Investment, Republic of Colombia—Republic of Turkey, July 28, 2014, Art. 4. https://investmentpolicyhubold.unctad.org/Download/TreatyFile/3249 (last visited Mar. 25, 2019).
- 93.
Agreement for the Liberalization, Promotion and Protection of Investment, Japan—The Republic of Colombia, Sep. 12, 2011, Art. 4, https://investmentpolicyhubold.unctad.org/Download/TreatyFile/797. Accessed 25 March 2019.
- 94.
Agreement on Investment under the Framework Agreement on Comprehensive Economic Cooperation, the Association of Southeast Asian Nations—the Republic of India, Nov. 12, 2014, Art. 7. https://investmentpolicyhubold.unctad.org/Download/TreatyFile/3337. Accessed 25 March 2019; Bilateral Agreement for the Promotion and Protection of Investments, The Republic of Colombia—The People’s Republic of China, Nov. 22, 2008, Art. 2. http://investmentpolicyhubold.unctad.org/Download/TreatyFile/720. Accessed 25 March 2019; Agreement for an Economic Partnership, Japan—Mongolia, Feb. 10, 2015, Art. 10.5. http://investmentpolicyhubold.unctad.org/Download/TreatyFile/3372. Accessed 25 March 2019; Agreement for the Promotion, Protection and Liberalisation of Investment, Japan—the Republic of Peru, Nov. 22, 2008, Art.5. http://investmentpolicyhubold.unctad.org/Download/TreatyFile/1733. Accessed 25 March 2019; Bilateral Agreement for the Promotion and Protection of Investments, United Kingdom of Great Britain and Northern Ireland—Republic of Colombia, Mar. 17, 2010, Art. 2. http://investmentpolicyhubold.unctad.org/Download/TreatyFile/3253- Accessed 25 March 2019. Free Trade Agreement, The People’s Republic of China - Republic of Korea, June 1, 2015, Art. 12.5. http://investmentpolicyhubold.unctad.org/Download/TreatyFile/3461. Accessed 25 March 2019; Agreement for the Promotion and Protection of Investments, The Republic of Colombia—The Republic of India, Nov. 10, 2009, Art.3. http://investmentpolicyhubold.unctad.org/Download/TreatyFile/796. Accessed 25 March 2019; Free Trade Agreement, Australia—the Republic of Korea, Apr. 8, 2014, Ch.11, Art. 11.5. http://investmentpolicyhubold.unctad.org/Download/TreatyFile/2971. Accessed 25 March 2019.
- 95.
Cordonier Segger et al. (2011), p. 778. For a comprehensive analysis of the national treatment standard see also Dolzer (2005b); UNCTAD (1999) National Treatment. United Nations. http://unctad.org/en/Docs/psiteiitd11v4.en.pdf. Accessed 25 March 2019; Kurtz (2010), pp. 243–278.
- 96.
Grierson-Weiler and Laird (2008), p. 262.
- 97.
Marvin Feldman v. Mexico, Sec. 172.
- 98.
Occidental Exploration and Production Company v. The Republic Of Ecuador (I), Sec. 173.
- 99.
Ibid Sec. 167–179.
- 100.
S.D. Myers, Inc. v. Canada, Sec. 250.
- 101.
Ibid Sec. 162, 168–195.
- 102.
Miles (2011), p. 268; See also Cordonier Segger et al. (2011), p. 778 (“When it comes to the examination of ‘like circumstances’, it is clear that focusing on commercial similarity alone without taking into consideration the potential environmental and social impacts of otherwise ‘like’ investments, could result in the exclusion of sustainable development goals”).
- 103.
Agreement on Investment under the Framework Agreement on Comprehensive Economic Cooperation, the Association of Southeast Asian Nations—the Republic of India, Nov. 12, 2014, Art. 3. http://investmentpolicyhubold.unctad.org/Download/TreatyFile/3337. Accessed 25 March 2019.
- 104.
Ibid.
- 105.
For analysis on the importance of finding a proper balance in drafting the national treatment clause see Wouters et al. (2013), p. 65 (“The balance to be found in respect of the national treatment standard is to protect foreign investors from discrimination by host States without overly constraining the latter’s sovereign right to regulate”).
