Multilateral instruments

In the multilateral context, the Draft United Nations Code of Conduct on Transnational Corporations, in its Article 48,24 stated that:

“Transnational corporations should receive [fair and] equitable [and non-discriminatory] treatment [under] [in accordance with] the laws, regulations and administrative practices of the countries in which they operate [as well as intergovernmental obligations to which the Governments of these countries have freely subscribed] [consistent with their international obligations] [consistent with international law]”.

Although most of the above issues had not reached consensus in the last version of the text (1986), the negotiating States agreed that the Code should provide for “equitable” treatment of transnational corporations.

The 1985 Convention establishing the Multilateral Investment Guarantee Agency (MIGA)

specifies in Article 12 (d) that in order to guarantee an investment, MIGA must satisfy itself that fair and equitable treatment and legal protection for the investment exist in the host country concerned.25 This would appear to be not only a prudent standard for lowering the risk for guaranteed investments, but also one of the means by which MIGA carries out its mission under Articles 2 and 23 to promote investment flows to and among developing countries, which include promotion of investment protection.

The 1992 World Bank Guidelines on Treatment of Foreign Direct Investment26 stipulate in their article III(2) that: “each State will extend to investments established in its territory by nationals of any other State fair and equitable treatment according to the standards recommended in the Guidelines”. It then in II (3) indicates the standards of treatment which are to be accorded to foreign investors in matters such as security of person and property rights, the granting of permits and licenses, the transfer of incomes and profits, the repatriation of capital. The approach suggested is thatfair and equitable treatment is an over-arching requirement.

The Energy Charter Treaty (1995) provides also that fair and equitable treatment shall be accorded at “all times”. Although the Treaty is limited to one sector, it is significant in this context because it includes among its Parties several economies in transition31 which embrace the standard.

There is diversity in the way the “fair and equitable treatment” standard is formulated in investment agreements. Certain agreements, in particular some BITs, expressly define the standard by reference to international law while others do not make such reference to international law.

• Because of the differences in its formulation, the proper interpretation of the “fair and equitable treatment” standard depends on the specific wording of the particular treaty, its context, the object and purpose of the treaty, as well as on negotiating history or other indications of the parties’ intent. For example, some treaties include explicit language linking or, in some cases limiting, fair and equitable treatment to the minimum standard of international customary law. Other treaties which either link the standard to international law without specifying custom, or lack any reference to international law, could, depending on the context of the parties’ intent, for example, be read as giving the standard a scope of application that is broader than the minimum standard as defined by international customary law.

• Independently of the way governments interpret the “fair and equitable treatment” standard, it is understood that the minimum standard refers to an evolving international customary law which is not “frozen” in time, but may evolve over time depending on the general and consistent practice of states and opinio juris, as may be reflected in jurisprudence related to the interpretation and application of these treaties.

• An analysis of the opinions of the arbitral tribunals which have attempted to interpret and apply the “fair and equitable treatment” standard identified a number of elements which, singly or in combination, have been treated as encompassed in the standard of treatment. Most of the arbitral opinions in the present survey mention two elements, due diligence and due process (including non-denial of justice and lack of arbitrariness), while only a few mention transparency and good faith. Due diligence and due process including non-denial of justice and lack of arbitrariness are elements well grounded in international customary law while transparency is an element which is often defined in international agreements as an obligation under a separate provision. Good faith seems to be considered more a basic principle underlying an obligation rather than a distinct obligation owed to investors pursuant to the “fair and equitable treatment” standard.

• The identified elements appear to have sufficient legal content to allow cases to be judged on the basis of law in accordance with the Vienna Convention on the Law of Treaties, and decisions are not made by a process approaching ex aequo et bono.

34. Contract-based investment arbitration.

40. Rules of Arbitration of the International Chamber of Commerce.

Date: 2016-03-03; view: 790