Document Type : Original Article from Result of Thesis
Highlights
Extended Abstract
Introduction
The Fair and Equitable Treatment (FET) standard is one of the most significant standards for the protection of foreign investment in international investment law. It has been incorporated into a considerable number of investment treaties and has become a major basis for assessing the conduct of host States in investment arbitration. Despite its practical importance, the nature, normative foundation, content, and limits of FET remain contested. One of the principal reasons for this continuing debate is the conceptual flexibility of the standard and the wide range of elements that arbitral tribunals have addressed within its scope, including good faith, the prohibition of arbitrary conduct, transparency, the protection of legitimate expectations, proportionality, non-discrimination, and procedural fairness. While this flexibility enables FET to respond to different forms of State conduct, it also raises a fundamental question: are these elements merely a collection of separate and independent obligations, or can they be understood as manifestations of a common normative foundation? Existing scholarship has examined FET from several perspectives. Some studies have focused on its relationship with the international minimum standard and customary international law; others have emphasized treaty wording and the rules of treaty interpretation, while another strand of scholarship has examined the role of general principles of law and good faith in determining the content of FET. Nevertheless, the relationship between these approaches, particularly the relationship between justice and fairness and the legal and operational elements of FET, has not been sufficiently developed within a single analytical framework. The present study addresses this gap. Its principal research question is: What is the normative foundation of the Fair and Equitable Treatment standard, and how can this foundation be reflected in the interpretation and application of its various elements? The study hypothesizes that the different elements of FET can be explained through a common normative foundation and mediated through recognized legal principles. Within such a framework, justice and fairness provide normative orientation, good faith performs a connecting and operational function, and identifiable legal criteria provide the basis for assessing State conduct. The objective is therefore not to establish justice as an autonomous source of new legal obligations, but to clarify its role in creating conceptual and interpretive coherence within the legal structure of FET.
Methodology
This study adopts a descriptive-analytical methodology based on the examination of international investment treaties and instruments, investment arbitral awards, and relevant international legal scholarship. The analysis combines a conceptual examination of justice, fairness, and good faith with an assessment of their relationship to the legal structure of FET. Investment arbitral jurisprudence concerning legitimate expectations, good faith, arbitrary conduct, transparency, proportionality, and procedural requirements is examined not merely as a collection of isolated examples, but as evidence relevant to the identification and delimitation of a coherent normative framework. At the same time, the study recognizes that the formulation of FET differs across investment treaties and that the interpretation of the standard must therefore remain connected to the applicable treaty text and the relevant rules of international law. Accordingly, the normative approach developed in this research does not seek to detach FET from treaty interpretation or from the jurisdictional framework applicable to investment arbitration. Rather, it examines how broader normative considerations may operate within the legal framework established by the treaty and recognized principles of international law.
Results and Discussion
The findings indicate that FET cannot adequately be understood as a mere collection of separate and unrelated obligations. Although each element of the standard has its own legal requirements and specific function, there is a normative coherence among them that makes it possible to analyze them within a common framework. In this framework, justice and fairness may be regarded at the normative level as concepts that provide orientation to the standard They must instead be mediated through recognized principles and rules of international law before they can operate as legal standards. Transparency and the protection of legitimate expectations can similarly be understood as particular manifestations of the requirement that State conduct be coherent, intelligible, and reasonably reliable. Nevertheless, the protection of legitimate expectations does not amount to an absolute guarantee of regulatory stability or prevent a State from modifying its policies and regulations in pursuit of legitimate public objectives. Likewise, proportionality and procedural fairness demonstrate that an assessment under FET may require consideration of both the public objectives pursued by the State and the effects of the relevant measures on the investor. From this perspective, the normative foundation of FET can be examined at three interconnected levels. First, at the normative level, justice, fairness, and good faith explain the general normative orientation of the assessment of State conduct. Second, at the interpretive level, these considerations are translated into applicable legal concepts through recognized principles and standards. Third, at the operational level, an arbitral tribunal assesses the conduct of the State in light of the applicable treaty, the circumstances of the case, and the evidence before it. These three levels demonstrate that the relationship between a normative foundation and a legal obligation is neither direct nor automatic; rather, it is mediated through a legal and interpretive process.
Conclusion
The principal conclusion of the research is that the capacity of FET to accommodate considerations of justice and fairness depends upon their operation within the legal structure of the standard and through recognized legal principles. By contrast, when considerations of justice and fairness are introduced into the interpretation and application of FET through good faith, the prohibition of arbitrariness, transparency, proportionality, procedural requirements, and other recognized legal criteria, they can contribute to greater coherence in the assessment of State conduct. The normative interpretation of FET must also remain compatible with the host State’s right to regulate in pursuit of legitimate public objectives. A State does not lose its regulatory authority merely because it has undertaken investment protection obligations. Accordingly, the protection of investors and the preservation of the State’s regulatory space must be assessed within the applicable treaty framework and in light of the legal criteria relevant to each case. The study therefore proposes understanding the normative foundation of FET through the concept of “constrained justice”: an approach that recognizes the capacity of justice and fairness to provide normative coherence and justification for FET, while constraining their legal operation through the treaty text, recognized legal principles, legal certainty, the limits of arbitral jurisdiction, and the State’s right to regulate. On this basis, the principal function of the normative foundation of FET is not to confer unlimited discretion upon arbitral tribunals, but to provide a disciplined framework for assessing the reasonableness, fairness, and legal justification of the exercise of public authority in investment relations.
