International Investment Law
Readings 5: Fair and Equitable Treatment (FET) & Fair Protection
and Security (FPS)
Schefer, ‘International Investment Law’
5. Standards of host state behaviour
5.1 Background: the idea of minimum standards
Constitutional protections + bilateral treaties secured until the
Bolshevik Revolution efective removal of right to property for its
own citizens so also for foreigners
National treatment meant only treating the foreigner as a national,
whether or not the national had property rights or not
Mexican revolution calls for strict interpretation of national
treatment, but the US objected to this CIL on minimum
standards of treatment of aliens (especially Hull advocated this!)
Until standards were taken up into bilateral treaties, there existed
no consensus on this in IL, but nowadays it is a widespread feature
which we can’t deny
What would the international standard mean in order for a tribunal
to apply a treaty?
Four of the most common standards: non-arbitrariness in
regulation, non-discriminatory treatment, reasonableness in
regulatory oversight, and the full protection and security of the
investor and the investment
5.4 Full protection and security
Standard that protects the investor against third party interference
in an investment both state and private (protection against
employee uprising or civil disturbances and from threatening the
investor itself)
Some tribunals would extend it to due process and legal security
(provision of a stable legal regime, availability of timely access to
court proceedings)
1
, 5.4.1 Physical security
The investor and the investment may not be bodily injured,
harassed or threatened, nor may it be damaged by the host or by
individuals or groups within the host territory
Wena Hotels-case: hotels forcefully taken over, but police did not
act nor prosecute the villains
AAPL v. Sri Lanka-case: confrmation that the state is not strictly
liable for attempting but failing to protect the investor/investment
American Manufacturing and Trading v. Zaire-case: objective
obligation of vigilance, standard of due diligence defnition
relative to the host’s capacities
Pantechniki SA Contractors and Engineers v. The Republic of
Albania
Albania had an FPS-obligation under the treaty, due diligence in the
protection of its investment against both private and public action
Due diligence needs to be analysed in light of the circumstances
and the resources of the state in question there was no police at
the scene which could turn its back, in fact, there was
powerlessness of the Albanian government
Conclusion: Albania did comply with its duty to extend full
protection and security in the circumstances that gave rise to this
case
5.4.2 Legal Protection
Precise extent of FPS: open issue
ELSI-case: extension of FPS to include legal protection and
resolving the dispute in a timely fashion
Suz, Sociedad General de Aguas de Barcelona, SA and Vivendi
Universal SA v. the Argentine Republic and AWG Group v. The
Argentine Republic
Tender for water provision of Buenos Aires, the parties got the
concession consortium Aguas Argentinas, took over $700 million
2
Readings 5: Fair and Equitable Treatment (FET) & Fair Protection
and Security (FPS)
Schefer, ‘International Investment Law’
5. Standards of host state behaviour
5.1 Background: the idea of minimum standards
Constitutional protections + bilateral treaties secured until the
Bolshevik Revolution efective removal of right to property for its
own citizens so also for foreigners
National treatment meant only treating the foreigner as a national,
whether or not the national had property rights or not
Mexican revolution calls for strict interpretation of national
treatment, but the US objected to this CIL on minimum
standards of treatment of aliens (especially Hull advocated this!)
Until standards were taken up into bilateral treaties, there existed
no consensus on this in IL, but nowadays it is a widespread feature
which we can’t deny
What would the international standard mean in order for a tribunal
to apply a treaty?
Four of the most common standards: non-arbitrariness in
regulation, non-discriminatory treatment, reasonableness in
regulatory oversight, and the full protection and security of the
investor and the investment
5.4 Full protection and security
Standard that protects the investor against third party interference
in an investment both state and private (protection against
employee uprising or civil disturbances and from threatening the
investor itself)
Some tribunals would extend it to due process and legal security
(provision of a stable legal regime, availability of timely access to
court proceedings)
1
, 5.4.1 Physical security
The investor and the investment may not be bodily injured,
harassed or threatened, nor may it be damaged by the host or by
individuals or groups within the host territory
Wena Hotels-case: hotels forcefully taken over, but police did not
act nor prosecute the villains
AAPL v. Sri Lanka-case: confrmation that the state is not strictly
liable for attempting but failing to protect the investor/investment
American Manufacturing and Trading v. Zaire-case: objective
obligation of vigilance, standard of due diligence defnition
relative to the host’s capacities
Pantechniki SA Contractors and Engineers v. The Republic of
Albania
Albania had an FPS-obligation under the treaty, due diligence in the
protection of its investment against both private and public action
Due diligence needs to be analysed in light of the circumstances
and the resources of the state in question there was no police at
the scene which could turn its back, in fact, there was
powerlessness of the Albanian government
Conclusion: Albania did comply with its duty to extend full
protection and security in the circumstances that gave rise to this
case
5.4.2 Legal Protection
Precise extent of FPS: open issue
ELSI-case: extension of FPS to include legal protection and
resolving the dispute in a timely fashion
Suz, Sociedad General de Aguas de Barcelona, SA and Vivendi
Universal SA v. the Argentine Republic and AWG Group v. The
Argentine Republic
Tender for water provision of Buenos Aires, the parties got the
concession consortium Aguas Argentinas, took over $700 million
2
