The Full Protection and Security Standard in International Investment Law: What and Who is Investment Fully[?] Protected and Secured from?

Abstract

The axis of this Article is a preferred interpretation and application of the full protection and security (“FPS”) standard in contemporary international investment law. By carrying out the intellectual tasks of jurists proposed by the New Haven School of International Law, its findings are that the FPS standard covers both physical and legal harms to investments caused by state organs and/or third parties and that due diligence is decisive for determining the observation of the standard. To write up these findings, the Article first repudiates the conventional wisdom that the FPS standard owes its origin to treaties of friendship, commerce, and navigation (“FCN”) concluded in the nineteenth century. It then relies on a historical analysis to refute the position that the FPS standard has historically applied exclusively to physical harms. It argues that the concept of the FPS standard since its genesis has been tied with legal protection, notably, administration of justice, and such a tie has not necessarily been established upon physical harms. Thus, based on the customary international law duty to provide foreigners with full protection and security, one is justified in interpreting the treaty based FPS standard to cover legal harms that are even more delicate and wider in scope, given the context and conditions of international investment. By finding that the FPS standard covers legal harms, its overlap with the fair and equitable treatment (“FET”) standard occurs and blurs their distinction in practice. Regardless of whether physical and legal harms are caused by state organs or by third parties, this Article advocates for a modified objective test of due diligence to determine whether host states comply with the FPS standard. To hold that the acts of state organs are wrongful as such without enquiring whether such organs were diligent or not is unconvincing on its own terms and not even consistent with the minimum standard of treatment. Host states’ economic, social, and political realities bear relevance to their compliance with the FPS standard in both physical and legal contexts. Absence of due diligence is a contextual conclusion based on an assessment of what is “due” in the actual context. Therefore, host states can fail the due diligence test without intending to cause harms (dolus).

Keywords: Full Protection and Security Standard (FPS)

JEL Classification: K22, K33