Substantive investor rights conferred under bilateral investment treaties.

U.S. BITs provide investors with six core benefits:

• U.S. BITs require that investors and their "covered investments" (that is, investments of a national or company of one BIT party in the territory of the other party) be treated as favorably as the host party treats its own investors and their investments or investors and investments from any third country. The BIT generally affords the better of national treatment or most-favored-nation treatment for the full life-cycle of investment -- from establishment or acquisition, through management, operation, and expansion, to disposition.
• BITs establish clear limits on the expropriation of investments and provide for payment of prompt, adequate, and effective compensation when expropriation takes place.
• BITs provide for the transferability of investment-related funds into and out of a host country without delay and using a market rate of exchange.
• BITs restrict the imposition of performance requirements, such as local content targets or export quotas, as a condition for the establishment, acquisition, expansion, management, conduct, or operation of an investment.
• BITs give covered investors the right to engage the top managerial personnel of their choice, regardless of nationality.
• BITs give investors from each party the right to submit an investment dispute with the government of the other party to international arbitration. There is no requirement to use that country's domestic courts.

Full protection and security standard in international investment law and practice.

Most investment treaties contain provisions granting full protection and security for investments. The wording of these clauses suggests that the host State is under an obligation to take active measures to protect the investment from adverse effects. The adverse effects may stem from private parties or from actions of the host State and its organs. More recently tribunals have found that provisions of this kind also guaranteed legal security enabling the investor to pursue its rights effectively. Tribunals have disagreed on whether full protection and security merely reflects the broader, fair and equitable treatment standard and customary international law or offers an independent and additional standard. Arbitral practice is generally agreed that this standard of protection merely requires due diligence and does not create absolute liability.

Physical Security

It is beyond doubt that the standard of full protection and security relates to the physical protection of the investor and its assets. In fact, in a number of cases tribunals seem to have assumed that this standard applies exclusively or preponderantly to physical security and to the host State’s duty to protect the investor against violence directed at persons and property stemming from State organs or private parties.5 Thus in Rumeli v Kazakhstan the Tribunal said:

The Arbitral Tribunal agrees with Respondent that the full protection and security standard... obliges the State to provide a certain level of protection to foreign investment from physical damage.6

In Saluka v Czech Republic the Tribunal said:

The ‘full protection and security’ standard applies essentially when the foreign investment has been affected by civil strife and physical violence.... the ‘full security and protection’ clause is not meant to cover just any kind of impairment of an investor’s investment, but to protect more specifically the physical integrity of an investment against interference by use of force.7

In Eastern Sugar v Czech Republic the Tribunal suggested that the standard protected investors against violence stemming from third parties.

It said: As the Tribunal understands it, the criterion in Art. 3(2) of the [Czech-Netherlands] BIT concerns the obligation of the host state to protect the investor from third parties, in the cases cited by the Parties, mobs, insurgents, rented thugs and others engaged in physical violence against the investor in violation of the state monopoly of physical force. Thus, where a host state fails to grant full protection and security, it fails to act to prevent actions by third parties that it is required to prevent.8

Legal Protection

There is also authority indicating that the principle of full protection and security reaches beyond safeguard from physical violence and requires legal protection for the investor.35 Some treaties actually refer to ‘legal security’.

Writing about the Energy Charter Treaty, which promises ‘most constant protection and security’37 Wa¨lde describes the standard as going beyond ‘police protection’ in a physical sense of security. Rather, this standard would include economic regulatory powers. He writes:

This obligation would not only be breached by active and abusive exercise of State powers but also by the omission of the State to intervene where it had the power and duty to do so to protect the normal ability of the investor’s business to function... a duty, enforceable by investment arbitration, to use the powers of government to ensure the foreign investment can function properly on a level playing field, unhindered and not harassed by the political and economic domestic powers that be.

In CME v Czech Republic a regulatory authority had created a legal situation that enabled the investor’s local partner to terminate the contract on which the investment depended. The Tribunal applied the following provision in the bilateral investment treaty (BIT) between the Czech Republic and the Netherlands:

... each Contracting Party shall accord to such investments full security and protection... The

Tribunal said:

613. The Media Council’s actions in 1996 and its actions and inactions in 1999 were targeted to remove the security and legal protection of the Claimant’s investment in the Czech Republic.... The host State is obligated to ensure that neither by amendment of its laws nor by actions of its administrative bodies is the agreed and approved security and protection of the foreign investor’s investment withdrawn or

Date: 2016-03-03; view: 961