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Reinterpreting the Fair and Equitable Treatment Provision in International Investment Agreements as a New and More Legitimate Way to Manage Risks

Published online by Cambridge University Press:  20 January 2017

Azernoosh Bazrafkan  and
Alexia Herwig
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Extract

International investment agreements (IIAs) emerged in the 1960's as an instrument to lower political risk for foreign investors and to facilitate political risk insurance when investing in developing countries with weak governance structures. Political risk is constituted by interferences to the investment by host states once the investor has entered the market and which would render the execution of the investment unduly burdensome, deprive the investor of the control or enjoyment of the investment or discriminate or treat the foreign investor arbitrarily. The legal provisions in IIAs include non–discrimination provisions, fair and equitable treatment, full protection and security, rights to compensation in case of expropriations, including indirect regulatory ones with the effect of depriving the investor of the control and benefits of the investment, provisions on free transfer of capital and, occasionally, non–precluded measures clauses as well as stabilization clauses in which the host state promises not to change the regulatory environment affecting the investment.

Type
Reports
Information
European Journal of Risk Regulation , Volume 7 , Issue 2 , June 2016 , pp. 439 - 443
Copyright
Copyright © Cambridge University Press 2016

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References

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7 Egger and Pfaffemayr, supra note 1, at 254.

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9 Occidental v Ecuador (UNCITRAL/LCIA Case No. UN3467, Final Award, 1 July 2004), paras. 85, 92; Siemens v Argentina (ICSID Case No ARB/02/8, Award, 17 January 2007), para. 270; Santa Elena v Costa Rica (ICSID Case No. ARB/96/1, Final Award, 17 February 2000), para. 72; AES v Hungary (ICSID Case No ARB/07/22, Award, 23 September 2010), paras. 14.3.1-14.3.4; Metalclad v Mexico (ICSID Case No ARB(AF)/97/1, Award, 30 August 2000), paras. 103 and 107.

10 Azurix v Argentina (ICSID Case No ARB/01/12, Award, 14 July 2006), paras. 309-12; Tecmed v Mexico (ICSID Case No ARB(AF)/00/2, Award, 28 May 2003), paras. 121-2.

11 Methanex v United States (UNCITRAL/NAFTA, Final Award, 3 August 2005) Part IV-Chapter D, paras. 7-9.

12 We use the notion of a public reason here in its Kantian sense as a reason everyone affected can reasonably assent to because each one would will it as a general rule.

13 See, e.g. North Atlantic Free Trade Agreement, Article 1105.

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16 Occidental v Ecuador, supra note 9, paras. 183-6 and 190-1.

17 Suez et al v Argentina (ICSID Case No ARB/03/19, Decision on Liability, 30 July 2010), para. 226; LG&E v Argentina (, ICSID Case No ARB/02/1, Decision on Liability, 3 October 2006), paras. 129 and 158; Enron v Argentina (ICSID Case No ARB/01/3, Award, 22 May 2007), para. 263.

18 Metalclad v Mexico, supra note 9, paras. 74 and 79-86

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21 Dworkin, Ronald, “What Is Equality ? Part 2:Equality of Resources”, 10 Philosophy and Public Affairs (1981), pp. 283 et sqq., at 292-304.Google Scholar

22 Ibid. 293.

23 On the envy test, see ibid, at 285-7.

24 Aaron James, “The Distinctive Significance of Systemic Risks”, forthcoming in Ratio Juris, manuscript on file with the authors, at 13-14, 25

25 Ibid, at 13-14. An illustrative example put forth in the literature and discussed also by James would be the practice of authorizing ambulances to speed on the way to hospital notwithstanding the risk of accident to bystanders this creates.