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Ecm_pro_068230 Fair and Equitable Treatment

Ecm_pro_068230 Fair and Equitable Treatment

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 A UNIFIED THEORY OF FAIR ANDEQUITABLE TREATMENT
B
 Y 
ENNETH
J.
 ANDEVELDE
*I.
N
E
MERGENT
F
 AIR AND
E
QUITABLE
T
REATMENT
S
TANDARD
......................................44II.F
 AIR AND
E
QUITABLE
T
REATMENT AS THE
ULE OF
L
 AW
............................................49III.F
 AIR AND
E
QUITABLE
T
REATMENT IN THE
RBITRAL
 A 
 WARDS
.........................................53 A.
Reasonableness 
...............................541.
Politically Motivated Acts Violate the Reasonableness Principle 
..................59B.
Nondiscrimination 
............................63C.
Consistency 
..................................661.
Consecutively Inconsistent Actions: Contracts 
................................692.
Consecutively Inconsistent Actions: Assurances 
...............................753.
A Finding of No Promises or Assurances 
....784.
When Reliance Is Not Reasonable 
..........805.
Changes in Laws Resulting in a Violation even in the Absence of Assurances 
..........816.
Inconsistent Positions Taken Simultaneously 
.82D.
Transparency 
................................83E.
 Due Process 
..................................89
*Professor of Law, Thomas Jefferson School of Law, San Diego, Cali-fornia. This article is based on a presentation that I gave in 2006 at a confer-ence in Puebla, Mexico, organized jointly by the United Nations Conferenceon Trade and Development (UNCTAD) and the Organization of AmericanStates (OAS). I withheld my paper from publication at that time because it  was part of a larger project, which I had begun in 2005, explicating the rela-tionship between bilateral investment treaty standards generally and the ruleof law. That larger project was completed in spring 2009, at which time Iupdated this paper to include awards issued through the end of 2008 and afew recent papers on the rule of law and submitted it for publication. Thelarger project was published by Oxford University Press in 2010 under thetitle
Bilateral Investment Treaties: History, Policy and Interpretation 
. I wish to ex-press my appreciation to UNCTAD and the OAS for providing me the op-portunity to present my paper at their conference and to the conferenceparticipants for their comments on my presentation.
43
 
44
INTERNATIONALLAWANDPOLITIC
[Vol.43:43
F.
Good Faith 
..................................96G.
Other Cases 
..................................101IV.C
ONCLUSION
....................................104Since the beginning of the decade, international arbitraltribunals have struggled unsuccessfully to define theobligation of “fair and equitable treatment” required by the vast majority of the world’s 2,600 bilateral investment treaties(BITs).
1
Although by the end of 2008 more than fifty awardshad been issued by international tribunals interpreting that standard,
2
none of them has purported to offer a unifiedtheory of the standard. This article endeavors to supply such atheory.I.
N
E
MERGENT
F
 AIR AND
E
QUITABLE
T
REATMENT
S
TANDARD
The fair and equitable treatment standard became a con-sistent feature of investment treaty practice after it appeared inthe Havana Charter of 1948.
3
Article 11(2)(a)(i) of the Char-ter called for the negotiation of international agreements “toassure just and equitable treatment for the enterprise, skills,capital, arts and technology brought from one Member coun-try to another.” Although the Charter never entered intoforce, it influenced U.S. treaty practice. When the UnitedStates inaugurated a program of post-war Friendship, Com-merce and Navigation (FCN) treaties, it included in those trea-ties a requirement that foreign property receive fair and equi-table treatment.
4
1.UNCTAD identified 2,608 BITs that had been concluded as of theend of 2007.
See 
U.N. Conference on Trade and Dev. (UNCTAD),
Recent  Developments in International Investment Agreements (2007-June 2008) 
, at 2, fig.1,U.N. Doc. UNCTAD/WEB/DIAE/IA/2008/1 (2008).2.A precise count is impossible because not every award is published,but fifty-four awards applying the standard are identified and discussedherein.3.Havana Charter for an International Trade Organization, Mar. 24,1948, 62 U.N.T.S. 26. For an excellent discussion of the history of the fairand equitable treatment standard, seeStephen Vasciannie,
The Fair and Equi- table Treatment Standard in International Investment Law and Practice 
, 70 B
RIT
. Y.B. I
NT
L
L. 99 (1999). The standard occasionally appeared in other trea-ties prior to 1948.
See generally 
ENNETH
J.
 ANDEVELDE
, B
ILATERAL
I
NVEST-MENT
T
REATIES
: H
ISTORY 
, P
OLICY AND
I
NTERPRETATION
(2010).4.
See, e 
.
.
,
Treaty of Friendship, Establishment and Navigation, U.S.-Lux., art. I, Feb. 23, 1962, 14 U.S.T. 251; Treaty of Friendship, Establishment 
 
