Role of Fair and Equitable Treatment in International Business Law

This study explores the role of Fair and Equitable Treatment (FET) in international business law, specifically in relation to investment protection and regulation of public policy issues. It analyzes the background and assessment of FET, as well as provides a critical analysis of its perspectives. The study concludes that FET plays a crucial role in balancing investor protection and regulation of public policy.

International Business Law

Table of Contents
Introduction......................................................................................................................................3
Background of FET (Fair and Equity Treatment) Standards...........................................................3
Assessment of Role of the FET relating to investment protection..................................................4
Role of FBT related with ability of state to regulate on key public issues......................................5
Critical analysis of both the perspectives of FET (Fair and Equitable Treatment) i.e. investor
protection and regulation of public policy issue..............................................................................7
Conclusion.......................................................................................................................................9
References......................................................................................................................................10

INTRODUCTION
The present study emphasizes on the answer for the debate on if or if not FET is capable to offset
two of the specified perspective that is investor protection, and aiding the ability of states to
control and govern the core public issues.The description of the same has been provided under
this report in detail manner in order to justify the conclusion.
BACKGROUND OF FET (FAIR AND EQUITY TREATMENT)
STANDARDS
Fair and equitable treatment has its origin from the customary international law minimum
standard of treatment of foreigners, which consist of domestic investor and other investors
(Mercurio, 2017).
Leite, (2016) stated that along with the protection of the investors, it has gained significant
popularity for addressing the interstate dispute proceedings. In other words, it is stated that fair
and equitable treatment is a fixed standard of the investor security. It is applicable on the
investment in a given condition, without considering the aspect of treatment on the investment
by the host countries (Lalonde, 2016). Therefore, the host countries cannot make claimin
accordance with the fair and equitable treatment by contending it is not similar with their own
principles or other foreign investors carrying out their activity in that country (Ortino, 2017).The
actual meaning of the fair and equity treatment needs an aspect of governance founded on fair
rules and regulations that are required to be implemented with the objective of being fair to the
third o connected parties that can be impacted by decision of the state (Lindberg, 2017).
ASSESSMENT OF ROLE OF THE FET RELATING TO INVESTMENT
PROTECTION
Fair and equitable treatment has turned out to be the major important principle that assists
towards the protection of the investors. Further, arbitral tribunals also regularly apply the FET
norms at the time of administration of the key public issues. Confining the rights of the host
state counties of self-governing power, the possibility defined in the FET in the present scenario

increasing significantly(Lalonde and Calamita, 2016). It also imposes the restriction on local
courts, local administration authority, and even the national ruling authority. However,
limitations of the fair and equitable treaty have not been clearly prescribed. Islam (2016) stated
that the investor-state investment arbitral tribunal have regularly recognized and merged
particular legal rules and regulation in the FET principle, such as transparency, reasonable
requirement, expectations, arbitrary treatment, denial of justice, bullying of foreign investors and
many other related aspect. In the following manner, the FET standard protect the interest of the
investor
Restriction of denial of justice
Denial of justice means restriction on the foreign investor to access or file the claim in a state for
the releasing its judicial activities (Hindelang and Krajewski, 2016). By inserting the clause
related with the restriction of the denial of justice principle in the international investment
agreement, the investor can protect himself to a significant extent from any misconduct. It will
give power to investor to carry out its judicial obligations for its investment (Schefer, 2016). It
can be analyzed in the two aspects, such as contracted parties’ which encounter a clause that
shows that fair and equitable treatment which comprises the responsibility for not rejecting in
administrative and legal proceedings.
Principle of Equity and Equitable Justice
The specified legal principle in FET enriches the main objective of Fair and Equitable Treatment
standard i.e., investor protection. A closer affinity could be assessed between FET and equitable
justice as the standard is engrained to the notions of equity. Halpern, (2018) asserted that the
standards of FET are founded on the basis of common notion in good faith through which it
protects the investor by providing required justice. By incorporating the specific clause regarding
the prohibition of illogical, biased, unfair, and unreasonable measures, the investor can protect
the interest in the fair and equitable standard. (Subedi, 2016 ). However, it is required by investor
to manage the investment is such a manner which ensure the economic vitality of the investment.
In order to assure same, investors are required to comply relevant regulatory requirements. The
provision of FET allows the foreign investor conduct to be accessed without the investor to be
obliged directly to conduct in a fair and equitable way (Hindelang and Krajewski, 2016).

