The cost of inaction: arbitral practice in respect of earlier generation FET clauses and current approaches to FET clauses, Report, OECD

Abstract

At the OECD Track 2 (“Future of Investment Treaties”) meeting on 7 November 2023, I gave a presentation titled “The cost of inaction: arbitral practice in respect of earlier generation FET clauses and current approaches to FET clauses”. The presentation summarised my findings regarding a comprehensive empirical research project on how investment tribunals have assessed the status, scope and content of the “fair and equitable treatment standard” (FET) clause found in the vast majority of bilateral and multilateral investment treaties. I have examined all publicly available awards rendered by arbitral tribunals dealing with FET clauses. To the best of my knowledge, this is the first comprehensive survey on the issue since the 2012 UNCTAD Report.1 I have found 279 relevant awards.2 This document summarises my findings. The full report will be published by Kluwer in 2024.I have focused my attention on the following three questions:
1. Based on the language of the FET clause contained in the treaty, what is the tribunal’s reasoning regarding the relationship between the standard of treatment it provides to foreign investors and the standard under “international law”, the “minimum standard of treatment” (MST) under custom, or, more generally, customary international law? In other words, do they constitute an equivalent treatment or does one offer a better level of protection than the other(s)?2. In relation to how the tribunal analysed the first question, what did it say about the content of the FET standard? In other words, what are the different elements of treatment that the host State must accord to foreign investors? More specifically, does the tribunal consider that the standard includes the protection of the investor’s legitimate expectations, that it imposes an obligation of transparency and to provide a stable legal and business environment?3. Does the answer to these two questions have any consequences or impact on a tribunal’s finding in terms of liability and awarding compensation?
This Reports examine the reasoning of tribunals for the following three different types of FET clauses.