2010]
A UNIFIED THEORY OF FAIR AND EQUITABLE TREATMENT 
45
The fair and equitable treatment standard soon found its way into codifications of investor rights. The 1959 Draft Con- vention on Investments Abroad, more commonly known as the Abs-Shawcross Convention, required at article 1 that “[e]achParty shall at all times ensure fair and equitable treatment tothe property of the nationals of other Parties.”
5
Article I(1) of the 1967 OECD Draft Convention on the Protection of For-eign Property was worded identically.
6
Meanwhile, in 1959, Germany concluded the first BIT, with Pakistan.
7
In the 1960s, other countries began to inaugu-rate their own BIT programs.
8
When Switzerland inauguratedits BIT program in 1961, it included the fair and equitabletreatment standard.
9
Soon, other countries included the stan-dard in their BITs.
10
The United States launched its programin 1977,
11
and every U.S. BIT has included the standard.
12
At 
and Navigation, U.S.-Belg., Feb. 21, 1961, art. I, 14 U.S.T. 1284; Conventionof Establishment, U.S.-Fr., art. I, Nov. 25, 1959, 11 U.S.T. 2398; Treaty of Friendship, Commerce, and Navigation, U.S.-Neth., art. I(1) Mar. 27, 1956,8 U.S.T. 2043.5.Herman Abs & Lord Shawcross,
 Draft Convention on Investments Abroad 
, 9 J. P
UB
. L. 116 (1960),
reprinted in 
U.N. Conference on Trade andDev. (UNCTAD),
International Investment Instruments: A Compendium 
,301,U.N. Doc. UNCTAD/DITE/2(Vol. 5) (2000).6.Organization for Economic Co-operation and Development (OECD), Draft Convention on the Protection of Foreign Property, Oct. 12,1967, 7 I.L.M. 117,119.7.Treaty for the Promotion and Protection of Investments, F.R.G.-Pak.,Nov. 25, 1959, 24 U.N.T.S. 1963.8.
See 
Kenneth J. Vandevelde,
A Brief History of International Investment Agreements 
, 12 U.C. D
 AVIS
J. I
NT
L
L. & P
OL
 Y 
157, 169 (2005) (listing severalcountries that entered into BITs in the 1960s).9.Treaty Relating to the Protection and the Encouragement of Invest-ments of Capital, Switz.-Tunis., art. 1, Dec. 2, 1961, RO 1964 67,
available at 
http://www.unctad.org/sections/dite/iia/docs/bits/switzer-land_tunisia_fr.pdf.10.
See, e 
.
.
,
 Agreement Concerning the Encouragement of Capital In- vestment and the Protection of Property, Tunis.-Belg.-Lux. art. 1, Jul. 15,1964, 561 U.N.T.S. 297; Protocol on the Promotion of the Movement of Cap-ital and Investments, Iraq-Kuwait, art. 2, Oct. 25, 1964,
available at 
http:// www.unctad.org/sections/dite/iia/docs/bits/kuwait_iraq.pdf.11.
See 
Kenneth J. Vandevelde,
The Bilateral Investment Treaty Program of the United States 
, 21 C
ORNELL
I
NT
L
L.J. 201, 209 (1988) (describing the develop-ment of the American BIT program).12.
See 
Kenneth J. Vandevelde, U.S. I
NTERNATIONAL
I
NVESTMENT
GREE-MENTS
329 (2009) (describing the fair and equitable treatment standard inarbitral practice).

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