Skip to main content
SpringerLink
Log in

Is CETA the Promised Breakthrough? Interpretation and Evolution of Fair and Equitable Treatment and (Indirect) Expropriation Provisions

  • Chapter
  • First Online:
EU External Action in International Economic Law

  • 588 Accesses

Abstract

This chapter examines two of the most common, and arguably the most controversial, foreign investment protection principles included in CETA, namely fair and equitable treatment and (indirect) expropriation. The chapter takes into account states’ treaty-making experiences, arbitral practice relating to the interpretation of these principles and the legal-political interplay between the two. Through this analysis, the chapter attempts to demonstrate whether or not the CETA provisions, as one of the first ‘new-wave’ free trade agreement drafts, bear the potential of providing further clarity and advancement as to how these principles of foreign investment protection are defined, understood and applied in case law.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Log in via an institution

Subscribe and save

Springer+ Basic
$34.99 /Month
  • Get 10 units per month
  • Download Article/Chapter or eBook
  • 1 Unit = 1 Article or 1 Chapter
  • Cancel anytime
Subscribe now

Buy Now

Chapter
USD 29.95
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
eBook
USD 149.00
Price excludes VAT (USA)
  • Available as EPUB and PDF
  • Read on any device
  • Instant download
  • Own it forever
Softcover Book
USD 199.99
Price excludes VAT (USA)
  • Compact, lightweight edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info
Hardcover Book
USD 199.99
Price excludes VAT (USA)
  • Durable hardcover edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

Similar content being viewed by others

Notes

  1. 1.

    Newcombe and Paradell 2009, pp. 3–70.

  2. 2.

    A model BIT is a text of reference, which is prepared and released by ministries or departments of states tasked to conduct investment treaty negotiations. The often serve as the basis of IIA negotiations. 2012Model US BIT, 2004 Model Canadian FIPA, 2015 Norway Model BIT and 2015 India Model BIT are some notable examples.

  3. 3.

    North American Free Trade Agreement 1994 https://ustr.gov/trade-agreements/free-trade-agreements/north-american-free-trade-agreement-nafta (Accessed 7 April 2016).

  4. 4.

    CETA (2017), http://ec.europa.eu/trade/policy/in-focus/ceta/ceta-chapter-by-chapter/ (Accessed 22 May 2019).

  5. 5.

    EU—Singapore FTA draft text (2015) http://trade.ec.europa.eu/doclib/press/index.cfm?id=961 (Accessed 6 April 2016); EU—Singapore trade and investment agreements (2018) http://trade.ec.europa.eu/doclib/press/index.cfm?id=961 (Accessed 22 May 2019).

  6. 6.

    EU—Vietnam FTA draft text (2016) http://trade.ec.europa.eu/doclib/press/index.cfm?id=1437 (Accessed 6 April 2016); EU—Vietnam trade and investment agreements (2018) http://trade.ec.europa.eu/doclib/press/index.cfm?id=1437 (Accessed 22 May 2019).

  7. 7.

    European Commission, TTIP draft text (2015) http://trade.ec.europa.eu/doclib/docs/2015/september/tradoc_153807.pdf (Accessed 6 April 2016).

  8. 8.

    Wagstyl S, Germany expresses concerns about US and Canada trade deals (Financial Times, 25 September 2014), http://www.ft.com/intl/cms/s/0/671841da-44c1-11e4-bce8-00144feabdc0.html#axzz456BMme00, Accessed 6 April 2016; Donnan S, Trade deals: Toxic talks (Financial Times, 6 October 2014), http://www.ft.com/intl/cms/s/0/27b8740e-48ce-11e4-9f63-00144feab7de.html#axzz456BMme00, Accessed 6 April 2016; EFILA (2015); Sinclair 2014.

  9. 9.

    Global Affairs Canada (2012) http://www.international.gc.ca/media_commerce/comm/news-communiques/2012/04/27a.aspx?lang=eng (Accessed 6 April 2016).

  10. 10.

    Thystrup and Ünüvar 2017.

  11. 11.

    Paparinskis 2013, pp. 105–110; Schreuer 2005, p. 359; Dolzer 2002, pp. 72–79.

  12. 12.