- 106.
Agreement concerning the Reciprocal Promotion and Protection of Investments, The Republic of Turkey—The People’s Republic of Bangladesh, April 12, 2012, Art. 3. http://investmentpolicyhubold.unctad.org/Download/TreatyFile/274. Accessed 25 March 2019.
- 107.
For the definition of MFN see Shan (2012), p. 21 (The MFN standard is meant to “…create a level playing field among different foreign states by prohibiting discrimination based on the basis of different foreign nationalities”); See also UNCTAD (2015) United Nations Conference on Trade and Development, Investment Policy Framework for Sustainable Development 96. https://unctad.org/en/PublicationsLibrary/diaepcb2015d5_en.pdf. Accessed 25 March 2019 (MFN “is designed to prevent nationality-based discrimination and to ensure a level-playing field between investors from the IIA home country and comparable investors from any third country”); For analysis of the MFN clauses see Tawil (2009), pp. 9–30; Hober (2009), pp. 31–41; Dolzer and Schreuer (2012), pp. 206–212; Schill (2009a), pp. 496–569.
- 108.
Kyrgyzstan—Swiss Federal Council Agreement on the Promotion and Reciprocal Protection of Investments, Jan. 29, 1999. http://investmentpolicyhubold.unctad.org/Download/TreatyFile/3261. Accessed 25 March 2019.
- 109.
Acconci (2008), p. 366.
- 110.
As noted by UNCTAD, “[a] number of arbitral decisions have read the MFN obligation as allowing investors to invoke more investor-friendly provisions from third treaties, e.g. to incorporate standards not included in the base treaty, to benefit from higher protection standards compared to the ones found in the base treaty or to circumvent procedural (ISDS-related) requirements in the base treaty”. See UNCTAD (2015) United Nations Conference on Trade and Development, Investment Policy Framework for Sustainable Development 96. https://unctad.org/en/PublicationsLibrary/diaepcb2015d5_en.pdf. Accessed 25 March 2019.
- 111.
Bayindir Insaat Turizm Ticaret Ve Sanayi A.Ş. v. Islamic Republic of Pakistan. International Centre for Settlement of Investment Disputes [ICSID], ARB/03/29, Aug. 27, 2009, Sec. 167. https://www.italaw.com/sites/default/files/case-documents/ita0075.pdf. Accessed 25 March 2019.
- 112.
Emilio Agustín Maffezini v. The Kingdom of Spain. International Centre for Settlement of Investment Disputes [ICSID], ARB/97/7, Jan. 25, 2000, Sec. 1. http://www.italaw.com/sites/default/files/case-documents/ita0479.pdf. Accessed 25 March 2019.
- 113.
Ibid Sec. 39.
- 114.
Ibid Sec. 56.
- 115.
Ibid Sec. 62.
- 116.
Ibid Sec. 64. When analyzing the public policy considerations, the tribunal examined Spain’s other BITs and found out that many of Spain’s BITs imposed no litigation related conditions prior to the submission of arbitration claims. See Ibid 58.
- 117.
Gas Natural SDG, S.A. v. The Argentine Republic. International Centre for Settlement of Investment Disputes [ICSID], ARB/03/10, June 17, 2005, Sec. 31. http://www.italaw.com/sites/default/files/case-documents/ita0354.pdf. Accessed 25 March 2019; ROSINVESTCO UK LTD. v. The Russian Federation. Stockholm Chamber of Commerce [SCC], No. 079/2005, Sep. 12, 2010, Sec. 137. https://www.italaw.com/sites/default/files/case-documents/ita0720.pdf. Accessed 25 March 2019; Siemens A.G. v. The Argentine Republic. International Centre for Settlement of Investment Disputes [ICSID], ARB/02/8, Aug. 3, 2004, Sec. 108-110. http://www.italaw.com/sites/default/files/case-documents/ita0788.pdf. Accessed 25 March 2019; Telefónica S.A. v. The Argentine Republic. International Centre for Settlement of Investment Disputes [ICSID], ARB/03/20, May 25, 2006, Sec. 100–108. http://www.italaw.com/sites/default/files/case-documents/ita0856.pdf. Accessed 25 March 2019; See also Camuzzi International S. A. v. The Argentine Republic. International Centre for Settlement of Investment Disputes [ICSID], ARB/03/2, May 11, 2005, Sec. 120, 121. http://www.italaw.com/sites/default/files/case-documents/ita0108.pdf. Accessed 25 March 2019. (In this case the investor also brought up the argument on the MFN clause similar to the Maffezini claim. However, as the Respondent state did not object to the claim, the tribunal did not examine it).
