The Role of Arbitral Tribunals in Determining the Scope of the Fair and Equitable Treatment Standard
Master of Laws
Whether or not investor-State dispute settlement (“ISDS”) faces a “legitimacy crisis,” there is a “growing consensus” that it requires reform. The development of the fair and equitable treatment standard (“FET standard”) by arbitral tribunals been a salient factor in fomenting this consensus and is the subject of several reform proposals. A number of scholars, including Professors Sornarajah and Gus van Harten, claim the interpretative process undertaken by tribunals in relation to the FET standard has contributed to ISDS’ legitimacy crisis because it involves applying subjective notions of what adjudicators perceive to be desirable developments of the law. On the other hand, Professors Christoph Schreuer and Susan Franck opine that the FET standard is flexible by design because it permits a tribunal to adapt and apply written texts to changing realities and to engage in a “gap filling” function. Despite the discord between these positions, both share the premise that tribunals have been fundamental in elaborating the scope and content of the FET standard. The scholarship to date, however, provides an incomplete account of how tribunals have developed the FET standard. Without understanding this process, the capacity for reforms of the FET standard to effectively circumscribe tribunals’ interpretive discretion and enhance predictability and legal correctness will be constrained.
To address this lacuna, I conducted a comprehensive empirical analysis of the evolution of the FET standard. Using data generated from this analysis, coupled with doctrinal reviews of ISDS jurisprudence, this paper discusses two key findings. First, it evaluates the extent to which the language adopted in FET clauses influences (i) the probability that FET claims will succeed and (ii) tribunals’ interpretive methodologies (Section III). It concludes, contrary to conventional wisdom, that the treaty language has exerted limited influence on both fronts. Second, it traces the evolution of stability and predictability as a component of fair and equitable treatment (Section IV). The origin of the purported obligation to afford investors a stable and predictable legal and business framework can be traced to a series of awards that relied on ambiguous preambular statements in United States bilateral investment treaties (BITs) to justify its development. In turn, the sub-standard has been reinforced by the profusion of Energy Charter Treaty cases since 2008, where there is arguably a more solid foundation for such an interpretation.
Dispute Resolution and Arbitration | International Law | Law
Whip, Thomas Ferguson, "The Role of Arbitral Tribunals in Determining the Scope of the Fair and Equitable Treatment Standard" (2022). LL.M. Essays & Theses. 9.