A Case Review and Analysis of the Legitimate Expectations Principle as it Applies within the Fair and Equitable Treatment Standard
59 Pages Posted: 23 Apr 2009
Date Written: March 19, 2009
The principle of legitimate expectations is increasingly important in international investment law. This honours paper, supervised by Dr Sarah Heathcote, examines the development and content of that principle within the fair and equitable treatment standard. Beginning with a brief overview of fair and equitable treatment, it evaluates the emergence of the legitimate expectations principle within the international investment "case law", before considering the principle's foundations in general international law. This is followed by an inductive analysis and discussion of the principle's key features. On the basis of this approach, the paper concludes that the legitimate expectations principle is moving towards consolidation in a number of important respects. Consistent with general international law, an investor's expectations are most likely to be considered "legitimate" if they are induced by an unambiguous, formal and unconditional assurance from the host state, which the investor has relied upon to its detriment. The investor's claim is further enhanced by evidence of highly individualised or contractual dealings, although contractual disappointments that do not display the characteristics of sovereign authority are unlikely to meet the threshold of legitimate expectations under the fair and equitable treatment standard. The paper also finds that the legitimate expectations principle is closely intertwined with transparency and legal stability, although this connection is procedural in nature and maintains the host state's liberty to determine the substantive content of its regulatory system. Finally, whether an investor has exercised an objective level of due diligence is an important factor in determining the legitimacy of investor expectations, although the extent of investor pre-investment disclosure obligations remains uncertain.
Keywords: Legitimate expectations, expectation, international investment law, investor, estoppel, fair and equitable treatment, investor diligence, good faith, general principles of law, transparency, stability, consistency, plain meaning, customary international law, ICSID, NAFTA, TECMED, Waste Management
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