Fair & Equitable Treatment Protection
Introduction
BIT’s (BITs) are investment agreements that are entered into by two sovereign states in a way that is not detrimental or injurious to investments by investors from the other contracting. State. They are regarded as a means of drumming up investor confidence by signaling that the legal and political structures are not injurious to foreign investors and investments, thus providing a welcoming climate for. FDI.
The Historical development of BIT’s & Fair & Equitable Treatment Protection
The development of. BIT’s was primarily a response to the fears and insufficiency of the customary international law of state responsibility for injuries to foreigners and their property. Further, the developed states required to obtain better market access assurance from developing states for their investors and to obtain advanced development in the standards of investment protection.
The first IIA was between Pakistan and Germany in 1959 for the promotion and protection of investments. It had many provisions that have become common in current BIT’s. The efforts by Germany to conclude. BIT’s were followed by Switzerland and Tunisia in 1961, Netherlands and Tunisia in 1963. Italy and Guinea in 1964, Sweden and Denmark in 1965, UK and Egypt in 1975.
The Features of the past BIT’s & Fair & Equitable Treatment Protection
The features of these treaties during this period were majorly based on the OECD draft Convention. Since then more than 3,000 such agreements have been concluded in the world.
Factors that has motivated developing states to enter into investment treaties
One of the factors that has motivated developing states to enter into investment treaties is due to the ambition for them by. OECD and UNCTAD. This was on the premise that they added security to foreign investors which would offshoot increase in foreign investment. The other factor which is put forth by intergovernmental institution such as International Finance Corporation is that, investment treaties are seen as risk management tools. Finally, globalization has increased the spread of investment treaties.
The developed countries have ready capital to invest in developing countries thus the majority of the BIT’s are concluded between developed and developing countries. The underlying principle behind. BIT’s is that, by granting foreign investor’s enhanced security and protection beyond that which is provided by the laws of the host state, will increase and attract foreign investment.
The Fair & Equitable Treatment clause in Ethiopian BIT’s
As discussed below, except for three. Ethiopia’s BIT concluded with UAE. Brazil & Qatar, in all other Ethiopia BITs the Fair & Equitable Treatment clause included are unqualified type. This will expose Ethiopia to potential, unnecessary litigation before the arbitral tribunals. If Ethiopian government body takes a measure contrary to the obligations contained in an investment treaty, that action can engender high liability for the government. This could potentially require the payment of millions of dollars in compensation, damage the state’s reputation as a decent place to invest, and limit the state’s ability to attract foreign investment in the future.
Terminology of Fair & Equitable Treatment
The manner in which the notion of fairness and equity to be granted to the investor is represented in a treaty may vary. Indeed there are a number of agreements that refer to the standard as “just and equitable treatment” or simply “equitable treatment.” For example Ethiopia Malaysia BIT on article 2(2) states that.
“Once an investment is admitted investors of each Contracting. Party shall at all times be accorded “equitable treatment” and shall enjoy full and adequate protection and security in the territory of the other. Contracting Party”. The French model and various BIT’s involving Switzerland also refer solely to “just and equitable treatment”.
The United States signed. Friendship Commerce and Navigation (FCN) Treaties with Belgium, Luxembourg, Greece. Ireland, Israel, and Pakistan all of which referred to the standard as “equitable treatment.” On the other hand, FCN’s agreed upon with Ethiopia, Germany, Oman, and the Netherlands referred to “FET”. The fact that the use of a different adjective would imply a different standard is questioned, however, as Fatouros suggests: “this variation in the form of words seems to be of no great importance.” The reason the drafters referred to the notion as “equitable treatment” or “just and equitable treatment” is that at that time, the formulation of it as. “FET” had not yet become the principal form of its expression.
Definition of Fair & Equitable Treatment Protection
Until the recent rise of arbitral interpretations of the “FET” standard, its meaning was not generally determined. The word “fair” is defined by the. Concise Oxford Dictionary as “just, unbiased, equitable, in accordance with rules”. Therefore, the concepts of fair and equitable are, to a large extent, interchangeable. In addition, equity suggests a balancing process, weighing up of what is right in all the circumstances. It is a word related to the idea of equilibrium defined as
“a state of physical balance”. The balancing function of equity is accepted as an aspect of international law.
Classical definition of Fair & Equitable Treatment
“FET” clauses typically refer to “treatment” of investments. “Treatment” is an expansive term, defined as “conduct, action or behavior towards a person”. Essentially, any action or omission attributable to the host State can become a subject of “FET” claim. While historic cases on the international minimum standard and denial of justice were typically concerned with alleged failures in the judicial system of the host State, modern. FET” claims cover, in addition, all types of administrative and legislative decisions, as well as the conduct of anybody or entity if this conduct is attributable to the State.
Case Studies on Fair & Equitable Treatment
Fair & Equitable Treatment Standard definition depends on the circumstances of each case. Accordingly in Mondev Case, it was stating that ‘judgment of what is fair and equitable cannot be reached in abstract; it must depend on the facts of the particular case. Indeed this definition of. Fair & Equitable Treatment Standard is considering a problem by some scholars and jurists.
The argument is that the definition can imply that the test is whether the investor has been treated fairly and equitably by the host State. The challenge with the definition is that it invites an ex aequo et bono consideration. Although fair and equitable principles may be considered as legal concepts of fairness and equity, the same should not be confused with ex aequo et bono. In Mondev Case, the tribunal noted that ‘It may not simply adopt its own idiosyncratic standard of what is fair or equitable, without reference to established sources of law.’
The actual practice of application of “Fair and Equitable Treatment.
Indeed The actual practice of application of. “Fair and Equitable Treatment” clauses by arbitral tribunals has drawn a distinction solely between. FET” as an unqualified standard and the. “FET” obligation linked to the minimum standard of treatment of aliens under customary international law. Where an IIA ties the. “FET” obligation to the customary international law minimum standard of treatment of aliens. The threshold of liability as applied by arbitral tribunals has been generally higher: the. State’s conduct needs to be egregious or outrageous in accordance with the Neer case. Indeed, the minimum standard of treatment of aliens is an international lowest common divisor or a floor for the assessment of governmental conduct. Generally, a reference in. “FET” clause to the minimum standard of treatment of aliens conveys a clear message that only the very serious acts of maladministration can be seen as violating the treaty.
Reference.
- Muthucumaraswamy Sornarajah, The International Law on Foreign Investment, (2nded Cambridge University Press 2004), Download pdf
- UNCTAD, The role of IIAs in attracting foreign direct investment to developing countries, (United Nations, 2009)
- UNCTAD, Fair and Equitable Treatment UNCTAD Series on Issues in International Investment Agreements,
- The Concise Oxford Dictionary of Current English, (8th ed. Clarendon Press 1990), p. 420. 83 Id., p. 396.
- Christoph Schreuer, Investments, International Protection, (Max Planck Encyclopedia of Public International Law, 2013)
- Read Understanding Indirect Expropriation in Ethiopian BITs