    Investor-state dispute settlement: The Arbitration Game (The Economist, 11 October 2014), http://www.economist.com/news/finance-and-economics/21623756-governments-are-souring-treaties-protect-foreign-investors-arbitration (Accessed 13 June 2017).

  13. 13.

    Two earlier drafts were leaked: CETA draft text (25 November 2013, http://eu-secretdeals.info/upload/COM-doc-CETA_-investment-protection-newText-Nov-21-2013_clean.pdf (Accessed 7 April 2016); CETA draft text (7 April 2014; http://eu-secretdeals.info/upload/2014/02/EU-Canada-FTA-Negotiations-Investment-chapter-4-April-2014_clean.pdf (Accessed 7 April 2016).

  14. 14.

    CETA final draft text (24 September 2014) http://www.bmel.de/SharedDocs/Downloads/Landwirtschaft/Markt-Statistik/CETA-Verhandlungsergebnis.pdf?__blob=publicationFile (Accessed 7 April 2016).

  15. 15.

    Right to regulate is one of the most fervently discussed issues in academia. See, for instance, OECD 2004; Titi 2014; Mouyal 2016.

  16. 16.

    Global Affairs Canada, Canada—European Union: Comprehensive Economic and Trade Agreement (CETA) http://international.gc.ca/trade-agreements-accords-commerciaux/agr-acc/ceta-aecg/understanding-comprendre/facts-faits.aspx?lang=eng (Accessed 7 April 2016).

  17. 17.

    European Commission, DG Trade, CETA: Question and Answers http://ec.europa.eu/trade/policy/in-focus/ceta/questions-and-answers/ (Accessed 7 April 2016).

  18. 18.

    Ibid.

  19. 19.

    NAFTA (1994) https://ustr.gov/trade-agreements/free-trade-agreements/north-american-free-trade-agreement-nafta (Accessed 7 April 2016).

  20. 20.

    NAFTA FTC Notes of Interpretation (31 July 2001) http://www.sice.oas.org/tpd/nafta/Commission/CH11understanding_e.asp (Accessed 7 April 2016).

  21. 21.

    Tobin and Busch 2010, p. 6.

  22. 22.

    See, generally, Van Harten 2007.

  23. 23.

    Anghie 2004; Miles 2013, p. 69.

  24. 24.

    Poulsen 2015, pp. 1–24.

  25. 25.

    Ibid.

  26. 26.

    Rubins and Kinsella 2005, p. 34.

  27. 27.

    Canada—US Free Trade Agreement (CUSFTA—1987).

  28. 28.

    For a database on NAFTA cases, see NAFTA Investor-State Arbitrations, http://www.state.gov/s/l/c3439.htm (Accessed 7 April 2016).

  29. 29.

    Ibid.; ITA Law Database on Investment Disputes based on Treaty, http://www.italaw.com/browse/international-investment-agreement-name?field_case_type_tid[0]=1090&field_case_treaties_tid=11 (Accessed 7 April 2016).

  30. 30.

    NAFTA FTC Notes of Interpretation (31 July 2001); Pope and Talbot v. Canada UNCITRAL Rules of Arbitration, ad hoc 2001.

  31. 31.

    Brower 2006; Roberts 2013, p. 59.

  32. 32.

    Harbine 2002, p. 384.

  33. 33.

    Lavranos 2013, p. 2. The Netherlands largely abandoned this form of treaty-making, as the recent 2018 Model BIT indicates.

  34. 34.

    See 2012 US Model BIT and 2004 Canada Model FIPA expropriation provisions.

  35. 35.

    CETA (2017), Article 8.9.

  36. 36.

    De Mestral 2015, p. 21.

  37. 37.

    Philip Morris Asia Limited v. Australia PCA 2012-12 (2012—pending); Vattenfall AB and others v. Federal Republic of Germany ICSID ARB/12/12 (2012—pending) are two prominent examples.

  38. 38.

    EY Knowledge 2015; Anderlini 2015.

  39. 39.

    MAI was an OECD initiative, and except for several disregarded Latin American initiatives, all texts originate from, and are endorsed by, developed states.

  40. 40.

    TPP draft text (2016) https://ustr.gov/trade-agreements/free-trade-agreements/trans-pacific-partnership/tpp-full-text (Accessed 7 April 2016).