Absolute standard of investor protection
FET (Fair and Equitable Treatment) standard is believed to be an inclusive protection standard.
The reason behind same is that the treatment to investor is no different from that faced by
individual nationals or the other related foreign investors having operations in the economy
(Haftel, 2017). The same can be accessed from the notion of legitimate expectations of the
investor relating to stable investment regime has become an indispensable variant of FET. The
specified instrument covers a wide scope of issues relating to human right, rights against
corruption so that justice could be provided to the investor to significant extent. The disputing
parties as well as arbitrators does not require facing the difficult problem relating to
establishment of relevant content of international low or customary international law.
ROLE OF FBT RELATED WITH ABILITY OF STATE TO REGULATE
ON KEY PUBLIC ISSUES
The specified perspectives can be assessed in relation to regulating key public policy issue is that
it precludes arbitrary as well as capricious actions relating against the investor (Gehne and Brillo,
2017). The same can be analyzed with the fact that in case prejudices of arbitrary grounds or in
case the subjection of investment towards arbitrary or unreliable conduct made by host State; in
this situation there is violation of fair and equitable standard (FET). Further, it is the reason that
it is believed that a FET standard inherently does not comprise arbitrary and capricious actions in
opposition to the investor.
A variety of cases which are to be dealt by Tribunal comprises the prohibition of arbitrary or
prejudice treatment in addition to FET standard. In case of SD Myers vs. Canadd, the decision
was made on the concept that arbitrary is considered as a definitional components relating to the
FET. Further it was asserted by Tribunal that non-compliance with international law provisions
made by the host party might not be influential in order to ascertain that a FET is not permitted
by the foreign investor. Though, the fact is that foreign investor has not complied with
international law which is specifically framed in order to protect to investor. It is likely to
consider and support the ascertaining contravene of Article 1105. Another similar analysis has
been assessed from case of Mondev vs United States, in which Tribunal considered the concept
of arbitrariness as part of FET standard as specified in Article 1105 of NAFTA. While making

judgment of above specified case Tribunal relied on the orthodox definition of arbitrariness from
the case of ELSI (Sweet, A.S., Chung, M.Y. and Saltzman, A.2017). In the legal case of SD
Myers v. Canada, the tribunal applied the arbitrary, being a definitional aspect of FET standard.
Gass, (2017) stated that in the concerned case, the tribunal held that non-compliance of the
international law done by the host party might not be definitive with the determination that
contracted party (foreign investor) has been repudiated FBT standard, but the matter that host
part did not complied with the international law, particularly established to safeguard investor
will lead to breach of FBT standard.
CRITICAL ANALYSIS OF BOTH THE PERSPECTIVES OF FET THAT IS
INVESTOR PROTECTION AND REGULATION OF PUBLIC POLICY
ISSUE
A considered balance held in investor protection and the obligation to control the public issue is
managed by FET standards. However reliance of protection is on different investor protection
provisions due to which the regulated process is complicated. The core standards, on which FET
is relied in order to provide protection to investor through protecting their investment are
transparency, fair procedures and conducing non-discrimination procedures (Garcia, Ciko,
Gaurav and Hough, 2015). The standard protects investor not only against significant times of
subjective, prejudiced or offensive conducts done by host States. The main clause which has
been inserted in FET relating to ‘restriction of denial of justice’ asserts that the investor is
empowered to carry judicial obligation relating to its investment (Devaney, 2015). Moreover, as
the standard is not limited to denial of justice, investor would be able to protect investment from
other relevant restrictions provided in international law. Even the principle of equity and
equitable justice provide assistance to investor in order to attain economic vitality of investment.
Thus, the core standard of FET have made significant attempt in order to provide justice to
investors and they have succeeded in same.
Another phase relating to regulation of public issue has also been analyzed in detail manner.
Thus, it can be concluded that standard of protection in opposition to discrimination and
arbitrariness or discrimination is part of FET but the measures relating to arbitrariness or
discrimination itself contradict with fair and equal treatment. In other words, it can be stated that

FET standard have not succeeded in providing justice in public issues relating to arbitrary and
discrimination. Crawford and Kotschwar, (2019), specified that the standard relating to
‘reasonableness’ is not same meaning as context of FET relating to its standard and same is true
in case of standard relating to antidiscrimination. However, reasonableness standard needs
representing that the conduct of State bear a reasonable relationship with the relevant policy and
on the other hand standard relating to anti- discrimination needs a reasoned explanation of the
related foreign investor’s differential treatment. The existence of lack in elaborate discussion of
the issue relating to relationship between two concept, the relevant sequential and separate
treatments in arbitral awards represent that tribunal assess these concepts as distinct standard
(Cotula, 2016).
Further, the FET standards can be formulated by the following prescribed manner in order to
balance investor protection as well as regulation of public policy issue–
No FET obligation
If the international investment agreement are silent regarding the compliance of the FET, then it
reflects that parties to the agreement are not agree to adopt the review measures under this
standard.
Fair and equitable standard in the absence of any connection or reference with the international
law or any other standard
It enhances the criteria of the host country to international responsibility. It is not clear and
confusing; therefore it will lead to diverging expectations as to the real level of the treatment that
should be afforded (Butler and Subedi, 2017).
FET connected with the international law
Investment or profit of any contracting party must comply with the FET, as per the international
law or rules prescribed under this agreement.
FET with additional essential content
In the agreement, the FET could be stated in the two manners, such as by clarifying the scope of
obligation under FET or by list the obligation under the FET clause. By this, the arbitrator cannot

implement its own description (Alvarez, 2016). Further, contracting parties do not face the
problem of setting the relevant aspect of customary international law/ international law.
CONCLUSION
On the basis on above discussion, conclusion can be drawn that the balance between investor
protection and regulating public policy has been attained by FET to significant extent.
Executives and legislative bodies do have supported and assisted in the balancing process
relating to Fair and Equity Treaty.The specified attempt has been supported by new policy
arguments relating to treaty benefits and impact relating to cost. Further, through compliance
with subsequent changes in FET standards discussed in the report could eventually lead to
enhance investor protection as well as regulate public policy issue. It can be depicted from above
discussion that specific provision of FET do provide positive contribution to governance and rule
of law but same was not available in earlier policy.
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