- 118.
Renta 4 S.V.S.A., Ahorro Corporacionemergentes F.I., Ahorro Corporacion Eurofondo F.I.,Rovime Inversiones Sica V S.A., Quasar De V Alors Sica V S.A., Orgor De V Alores Sica V S.A., Gbi 9000 Sica V S.A. v. The Russian Federation. Stockholm Chamber of Commerce [SCC], Award on Preliminary Objections, Mar. 20, 2009, Sec. 119, http://www.italaw.com/sites/default/files/case-documents/ita0714.pdf. Accessed 25 March 2019; Wintershall Aktiengesellschaft v. Argentine Republic. International Centre for Settlement of Investment Disputes [ICSID], ARB/04/14, Dec. 8, 2008, Sec. 160, 197. https://www.italaw.com/sites/default/files/case-documents/ita0907.pdf. Accessed 25 March 2019; Plama Consortium Limited v. Republic Of Bulgaria. International Centre for Settlement of Investment Disputes [ICSID], ARB/03/24, Feb. 8, 2005, Sec. 240. http://www.italaw.com/sites/default/files/case-documents/ita0669.pdf. Accessed 25 March 2019; Vladimir Berschader and Moïse Berschader v. The Russian Federation. Stockholm Chamber of Commerce [SCC], No. 080/2004, Apr. 21, 2006, Sec. 208. http://www.italaw.com/sites/default/files/case-documents/ita0079_0.pdf. Accessed 25 March 2019.
- 119.
Telenor Mobile Communications A.S. v. The Republic of Hungary. International Centre for Settlement of Investment Disputes [ICSID], ARB/04/15, Sep. 13, 2006, Sec. 17. https://www.italaw.com/sites/default/files/case-documents/ita0858.pdf. Accessed 25 March 2019; For further analysis of this case see Di Pietro (2012), pp. 798–814.
- 120.
Ibid Sec. 19.
- 121.
Ibid Sec. 20.
- 122.
Ibid Sec. 93.
- 123.
Ibid Sec. 94.
- 124.
Faya-Rodríguez and Joubin-Bret (2010), p. 100.
- 125.
In this regard, Wouters, Duquet, and Hachez write that “[m]ost-favoured-nation clauses in bilateral agreements have significant effects, as they may be used to endow the network of BITs with the multilateral role and non-discriminatory fashion a multilateral treaty was never able to provide”. See Wouters et al. (2013), p. 60.
- 126.
For examples of such agreements see generally Agreement on the Promotion and the Reciprocal Protection of Investments, Republic of Albania—The Republic of Cyprus, Aug. 5, 2010, Art. 4 (3). http://investmentpolicyhubold.unctad.org/Download/TreatyFile/3145. Accessed 25 March 2019; Agreement on the Promotion and Protection of Investments, Republic of Turkey - Republic of Slovenia, Mar. 23, 2004, Art. 3. http://investmentpolicyhubold.unctad.org/Download/TreatyFile/2274. Accessed 25 March 2019; Agreement for the Promotion and Reciprocal Protection of Investments, Republic of Albania—Republic of Azerbaijan, Feb. 9, 2012, Art. 4. http://investmentpolicyhubold.unctad.org/Download/TreatyFile/4. Accessed 25 March 2019.
- 127.
Agreement for the Reciprocal Promotion and Protection of Investments, State of Israel—Republic of the Union of Myanmar, Oct. 5, 2014, Art. 3. http://investmentpolicyhubold.unctad.org/Download/TreatyFile/3161. Accessed 25 March 2019.
- 128.
Faya-Rodríguez and Joubin-Bret (2010), p. 106 (“A broad MFN obligation…makes it difficult to update, refine or improve new IIAs, as the new treaties may be modified by reason of past treaties.”).
