I Introduction

The fair and equitable treatment (FET) standard in investment protection treaties remains at the core of states' obligations and thus many disputes. With notable exceptions,2 particularly in the newer generation of treaties,3 the FET standard is also often left undefined. Notwithstanding that, tribunals have elaborated on this standard to develop both substantive and procedural principles. This chapter will provide a brief review of these standards and highlight some of the more recent cases.

II Recent cases on the Principles of FET

i CC/Devas (Mauritius) Ltd, Devas Employees Mauritius Private Limited and Telecom Devas Mauritius Limited v. India4

The claimants, three Mauritian companies, initiated proceedings against India pursuant to the Agreement between the Government of the Republic of Mauritius and the Government of the Republic of India for the Promotion and Protection of Investments (the Treaty), which entered into force on 20 June 2000. The claimants were shareholders of Devas Multimedia Private Limited (Devas), which had entered into a contract with Antrix Corporation Limited, an Indian state-owned company, in 2005 for the lease of part of the electromagnetic spectrum for the purposes of offering wireless broadband access and audio-video services throughout India. In 2011, Devas was notified that the contract had been annulled by India, following the government's decision to reserve a part of the electromagnetic spectrum for 'national needs'. The claimants contended that the annulment amounted to an expropriation of their investment and alleged that the expropriatory nature of India's actions and the violation of their legitimate expectations as investors constituted a breach of the FET standard under the Treaty.

The tribunal held that India had breached the FET standard under the Treaty by frustrating the claimants' legitimate expectations that India would deal with them in good faith. India did not deal with the claimants in good faith because it failed to inform them about the decision to annul the contract, which was taken in 2010. The text of the Treaty and the general obligation of good faith under international law formed the basis of such a legitimate expectation:

The preamble of the Treaty mentions the desire of the Contracting Parties “to create favourable conditions for greater flow of investments.” In Article 3(2), it states that “[e]ach Contracting Party shall in accordance with its laws render assistance to the investors of the other Contracting Party, whose investments were made in its territory, for obtaining the required clearances and permissions.” To these general statements must be added the provisions of Articles 4 and 6 of the Treaty dealing with the treatment of investments and expropriation which have already been extensively considered in this award.
If one searches for a general obligation of good faith under international law, one need not go further than the Vienna Convention on the Law of Treaties in which one can find no less than five mentions of the requirement of good faith. This principle of good faith is not only self-standing, but it also stems from the concept of FET. In this regard, the Tribunal agrees with the Tecmed panel that “the commitment of fair and equitable treatment . . . is an expression and part of the bona fide principle recognized in international law.”5

The tribunal also addressed the parties' arguments on whether the FET standard was the same as the minimum standard of treatment under customary international law, stating that customary international law 'ha[d] evolved since 1926' and the Neer v. Mexico decision6 therefore did not reflect the current FET standard.7 Ultimately, the tribunal emphasised that legitimate expectations was a central feature of the FET standard regardless of its exact content and scope in this particular case:

The Tribunal need not enter into a lengthy discussion of the concept and scope of the FET standard in general. Suffice it to say for the purpose of this case that, whatever the scope of the FET standard, the legitimate expectations of the investors have generally been considered central to its definition. That concept however is not unlimited.8

ii Olin v. Libya9

The claimant initiated proceedings against Libya pursuant to the Agreement on the Promotion and the Reciprocal Protection of Investments between the Government of the Republic of Cyprus and the Great Socialist Libyan Arab Jamahiriya of 30 June 2004 (the Agreement), alleging that Libya had breached several obligations under the Agreement, including the obligation to extend FET to Cypriot investors. The dispute arose out of Libya's expropriation of the land on which the claimant's factory was erected. In the 1990s, Libya initiated a series of legislative and economic reforms designed to attract foreign investment, including the Libyan Investment Law enacted in 1997. The claimant decided to invest in a factory in Libya and subsequently obtained governmental approvals to build and operate its factory. In November 2006, the claimant received an eviction order on the factory and only then became aware of an order issued a month earlier that had expropriated the claimant's land.

The tribunal held that Libya violated the FET standard on several counts.

First, the claimants' legitimate expectations that Libya was willing to establish an environment favourable to foreign investments were frustrated by Libya's disregard of its Investment Law in expropriating the claimant's land. Changes in Libya's national and international legislative frameworks in the 1990s, combined with public declarations and assurances by Libyan authorities, were fundamental to the claimant's decision to invest in Libya and gave rise to such legitimate expectations.10

Second, Libya's measures prevented the claimants from operating its investment with a 'minimum level of certainty as to its fate and . . . ability to implement basic business decisions in an unfettered manner',11 breaching the FET standard. Libya had transferred legal title of the land from the claimant to another party, attempted to evict it, destroyed buildings next to the claimants' factory and surrounded the factory with the army.12 This 'rendered the fate of the claimant's investment uncertain and undermined its ability to plan and to gain the confidence of its business partners'.13

