The Origin and Evolution of Investment Treaty Standards 1st edition by Federico Ortino ISBN 0198842635 978-0198842637

Introduction

I. Guarantees of Legal Stability in the Strict Sense

Introduction

A. Respect of Host State’s Undertakings with Regard to Foreign Investments and the Umbrella Clause

B. Regulatory Stability in the Strict sense and (the Little Known Case of) Investment Treaties’ Stabilization Clauses

C. Strict Stability through the Fair and Equitable Treatment (FET) Standard

1. Linking FET and legal stability in the strict sense: the early attempt

2. The majority of investment tribunals have rejected the link between FET and stability in the strict sense

3. FET, regulatory change and recent arbitral practice: still in muddy waters

(a) Some tribunals’ failure to take a clear position on whether or not FET includes a strict stability obligation

(b) Some tribunals’ failure to clearly address the precise ambit of, and relationship between, the obligation to provide a stable legal framework and the obligation to protect the investor’s legitimate expectations

(c) Some tribunals’ failure to clarify the kind of regulatory change that qualifies for a breach of the FET provision

D. Recent Treaty Practice

Preliminary Conclusions

II. Protecting the Value of Investments: The Expropriation Provision

Introduction

A. The Origin of the Concept of Expropriation in Modern Investment Treaties

1. Textual emphasis on adverse ‘effect’ on the foreign ‘investment’

2. What relevance for the host State measure’s public purpose?

B. Indirect Expropriation in Investment Arbitral Practice: ‘Sole-Effect’ versus ‘Police Powers’

1. Initial interpretations and the exclusive relevance of the measure’s (adverse) economic effect

2. The relevance of the measure’s purpose in assessing the existence of an indirect expropriation

3. ‘Sole effect’ versus ‘police powers’: an enduring but evolving inconsistent arbitral tribunal practice

C. ‘Expropriatory Effect’: A Concept in Search of a Definition

1. The threshold question: substantial versus total deprivation

2. The denominator problem

3. The object of deprivation: property interest, control or value?

(a) Implications of investment treaties’ emphasis on ‘effect’: substance over form

(b) Early arbitral practice: a broad view with a few dissenting voices

(c) Arbitral practice beyond the early years: conflicting views remain and minority dissenting voices become louder

D. Recent Treaty Practice

Preliminary Conclusions

III. Ensuring Reasonableness in the Conduct of Host States

Introduction

A. The Origin of Reasonableness-Based Provisions in Modern Investment Treaties

1. Express references in early investment protection instruments to ‘standards’

2. What is the ‘original’ meaning of ‘fair’, ‘equitable’, ‘unreasonable’, ‘arbitrary’, ‘discriminatory’? Clues pointing to extensive protection

(a) No clear link between investment treaty standards and customary law

(b) Overlapping nature of investment treaty standards

(c) Open-ended nature of investment treaty standards

3. Investment treaty standards (such as fair and equitable treatment, full protection and security, non-impairment through arbitrary, unreasonable or discriminatory measures) as reasonableness-based standards

(a) Focus on the merit or soundness of the host State’s conduct

(b) Focus on a variety of factors

(c) Focus on balancing different interests

B. Full Protection and Security and Due Diligence

1. The very first case: AAPL v Sri Lanka

2. Subsequent arbitral practice and divergent application of the ‘due diligence’ standard

3. What standard when assessing acts of State organs causing harm to the investment?

C. Fair and Equitable Treatment (and Non-Impairment) Standards: Good Faith, Arbitrariness and Legitimate Expectations

1. Good faith

2. Arbitrary (or unjustifiable or unreasonable) conduct

(a) Arbitrariness and the ‘high threshold’ approach

(b) Arbitrariness and the broader (more intrusive) reach

(c) Arbitrariness and investment tribunals’ ambivalent approach

3. The protection of legitimate expectations

(a) Balancing investors’ legitimate expectations and host States’ right to regulate: sketching two approaches followed by investment tribunals

(b) Balancing exercise and standard of review

D. Indirect Expropriation and the ‘Legitimate’ Exercise of Police Powers

1. Several versions of the ‘police powers’ doctrine

2. Means–ends rationality (or bona fide regulation for a public purpose)

(a) Host State’s measure is a bona fide measure

(b) Host State’s measure is a legitimate exercise of its right to sanction violations of domestic law

(c) Host State’s measure is a legitimate exercise of its rights under the investment contract

3. Proportionality balancing

(a) Tecmed and the sensitivity of putting different values on the proportionality scale

(b) Subsequent arbitral practice and various applications of proportionality balancing

(c) Proportionality balancing in the context of the host State’s exercise of its rights under the investment contract

E. Recent Treaty Practice

1. FPS and FET clauses

2. Expropriation

Preliminary Conclusions

Conclusion

Select Bibliography

Index