- 129.
Ibid 96 (“[T]he uncertainty and ongoing discussions and debates [regarding the scope and effect of the MFN clause]…affect investors who are left unclear about the way to use or invoke MFN treatment commitments made by their host State.”).
- 130.
- 131.
Zeitler (2010), p. 183.
- 132.
Dolzer and Schreuer (2012), p. 161. See also Asian Agricultural Products LTD. (AAPL) v. Republic of Sri Lanka. International Centre for Settlement of Investment Disputes [ICSID], ARB/87/3, June 27, 1990, Sec. 48, http://www.italaw.com/sites/default/files/case-documents/ita1034.pdf. Accessed 25 March 2019.
- 133.
Wena Hotels Limited v. Arab Republic of Egypt. International Centre for Settlement of Investment Disputes [ICSID], ARB/98/4, Dec. 8, 2000, Sec. 77, 84–95. http://www.italaw.com/sites/default/files/case-documents/ita0902.pdf. Accessed 25 March 2019; American Manufacturing & Trading, Inc. v. Republic of Zaire. International Centre for Settlement of Investment Disputes [ICSID], ARB/93/1, Feb. 21, 1997, Sec. 6.11. http://www.italaw.com/sites/default/files/case-documents/ita0028.pdf. Accessed 25 March 2019.
- 134.
Saluka Investments BV (The Netherlands) v. The Czech Republic. Permanent Court of Arbitration [PCA], Mar.17, 2006, Sec. 484. http://www.italaw.com/sites/default/files/case-documents/ita0740.pdf. Accessed 25 March 2019 (“…[The FPS] standard obliges the host State to adopt all reasonable measures to protect assets and property from threats or attacks which may target particularly foreigners or certain groups of foreigners. The practice of arbitral tribunals seems to indicate, however, that the “full security and protection” clause is not meant to cover just any kind of impairment of an investor’s investment, but to protect more specifically the physical integrity of an investment against interference by use of force.”); Noble Ventures, Inc. v. Romania. International Centre for Settlement of Investment Disputes [ICSID], ARB/01/11, Oct. 12, 2005, Sec. 167. http://www.italaw.com/sites/default/files/case-documents/ita0565.pdf. Accessed 25 March 2019 (In this case the tribunal dismissed the Claimant’s argument that Romania violated the FPS standard, noting that “[t]he Claimant has failed to prove that its alleged injuries and losses could have been prevented had the Respondent exercised due diligence in this regard, nor has it established any specific value of the losses.” See Ibid Sec. 166).
- 135.
As Sornarajah writes, “…there has been a tendency to expand the scope of the provision well beyond its moorings in customary law to include a wider notion that the clause mandates the maintenance of conditions of stability for the investment”. See Sornarajah (2012), p. 205. See also Schefer (2013), p. 312.
- 136.
Azurix Corp. v. The Argentine Republic. International Centre for Settlement of Investment Disputes [ICSID], ARB/01/12, July 14, 2006, Sec. 408. http://www.italaw.com/sites/default/files/case-documents/ita0061.pdf. Accessed 25 March 2019; For another tribunal applying the same position as the Azurix tribunal see Biwater Gauff ltd. v. United Republic of Tanzania. International Centre for Settlement of Investment Disputes [ICSID], ARB/05/22, July 24, 2008, Sec. 729. http://www.italaw.com/sites/default/files/case-documents/ita0095.pdf. Accessed 25 March 2019 (“The Arbitral Tribunal adheres to the Azurix holding that when the terms “protection” and “security” are qualified by “full”, the content of the standard may extend to matters other than physical security. It implies a State’s guarantee of stability in a secure environment, both physical, commercial and legal. It would in the Arbitral Tribunal’s view be unduly artificial to confine the notion of “full security” only to one aspect of security, particularly in light of the use of this term in a BIT, directed at the protection of commercial and financial investments.”).
- 137.
National Grid PLC v. The Argentine Republic. International Centre for Settlement of Investment Disputes [ICSID], Nov. 3, 2008, Sec. 189. http://www.italaw.com/sites/default/files/case-documents/ita0555.pdf. Accessed 25 March 2019.
- 138.
