Neer-Ly Misled?

Abstract

One of the most heated debates concerning the standards of protection for foreign investment seems to have taken the wrong track and never looked back. The lapse relates to the question whether the concepts of “fair [or ‘just’] and equitable” treatment and “full protection and security” are synonymous with, or part of, the customary-law “minimum standard for the treatment of aliens.” This issue has given rise to now-familiar sub-questions: (i) whether treatment compliant with the customary-law minimum standard is by definition fair and equitable (and consistent with the duty to ensure protection and security); and (ii) whether the customary-law standard of treatment is frozen in time. But a more basic matter seems to have been eluded by a hasty assumption, namely that the minimum standard of treatment looks to a single, generally applicable standard of review with respect to all types of state conduct, and that the test was set forth in the 1926 Neer decision of the United States– Mexico General Claims Commission.

The record shows that this assumption is unsustainable. The Neer criterion of “outrage, … bad faith, … willful neglect of duty” and glaring “insufficiency of governmental action” applied only to what the Commission regarded as denial of justice claims. In all other cases, and in particular with respect to “direct responsibility for acts of executive officials,” the elements of the Neer formulation were “aggravating circumstances,” and not necessary to constitute an international wrong.