Whether the usefulness of the fair and equitable treatment standard for investors is undermined by uncertainty about its meaning

Abstract

Fair and equitable treatment standards are recognized as the principles used to protect foreign investors from unfair practices. However, although fair and equitable practices are often defined in terms of investments, it does not provide meanings or definitions of fair and equitable practices resulting in different and ambiguous meanings of such principles. Unclearness of such principles may be viewed in two perspectives. The first view is that there is a lack of efficiency when such principles are applied. The second point of view is that there is room for interpretation or giving meanings to such principles in accordance with each situation of investment or different agreements. Thus, in this article, we will analyze whether ambiguous meanings of fair and equitable practices reduce their value. The author finds that uncertain meanings of fair and equitable practices do not reduce their value due to many reasons. Firstly, tribunals can interpret fair and equitable treatment standards using various factors such as good faith and legitimate expectation, compliance with contractual obligation and due process to adjust fair and equitable treatment standards in accordance with the different facts of each case; therefore, foreign investors receive justice in proper protection. Secondly, uncertainty of fair and equitable treatment standard’s meaning fills gaps when foreign investors receive low levels of protection or do not receive protection from other standards. Lastly, tribunals can continually comprise new elements to provide more advantages derived from fair and equitable treatment standards to investors.