  41. 41.

    TFEU (2009), Article 3(1)(e) and Article 207(1).

  42. 42.

    The exclusivity of this competence is, it seems, far from granted. On 16 May 2017, the Court of Justice of the European Union (CJEU) issued the Opinion 2/15 on the EU—Singapore FTA, holding that the EU would share its competence with Member States on (i) non-direct foreign investment, (ii) ISA, and (iii) state-to-state dispute settlement relating to provisions regarding portfolio investment and ISA. The full text of the Opinion can be accessed at http://www.mlex.com/Attachments/2017-05-16_2CW21X23B07N046Z/C0002_2015%20EN.pdf (Accessed 13 June 2017).

  43. 43.

    UNCTAD IIA Navigator, http://investmentpolicyhub.unctad.org/IIA (Accessed 7 April 2016).

  44. 44.

    Ibid.

  45. 45.

    OECD Draft Convention (1967).

  46. 46.

    Bonnitcha 2014, p. 143.

  47. 47.

    Lavranos 2013.

  48. 48.

    European Commission 2010.

  49. 49.

    Ibid.

  50. 50.

    Ibid.

  51. 51.

    European Commission 2013.

  52. 52.

    European Parliament 2011.

  53. 53.

    Fontanelli and Bianco 2014, pp. 216–217.

  54. 54.

    European Parliament 2011.

  55. 55.

    Ibid. [emphasis added].

  56. 56.

    Court of Justice of the European Union, Opinion 1/17 (30 April 2019, http://curia.europa.eu/juris/document/document.jsf?text=&docid=213502&pageIndex=0&doclang=EN&mode=lst&dir=&occ=first&part=1&cid=4976548 (Accessed 22 May 2019).

  57. 57.

    Ibid., para 156–61.

  58. 58.

    Ibid.

  59. 59.

    CETA (2017), Article 8.10.

  60. 60.

    Ibid.

  61. 61.

    Ibid. [emphasis added].

  62. 62.

    “Legitimate expectations” is a growingly popular, standalone component of the FET obligation. See Potesta 2013; Schreuer and Kriebaum 2009.

  63. 63.

    Bernasconi-Osterwalder 2013, p. 17.

  64. 64.

    CAFTA-DR Article 10.5 refers to denial of justice “in criminal, civil, or administrative adjudicatory proceedings in accordance with the principle of due process”, and the ECT Article 10 explicitly refers to “stable, equitable, favourable and transparent conditions”.

  65. 65.

    Bernasconi-Osterwalder 2013, p. 17.

  66. 66.

    CETA (2017), Article 8.10.

  67. 67.

    OECD Draft Convention (1967), Notes and Comments to Article 1.

  68. 68.

    Dolzer and Schreuer 2008, p. 124; Mann 1981, p. 244.

  69. 69.

    Waste Management, Inc. v. United Mexican States ICSID ARB(AF)/00/32004.

  70. 70.

    Railroad Development Corporation v. Guatemala ICSID ARB/07/23 2012.

  71. 71.

    Waste Management (2004).

  72. 72.

    Saluka Investments BV v. The Czech Republic ad hoc, UNCITRAL Rules 1976 (2006).

  73. 73.

    Mohammad Ammar al-Bahloul v. Republic of Tajikistan SCC V (064/2008.

  74. 74.

    Liman Caspian Oil BV and NCL Dutch Investment BV v. Republic of Kazakhstan ICSID ARB/07/14 2010.

  75. 75.

    Saluka 2006, para 302.

  76. 76.

    Cargill, Inc. v. Mexico ICSID ARB(AF)/05/2 2009.

  77. 77.

    Tecnicas Medioambientales Tecmed S.A. v. Mexico ICSID ARB(AF)/00/2 2003, para 154.

  78. 78.

    Ibid.

  79. 79.

    Tecmed is, to the knowledge of the author, the first public award that employs the term “investor’s expectations”.

  80. 80.

    Hamamoto 2014, p. 144.

  81. 81.

    What constitutes ‘legitimate’ expectations may be articulated under the relevant IIA, as is partially the case in the CETA Article 8.10.

  82. 82.