Suez, Sociedad General de Aguas de Barcelona S.A., and InterAgua Servicios Integrales del Agua S.A. v. The Argentine Republic. International Centre for Settlement of Investment Disputes [ICSID], ARB/03/17, Dec. on Liability, July 30, 2010, Sec. 167. http://www.italaw.com/sites/default/files/case-documents/ita0813.pdf. Accessed 25 March 2019 (The tribunal also added that the FDS standard may “…may also include an obligation to provide adequate mechanisms and legal remedies for prosecuting the State organs or private parties responsible for the injury caused to the investor.” See Ibid.)
- 139.
BG Group PLC v. the Argentine Republic. Ad Hoc Arbitration, Dec. 24, 2007, Sec. 324. http://www.italaw.com/sites/default/files/case-documents/ita0081.pdf. Accessed 25 March 2019.
- 140.
Ibid Sec. 326 (in particular, criticizing Azurix v. Argentina and Siemens v. Argentina cases which have provided broad interpretation of the FPS standard).
- 141.
UNCTAD (2015) United Nations Conference on Trade and Development, Investment Policy Framework for Sustainable Development 98. https://unctad.org/en/PublicationsLibrary/diaepcb2015d5en.pdf. Accessed 25 March 2019.
- 142.
Treaty concerning the Encouragement and Reciprocal Protection of Investment, The United States of America—The Oriental Republic of Uruguay, Nov. 4, 2005, Art. 5 (2). http://investmentpolicyhubold.unctad.org/Download/TreatyFile/2380. Accessed 25 March 2019.
- 143.
European Union—Viet Nam Free Trade Agreement(Draft Version), Art. 14(4). http://investmentpolicyhub.unctad.org/Download/TreatyFile/3563. Accessed 25 March 2019; For a similar provision see also India’s Model Bilateral Investment Treaty, Art. 3 (3.2). http://investmentpolicyhubold.unctad.org/Download/TreatyFile/3560. Accessed 25 March 2019.
- 144.
See generally Dumberry (2012), p. 236 (“While some States (Switzerland, Netherlands, United Kingdom, Germany) often include umbrella clauses in their BITs, other States rarely do (France, Australia) and others never do (Canada).”); Vandevelde (2010), p. 257 (An umbrella clause is “…not as common as the fair and equitable treatment or full protection and security standards or the expropriation, transfers, or war and civil disturbance provisions.”).
- 145.
Schill (2010), p. 317; For comprehensive analysis of umbrella clauses see also Wong (2006), pp. 135–177; Schill (2009c), pp. 1–97; Yannaca-Small (2006), Newcombe and Paradell (2009), pp. 437–480; Wälde (2005), pp. 183–236; Miles (2008), pp. 3–23; Subedi (2012), pp. 102–104; Schokkaert and Heckscher (2009), pp. 480–489.
- 146.
UNCTAD (2015) United Nations Conference on Trade and Development, Investment Policy Framework for Sustainable Development 102. https://unctad.org/en/PublicationsLibrary/diaepcb2015d5_en.pdf. Accessed 25 March 2019.
- 147.
- 148.
SGS Société Générale de Surveillance S.A. v. Islamic Republic of Pakistan. International Centre for Settlement of Investment Disputes [ICSID], ARB/01/13, Aug. 6, 2003, Sec. 164. https://www.italaw.com/sites/default/files/case-documents/ita0779.pdf. Accessed 25 March 2019.
- 149.
Ibid Sec. 2, 11.
- 150.
Ibid Sec. 16.
- 151.
Ibid Sec. 17.
- 152.
Ibid Sec. 53.
- 153.
Ibid Sec. 43.
- 154.
Ibid Sec. 98. The counsel for SGS called this a ‘mirror effect’—“You have a violation of the contract, and the Treaty says, as if you had a mirror, that this violation will also be susceptible to being characterized as a violation of the Treaty”. See Ibid Sec. 99.
- 155.
