Fair and equitable treatment (FET)
is often called an ‘absolute’ or ‘noncontingent’ standard, but what does that mean? As opposed to the ‘relative’ or ‘contingent’ non-discrimination standards of MFN and national treatment, which always depend on how a state treats its own investors or investors from third countries, FET is not relative to, or contingent upon, such treatment; rather it is ‘absolute.’
Even if the wording of FET clauses in treaties is a bit terse and vague, and potentially tautological, there is a growing international consensus on what ‘fair and equitable’ means, especially as a result of the increasing jurisprudence of investment tribunals. At the same time, states may react to this jurisprudence, refine or correct it in treaty texts.
Examples of FET clauses abound. NAFTA, probably the most important enlarged Free Trade Agreement (FTA), has a chapter on investment, the so-called Chapter 11, which resembles a bilateral investment treaty. In NAFTA, FET is very succinctly formulated: each party accords treatment in accordance with international law, including FET. And the second part of the package is also included: ‘full protection and security,’ a standard often combined with FET to which we will turn in the next sub-chapter. Article 1105 NAFTA provides:
Each Party shall accord to investments of investors of another Party treatment in accordance with international law, including fair and equitable treatment and full protection and security.
Another example of an FET clause can be found in the France-Hong Kong BIT which provides that investments...
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