    Cargill (2009), para 242.

  83. 83.

    L. F. H. Neer and Pauline Neer (U.S.A.) v. United Mexican States 1926. IV RIAA 60.

  84. 84.

    Cargill (2009), para 244.

  85. 85.

    ADF Group Inc. v. United States of America ICSID ARB(AF)/00/1 2003.

  86. 86.

    Cargill (2009), para 283, 284.

  87. 87.

    Occidental Exploration and Production Company v. Republic of Ecuador LCIA Arbitration UN 3467 2004.

  88. 88.

    Ibid., para 185.

  89. 89.

    Ibid., para 183.

  90. 90.

    Vandevelde 2010.

  91. 91.

    Ibid., p. 47.

  92. 92.

    Ibid., pp. 104–105.

  93. 93.

    Saluka (2006), para 291.

  94. 94.

    Berman 2013.

  95. 95.

    CETA (2017), Article 8.12 [emphasis added].

  96. 96.

    Ibid.

  97. 97.

    Lavranos 2013.

  98. 98.

    CETA (2017), Annex 8-A.

  99. 99.

    Other examples include US—Australia FTA (2005), and US—Colombia TPA (2012).

  100. 100.

    Thystrup and Ünüvar 2017, p. 57.

  101. 101.

    CETA (2017), Annex 8-A.

  102. 102.

    Ibid.

  103. 103.

    Ibid.

  104. 104.

    Dolzer 2002; Kriebaum 2007, p. 732.

  105. 105.

    CETA (2017), Annex 8-A.

  106. 106.

    The sole effects doctrine, as scrutinized by a number of scholars, proposes that the motivation or rationale behind a damaging expropriatory act does not play any (or a very limited) role in expropriation analysis. Kriebaum 2007, p. 724.

  107. 107.

    Ibid.; Alvarez 2011; Knahr 2007.

  108. 108.

    CAFTA-DR (2009), Article 10.7.

  109. 109.

    Railroad Development (2012).

  110. 110.

    Ibid., para 81.

  111. 111.

    While Al Tamimi v. Oman is another award examining an expropriation claim pursuant to an annexed expropriation provision (US—Oman FTA), the tribunal concludes its analysis after failing to find attributability of the damage and the state of Oman. Tribunal therefore did not have to analyse the intent of any state act.

  112. 112.

    Schrijver 2008, pp. 258–306.

  113. 113.

    Sauvant 2016.

  114. 114.

    See, LG&E Energy Corp., LG&E Capital Corp., and LG&E International, Inc. v. Argentine Republic, ICSID ARB/02/1 2007 and AES Summit Generation Limited and AES-Tisza ErömüKft v. The Republic of Hungary, ICSID ARB/07/22 2010.

  115. 115.

    See, generally, Mazumder 2015.

  116. 116.

    See 2004 Canada Model FIPA, 2012 US Model BIT; US—Singapore FTA (2004), and the US—South Korea FTA (2011).

References

  • Alvarez J E (2011) The Return of the State. Minnesota Journal of Int’l Law 20:223–264.

    Google Scholar 

  • Anderlini J (2015) China to become one of world’s biggest overseas investors by 2020 (Financial Times, 25 June 2015), http://www.ft.com/intl/cms/s/0/5136953a-1b3d-11e5-8201-cbdb03d71480.html#axzz456BMme00 Accessed 7 April 2016.

  • Anghie A (2004) Imperialism, Sovereignty and the Making of International Law. Cambridge University Press, Cambridge.

    Google Scholar 

  • Berman F (2013) The Interpretation and Application of Fair and Equitable Treatment: An Arbitrator’s Perspective. EJIL: Talk! European Journal of International Law, http://www.ejiltalk.org/the-interpretation-and-application-of-fair-and-equitable-treatment-an-arbitrators-perspective/ Accessed 7 April 2016.

  • Bernasconi-Osterwalder N (2013) Commentary to the Draft Investment Chapter of the Canada-EU Comprehensive Economic and Trade Agreement (CETA). IISD Report.

    Google Scholar 

  • Bonnitcha J (2014) Substantive Protection under Investment Treaties: A Legal and Economic Analysis. Cambridge University Press, Cambridge.

