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A tribunal cannot award double recovery for the same damages to the same assets hypothetically caused by different IIT provisions, even if the methods of calculations were different
- International Investment Treaties (IITs) > Protection of Investors under IITs > Expropriation and Standards of Protection > Relationship of Standards of Protection Within a Single IIT
- Investment Treaty Arbitration > Damages and Interest > Relationship of Damages and Compensation for Expropriation
It does not make a difference whether or not the IIT explicitly requires nationals and foreigners to be in "like circumstances"; this element is inherent in an evaluation of discrimination
A breach of an IIT can be found irrespective of a breach of domestic law, but a breach of domestic law may entail a breach of international law
Three step test for determining a violation of the national treatment standard
Measures of general application that practically resulted in different treatment cannot be considered discriminatory per se without any "in like circumstances" requirement
A de facto discrimination requires that the claimant presents a prima facie case of nationality-based discrimination without the respondent proving that the less favourable treatment is reasonable
Article 25 ILC Articles on State Responsibility codifies the customary international law regarding the concept of necessity
- International Investment Treaties (IITs) > International Law Rules Applicable to IITs > Relationship of IITs to Other Sources of International Law > Relationship of an IIT to Customary International Law
- International Investment Treaties (IITs) > International Law Rules Applicable to IITs > Law of State Responsibility > Circumstances Precluding Wrongfulness
An investor cannot expect that the legal regime of the host state remains unchanged; however, an investor's expectation is legitimate and protected by the FET standard, if the host state explicitly assumes a specific legal obligation for the future
The standard of fair and equitable treatment can be distinguished from other standards of treatment in several ways
There is no abstract definition of what is fair and equitable; whether treatment was fair and equitable depends on the facts of the particular case
When examining an alleged breach of the FET standard, a tribunal has to take the investor's conduct into account, too
For determining a breach of the FET standard, a proportionality test may be required; a tribunal has to weigh the investor's reasonable expectations on the one hand, and the legitimate regulatory interest on the other hand
The host state has to prove that the requirements of a rule precluding wrongfulness were met
- International Investment Treaties (IITs) > International Law Rules Applicable to IITs > Law of State Responsibility > Circumstances Precluding Wrongfulness
- Investment Treaty Arbitration > Procedural Questions > Rules of Evidence
A "losses due to war" clause cannot be interpreted as precluding the wrongfulness of a host state's breach of another standard of protection
A "losses due to war" clause is not applicable to an economic emergency, unless that emergency has caused losses similar to those of war, uprising or other kind of civil disturbance
The protection by a "full protection and security" clause is not limited to physical protection, but includes legal security
A comparative approach to defining what is fair and equitable is justified as the situation and conduct to be evaluated under an IIT occur within a domestic legal system
There is a conflict between the expectations of the investor regarding the stability of the legal environment and the regulatory interests of a host state
- International Investment Treaties (IITs) > Protection of Investors under IITs > Expropriation and Standards of Protection > Fair and Equitable Treatment > Discretion of the State
- International Investment Treaties (IITs) > Protection of Investors under IITs > Expropriation and Standards of Protection > Fair and Equitable Treatment > Case Groups > Legitimate Expectations
Once a contract has been authorised in accordance with domestic law, the subsequent withdrawal of the contractual rights constitutes unfair treatment
If an IIT explicitly deems domestic legislation applicable, the economic rights of the investor have to be determined according to the domestic legal system; the host state cannot, however, avoid responsibility for a treaty breach by invoking internal law
- International Investment Treaties (IITs) > International Law Rules Applicable to IITs > Relationship of IITs to Domestic Law > Applicability of Domestic Law / Renvoi
- International Investment Treaties (IITs) > Protection of Investors under IITs > Applicable Law / Choice of Law Clauses
It is impossible to determine an "ordinary meaning" of the expression "fair and equitable"
The FET standard is derived from the requirement of good faith as a general principle of law
- International Investment Treaties (IITs) > International Law Rules Applicable to IITs > Relationship of IITs to Other Sources of International Law > Relationship of an IIT to General Principles of International Law > Good Faith
- International Investment Treaties (IITs) > Protection of Investors under IITs > Expropriation and Standards of Protection > Fair and Equitable Treatment > Character and Scope
Although a statement in a preamble does not create legal obligations, it sheds light on the object and purpose of the treaty
- International Investment Treaties (IITs) > International Law Rules Applicable to IITs > Law of Treaties > Rules of Interpretation > Object and Purpose as a Rule of Interpretation
- Vienna Convention on the Law of Treaties > Article 31 - General rule of interpretation > Object and Purpose
If an IIT requires "fair and equitable treatment in conformity with the principles of international law", this cannot be read as "treatment required by the minimum standard under international law"
While different tribunals should seek to act consistently with one another, there is no doctrine of precedent
Even if there is no explicit provision in an IIT, a measure is equivalent to an expropriation if it causes an effective deprivation of the investment; a deprivation is effective if there is a total loss of value of the property
A state's formal declaration constitutes a unilateral act, which gives rise to obligations on which third parties may rely
In requiring a loss of material control over an investment, the phrase "measure having a similar effect of dispossession" is more restrictive than the phrase "tantamount to expropriation"
International Law Rules Applicable to IITs
