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Fair and Equitable Standard in International Investment Law

Background of the Fair and Equitable Standard

The Fair and Equitable (henceforth, FET) Standard has important relevance in the context of international investment law, from bilateral investment treaties (BITs) to regional investment treaties, to multilateral treaties, all have included the standard into their agreements and ensure its implementation.

Now, it is imperative to note that there is no constitutional definition for the FET standard, and a majority of the time, the said standard is adopted in varying versions. Due to this reason, the meaning and interpretation of the standard are also not uniform which gives a lot of area for ambiguity. Nevertheless, most frequently the model would include:

  1. the standard alone,
  2. the standard in conjunction with the full protection and security reference,
  3. the standard in conjunction with the national treatment, and the standard in conjunction with the most favored nation treatment.

Explanation of the Standard

Primarily, it is crucial to bear in mind that there is no particular meaning of the standard that is accepted universally by the tribunals and in a majority of cases, the standard is interpreted at par to the ordinary meaning of the words “fair and “equitable.”

In layman parlance, the FET standard can be explained as customary practice in the international investment law which ensures to set an obligation to perform activities in a fair and equitable manner.

According to the 2004 US BIT Model, the standard can be referred to as “an obligation to provide “fair and equitable treatment” includes the obligation not to deny justice in criminal, civil, or administrative adjudicatory proceedings in accordance with the principle of due process embodied in the principal legal systems of the world…”

Moreover, OCED reiterates that “the meaning of the “fair and equitable treatment” standard may not necessarily be the same in all the treaties in which it appears. The proper interpretation may be influenced by the specific wording of a particular treaty, its context, negotiating history or other indications of the parties’ intent…” 

Meaning: As part of the minimum standard needed by customary international law, fair and equitable treatment must be provided.

For starters, one must understand the meaning of the “minimum standard” requirement with respect to the FET standard in international investment law. You see, foreign investors are entitled to a particular degree of treatment under customary law, and any treatment that falls short of that level entails state liability.

Furthermore, some have identified the FET standard as one of the elements of the minimal level of treatment of foreigners and their property required by international law.

In Conclusion

  1. The FET clause/standard is simply an omnipresent practice in international investment law that helps in protecting and promoting trade practices between the nations.
  2. The clause does not have any universal definition and is adopted in varying versions.
  3. Throughout the years, there have been a number of meanings and interpretations that have been given, however, none have been accepted universally.

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