    Book  Google Scholar 

  • Brower C (2006) Why the FTC Notes of Interpretation Constitute a Partial Amendment of NAFTA Article 1105. Va. J. Int’l L. 46: 347–363.

    Google Scholar 

  • De Mestral A (2015) Investor-State Arbitration Between Developed Democratic Countries. CIGI Investor-State Arbitration Series, Paper no. 1.

    Google Scholar 

  • Dolzer R (2002) Indirect Expropriations: New Developments? NYU Envtl L.J. 11: 64–93.

    Google Scholar 

  • Dolzer R, Schreuer C (2008) Principles of International Investment Law. Oxford University Press, Oxford.

    Book  Google Scholar 

  • EY Knowledge (2015) Riding the Silk Road: China sees outbound investment boom – Outlook for China’s outward foreign direct investment. http://www.ey.com/Publication/vwLUAssets/ey-china-outbound-investment-report-en/$FILE/ey-china-outbound-investment-report-en.pdf Accessed 7 April 2016.

  • Fontanelli F, Bianco G (2014) Converging towards NAFTA: An Analysis of FTA Investment Chapters in the European Union and the United States. Stan. J. Int’l L. 50: 211–246.

    Google Scholar 

  • Hamamoto S (2014) Protection of the Investor’s Legitimate Expectations: Intersection of a Treaty Obligation and a General Principles of Law. In: Shan W, Su J (eds) China and International Investment Law: Twenty Years of ICSID Membership. Brill Nijhoff, Leiden, pp. 141–172.

    Chapter  Google Scholar 

  • Harbine J (2002) NAFTA Chapter 11 Arbitration: Deciding the Price of Free Trade. Ecology Law Quarterly 29: 371–394.

    Google Scholar 

  • Knahr C (2007) Indirect Expropriation in Recent Investment Arbitration. Austrian Review of International and European Law 12: 85–102.

    Google Scholar 

  • Kriebaum U (2007) Regulatory Takings: Balancing the Interests of the Investor and the State. The Journal of World Investment & Trade 8: 717–744.

    Article  Google Scholar 

  • Lavranos N (2013) In Defence of Member States’ BITs Gold Standard: The Regulation 1219/2012 Establishing a Transitional Regime for Existing Extra-EU BITs – A Member State’s Perspective. TDM 10: 1–14.

    Google Scholar 

  • Mann F (1981) British Treaties for the Promotion and Protection of Investments. British Yearbook of International Law, pp 241–254.

    Google Scholar 

  • Mazumder S (2015) Can I stay a BIT longer? The effect of bilateral investment treaties on political survival. The Review of International Organizations http://shommazumder.github.io/files/BIT-Survival.pdf Accessed 7 April 2016.

  • Miles K (2013) The Origins of International Investment Law: Empire, Environment and the Safeguarding of Capital. Oxford University Press, Oxford.

    Book  Google Scholar 

  • Mouyal L (2016) International Investment Law and the Right to Regulate: A Human Rights Perspective. Routledge, New York.

    Book  Google Scholar 

  • Newcombe A, Paradell L (2009), Law and Practice of Investment Treaties: Standards of Treatment. Kluwer Law Int’l, Alphen aan den Rijn.

    Google Scholar 

  • OECD (Organization for Economic Cooperation and Development) (2004) Indirect Expropriation and the Right to Regulate in International Investment Law. Working Paper on International Investment, No. 2004/4.

    Google Scholar 

  • Paparinskis M (2013) The International Minimum Standard and Fair and Equitable Treatment. Oxford University Press, Oxford.

    Book  Google Scholar 

  • Potesta M (2013) Legitimate Expectations in Investment Treaty Law: Understanding the Roots and the Limits of a Controversial Concept. ICSID Review 28: 88–122.

    Article  Google Scholar 

  • Poulsen L (2015) Bounded Rationality and Economic Diplomacy: The Politics of Investment Treaties in Developing Countries. Cambridge University Press, Cambridge.

    Book  Google Scholar 

  • Roberts A (2013) Clash of Paradigms: Actors and Analogies Shaping the Investment Treaty System. The American Journal of International Law 107: 45–94.