Ibid Sec. 166 (“…Article 11 does not purport to state that breaches of contract alleged by an investor in relation to a contract it has concluded with a State (widely considered to be a matter of municipal rather than international law) are automatically “elevated” to the level of breaches of international treaty law”). The tribunal also noted that if one were to accept the position of SGS, then it would result in undesirable consequences. In particular, the tribunal stated that it would mean that any allegation of breach of “…an unlimited number of State contracts, as well as other municipal law instruments setting out State commitments including unilateral commitments to an investor of the other Contracting Party” could be “…treated as a breach of the BIT”. See Ibid Sec. 168.
- 156.
Ibid Sec. 170.
- 157.
Ibid Sec. 167; A similar stance toward an umbrella clause was taken up by the Pan American v. Argentina tribunal. The tribunal noted the following: “…[An] umbrella clause cannot transform any contract claims into a treaty claim, as this would necessarily imply that any commitments of the State in respect to investments, even the most minor ones, would be transformed into treaty claims. These far reaching consequences of a broad interpretation of the so-called umbrella clauses…[are] quite destructive of the distinction between the national legal orders and the international legal order...”. See Pan American Energy LLC, BP Argentina Exploration Company v. The Argentine Republic. International Centre for Settlement of Investment Disputes [ICSID], ARB/03/13, July 27, 2006, Sec. 110. http://www.italaw.com/sites/default/files/case-documents/ita0616.pdf. Accessed 25 March 2019.
- 158.
SGS Société Générale de Surveillance S.A. v. Islamic Republic of Pakistan, Sec. 168. It is interesting to note that following this Award Switzerland issued a note, where it stated that “…Swiss authorities are alarmed about the very narrow interpretation given to the meaning of Article 11 by the [SGS v. Pakistan] Tribunal which not only runs counter to the intention of Switzerland when concluding the Treaty but is quite evidently neither supported by the meaning of similar articles in BITs concluded by other countries…” and concluded that an investor should be allowed to bring a BIT claim for violation of the umbrella clause. See Swiss Authorities’ Note on the Interpretation of Article 11 of the BIT of Switzerland and Pakistan cited in Gaillard (2005), pp. 341, 342.
- 159.
SGS Société Générale de Surveillance S.A. v. Republic of the Philippines. International Centre for Settlement of Investment Disputes [ICSID], ARB/02/6, Jan. 29, 2004, Sec. 1. http://www.italaw.com/sites/default/files/case-documents/ita0782.pdf. Accessed 25 March 2019. For a comprehensive analysis of this case see Wendlandt (2008), pp. 523–559.
- 160.
Ibid Sec. 15, 16.
- 161.
The clause reads as follows: “Each Contracting Party shall observe any obligation it has assumed with regard to specific investments in its territory by investors of the other Contracting Party”. See Ibid Sec.115.
- 162.
Ibid Sec. 92.
- 163.
SGS Société Générale de Surveillance S.A. v. Republic of the Philippines, Sec. 128.
- 164.
Ibid Sec. 125.
- 165.
In this respect, one cannot but agree with Potts who notes that “[w]ithin the field of international investment law, the legal status of umbrella clauses is in a state of disarray” and that “[t]he current jurisprudence provides little predictive power for current and future investors concerning the redress of contractual breaches”. See Potts (2011), p. 1045.
- 166.
UNCTAD (2015) United Nations Conference on Trade and Development. Investment Policy Framework for Sustainable Development. 102, https://unctad.org/en/PublicationsLibrary/diaepcb2015d5_en.pdf. Accessed 25 March 2019.
- 167.
Dumberry (2012), p. 236.
- 168.
Agreement for the Liberalization, Promotion and Protection of Investment, Japan—The Oriental Republic of Uruguay, Jan. 26, 2015, Art. 6. http://investmentpolicyhubold.unctad.org/Download/TreatyFile/3284. Accessed 25 March 2019.
- 169.
Ibid.
- 170.
European Union—Singapore Comprehensive Free Trade Agreement, Art. Art. 9.4. (5). https://investmentpolicyhubold.unctad.org/Download/TreatyFile/5714. Accessed 25 March 2019.
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Esenkulova, B. (2020). Investment Protection and Sustainable Development in International Investment Agreements: Building Bridges Instead of Walls. In: Nagy, C. (eds) World Trade and Local Public Interest. Studies in European Economic Law and Regulation, vol 19. Springer, Cham. https://doi.org/10.1007/978-3-030-41920-2_12
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