Relationship of IITs to Other Sources of International Law
System of Precedents
While different tribunals should seek to act consistently with one another, there is no doctrine of precedent
Relationship of an IIT to Customary International Law
Article 25 ILC Articles on State Responsibility codifies the customary international law regarding the concept of necessity
Relationship of an IIT to General Principles of International Law
Good Faith
The FET standard is derived from the requirement of good faith as a general principle of law
Further Problems
A state's formal declaration constitutes a unilateral act, which gives rise to obligations on which third parties may rely
Relationship of IITs to Domestic Law
Applicability of Domestic Law / Renvoi
A breach of an IIT can be found irrespective of a breach of domestic law, but a breach of domestic law may entail a breach of international law
If an IIT explicitly deems domestic legislation applicable, the economic rights of the investor have to be determined according to the domestic legal system; the host state cannot, however, avoid responsibility for a treaty breach by invoking internal law
Law of Treaties
Rules of Interpretation
Object and Purpose as a Rule of Interpretation
Although a statement in a preamble does not create legal obligations, it sheds light on the object and purpose of the treaty
Law of State Responsibility
Circumstances Precluding Wrongfulness
Article 25 ILC Articles on State Responsibility codifies the customary international law regarding the concept of necessity
The host state has to prove that the requirements of a rule precluding wrongfulness were met
Protection of Investors under IITs
Expropriation and Standards of Protection
Expropriation
Indirect Expropriation / Regulations
Further Problems
Even if there is no explicit provision in an IIT, a measure is equivalent to an expropriation if it causes an effective deprivation of the investment; a deprivation is effective if there is a total loss of value of the property
Measures Tantamount to Expropriation
In requiring a loss of material control over an investment, the phrase "measure having a similar effect of dispossession" is more restrictive than the phrase "tantamount to expropriation"
Fair and Equitable Treatment
Relationship to Public International Law
If an IIT requires "fair and equitable treatment in conformity with the principles of international law", this cannot be read as "treatment required by the minimum standard under international law"
Character and Scope
The standard of fair and equitable treatment can be distinguished from other standards of treatment in several ways
There is no abstract definition of what is fair and equitable; whether treatment was fair and equitable depends on the facts of the particular case
A comparative approach to defining what is fair and equitable is justified as the situation and conduct to be evaluated under an IIT occur within a domestic legal system
Once a contract has been authorised in accordance with domestic law, the subsequent withdrawal of the contractual rights constitutes unfair treatment
It is impossible to determine an "ordinary meaning" of the expression "fair and equitable"
The FET standard is derived from the requirement of good faith as a general principle of law
Discretion of the State
There is a conflict between the expectations of the investor regarding the stability of the legal environment and the regulatory interests of a host state
Case Groups
Legitimate Expectations
An investor cannot expect that the legal regime of the host state remains unchanged; however, an investor's expectation is legitimate and protected by the FET standard, if the host state explicitly assumes a specific legal obligation for the future
When examining an alleged breach of the FET standard, a tribunal has to take the investor's conduct into account, too
For determining a breach of the FET standard, a proportionality test may be required; a tribunal has to weigh the investor's reasonable expectations on the one hand, and the legitimate regulatory interest on the other hand
There is a conflict between the expectations of the investor regarding the stability of the legal environment and the regulatory interests of a host state
Full Protection and Security
Further Problems
The protection by a "full protection and security" clause is not limited to physical protection, but includes legal security
Compensation for Losses in Times of War, National Emergencies etc. Including Necessity Considerations
A "losses due to war" clause cannot be interpreted as precluding the wrongfulness of a host state's breach of another standard of protection
A "losses due to war" clause is not applicable to an economic emergency, unless that emergency has caused losses similar to those of war, uprising or other kind of civil disturbance
National Treatment
General Remarks
Three step test for determining a violation of the national treatment standard
Scope of Protection – Local and Foreign Investors in Like Circumstances
It does not make a difference whether or not the IIT explicitly requires nationals and foreigners to be in "like circumstances"; this element is inherent in an evaluation of discrimination
Measures of general application that practically resulted in different treatment cannot be considered discriminatory per se without any "in like circumstances" requirement
Justification of Distinction
A de facto discrimination requires that the claimant presents a prima facie case of nationality-based discrimination without the respondent proving that the less favourable treatment is reasonable
Relationship of Standards of Protection Within a Single IIT
A tribunal cannot award double recovery for the same damages to the same assets hypothetically caused by different IIT provisions, even if the methods of calculations were different
Applicable Law / Choice of Law Clauses
If an IIT explicitly deems domestic legislation applicable, the economic rights of the investor have to be determined according to the domestic legal system; the host state cannot, however, avoid responsibility for a treaty breach by invoking internal law
Procedural Questions
Rules of Evidence
The host state has to prove that the requirements of a rule precluding wrongfulness were met
Damages and Interest
Relationship of Damages and Compensation for Expropriation
A tribunal cannot award double recovery for the same damages to the same assets hypothetically caused by different IIT provisions, even if the methods of calculations were different
Article 31 - General rule of interpretation
Object and Purpose
Although a statement in a preamble does not create legal obligations, it sheds light on the object and purpose of the treaty