    Article  Google Scholar 

  • Rubins N, Kinsella NS (2005) International Investment, Political Risk and Dispute Resolution: A Practitioner’s Guide. Oceana Publications, New York.

    Google Scholar 

  • Sauvant K (2016) The Evolving International Investment Law and Policy Regime: Ways Forward. E15 Task Force on Investment Policy – Policy Options Paper. E15 Initiative. International Centre for Trade and Sustainable Development (ICTSD) and World Economic Forum), Geneva.

    Google Scholar 

  • Schreuer C (2005) Fair and Equitable Treatment in Arbitral Practice. Journal of World Investment & Trade 6:357–386.

    Google Scholar 

  • Schreuer C, Kriebaum U (2009) At What Time Must Legitimate Expectations Exist? In: Werner J, Ali AH (eds) A Liber Amicorum: Thomas Wälde – Law Beyond Conventional Thought. Cameron May, London, pp 265–276.

    Google Scholar 

  • Schrijver N (2008) Sovereignty over Natural Resources: Balancing Rights and Duties. Cambridge University Press, Cambridge.

    Google Scholar 

  • Sinclair S (2014) Investor-State Dispute Settlement in the TTIP and CETA: Submission to the European Commission’s Public Consultation. Canadian Centre for Policy Alternatives, https://www.policyalternatives.ca/sites/default/files/uploads/publications/National%20Office/2014/07/investor_state_dispute_settlement.pdf Accessed 6 April 2016.

  • Thystrup A, Ünüvar G (2017) A Waiver for Europe? CETA’s Trade in Services, and Investment Protection Provisions and Their Legal-Political Implications on Regulatory Competence. In: Adinolfi G, Baetens F, Caiado J, Lupone A, Micara AG (eds) International Economic Law: Contemporary Issues. Springer, Berlin/Heidelberg, pp 41–59.

    Chapter  Google Scholar 

  • Titi C (2014) The Right to Regulate in International Investment Law. CH Beck/Hart/Nomos, Munich/Oxford/Baden-Baden.

    Book  Google Scholar 

  • Tobin J, Busch M (2010) A BIT is Better Than a Lot: Bilateral Investment Treaties and Preferential Trade Agreements. World Politics 1: 1–42.

    Article  Google Scholar 

  • Van Harten G (2007) Investment Treaty Arbitration and Public Law. Oxford University Press, Oxford.

    Google Scholar 

  • Vandevelde K (2010) A Unified Theory of Fair and Equitable Treatment. International Law and Politics 43:43–106.

    Google Scholar 

Other Documents and Sources

Download references

Author information

Authors and Affiliations

  1. Centre of Excellence for International Courts (iCourts), University of Copenhagen, Copenhagen, Denmark

    Güneş Ünüvar

Authors
  1. Güneş Ünüvar
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Güneş Ünüvar .

Editor information

Editors and Affiliations

  1. Faculty of Law, University of Oslo, Oslo, Norway

    Mads Andenas

  2. Department of Political and Social Sciences, University of Cagliari, Cagliari, Italy

    Luca Pantaleo

  3. Université du Luxembourg, Luxembourg, Luxembourg

    Matthew Happold

  4. Hague University of Applied Sciences, The Hague, The Netherlands

    Cristina Contartese

Rights and permissions

Reprints and permissions

Copyright information

© 2020 T.M.C. Asser Press and the authors

About this chapter

Check for updates. Verify currency and authenticity via CrossMark

Cite this chapter

Ünüvar, G. (2020). Is CETA the Promised Breakthrough? Interpretation and Evolution of Fair and Equitable Treatment and (Indirect) Expropriation Provisions. In: Andenas, M., Pantaleo, L., Happold, M., Contartese, C. (eds) EU External Action in International Economic Law. T.M.C. Asser Press, The Hague. https://doi.org/10.1007/978-94-6265-391-7_9

Download citation

  • DOI: https://doi.org/10.1007/978-94-6265-391-7_9

  • Published:

  • Publisher Name: T.M.C. Asser Press, The Hague

  • Print ISBN: 978-94-6265-390-0

  • Online ISBN: 978-94-6265-391-7

  • eBook Packages: Law and CriminologyLaw and Criminology (R0)

Publish with us

Policies and ethics

Search

Navigation