Third, Libya's failure to act in a transparent manner breached the FET standard as the claimant was only informed of the expropriation order several weeks after its enactment.14 The tribunal stated the requirements of transparency as follows:

In the Tribunal's view . . . a minimum requirement of fairness and equity would entail that investors are informed in advance that a decision to expropriate their investment is contemplated, and are given a reasonable opportunity to engage in a dialogue with the government to find an adapted solution.15

Fourth, Libya's failure to authorise the importation of new equipment, to allow repatriation of the claimants' profits and to assist it in accessing foreign currency, as well as attempting to restart domestic proceedings over the legality of the expropriation order, were in breach of the FET standard.16 However, the tribunal was not convinced that the liquidation of the claimant was in breach of FET as it had not been proven that Libya's motives were 'hostil[e]'.17

Fifth, Libya's failure to afford the claimant administrative due process was in breach of the FET standard. There was a lack of transparency in the decision-making process of Libyan authorities, contradictory approaches of different governmental entities and the expropriation order did not comply with the Libyan Investment Law.18

However, the claimant failed to prove that there was lack of due process or a denial of justice before the Libyan courts. The tribunal observed that the standard to establish a denial of justice was high and it was necessary to show that court proceedings were in breach of due process and were so unfair that they amounted to a denial of justice.19 Thus, a three-year delay in the claimant's court proceedings and insufficiently substantiated bribery allegations failed to establish a denial of justice.20 The tribunal noted that unfair decisions could only constitute a denial of justice 'if its shocking nature implies a breach of due process'.21

iii Marfin v. Cyprus22

The claimants initiated proceedings against Cyprus pursuant to the Agreement between the Government of the Hellenic Republic and the Government of the Republic of Cyprus for the Reciprocal Promotion and Protection of Investments, which entered into force on 26 February 1992, alleging that Cyprus breached several obligations under it, including the obligation to accord FET to Greek investors. The dispute concerned Cyprus' issuance of a decree that increased the government's participation in the Cyprus Popular Bank (the Bank) in which the claimants had invested, allegedly resulting in the takeover and removal of the Bank's management and the Bank's subsequent dissolution.

Addressing Cyprus' contention that the state's 'margin of appreciation' should be given due regard by the tribunal in determining whether the measures were proportional and therefore not in breach of the FET standard, the tribunal declined to consider whether the margin of appreciation theory, which was developed in international human rights jurisprudence, applied in international investment law. The tribunal emphasised that it was 'not the role of an international arbitral tribunal to evaluate the substantive correctness of economic and policy choices made by a State', and limited its consideration of proportionality to whether the measures had a 'reasonable relationship to some rational policy' and were 'appropriately tailored so as not to impose an excessive burden on an investor'.23

The tribunal also rejected the claimant's contention that a breach of the expectation that Cyprus would conduct itself impartially, regularly and reasonably constituted a separate legal basis for finding a breach of the FET standard. Instead, the FET standard, 'in and of itself, establishe[d] such an obligation'.24

The tribunal rejected all claims of Cyprus' violation of the FET standard.

First, the tribunal drew from its expropriation analysis, relating to the same impugned measure, that Cyprus' conduct did not breach the FET standard as it was 'not arbitrary, capricious, unrelated to a rational policy or manifestly lacking in even-handedness'.25

Second, contrary to the claimants' contentions, the tribunal found no discrimination of the Bank on the basis of its Greek nationality, which amounted to a violation of the FET standard. The tribunal compared the treatment of the Bank to the treatment of the Bank of Cyprus as both banks were comparable in size, systemically important for the health of the country's financial system, similarly exposed to the Greek market, registered in Cyprus and traded on the Cyprus Stock Exchange, and required recapitalisation.26 There was no discrimination in the treatment of the Bank with respect to the removal of its management, as management in both banks were removed after emergency financial assistance was offered by the state.27 There was also no discrimination with regard to the state's grant of emergency liquidity assistance on the facts.28 Finally, the difference of treatment that led to the Bank's dissolution and the Bank of Cyprus' recapitalisation was de minimis as the existing shareholders and bondholders in both banks were 'completely wiped out'.29

Third, the tribunal dismissed the claimant's contentions that Cyprus breached the FET standard by failing to provide due process to their investment. The tribunal rejected the argument that the issuance of a worldwide freezing order of the claimant's funds constituted a denial of justice by Cypriot courts, since the claimants failed to exhaust local remedies by appealing the decision and there was no opportunity for the judicial system to correct itself.30 Further, the tribunal rejected the argument that Cyprus failed to afford due process to the claimants and engaged in arbitrary and abusive conduct in the criminal proceedings initiated against its witnesses in the arbitration, as these allegations were not proven on the facts.31 Finally, the tribunal rejected the complaint that Cyprus had embarked on a 'public campaign of vilification and harassment' against the claimants, on the ground that public statements by two Cypriot officials did not demonstrate 'an animus' against them and, in any case, were not sufficient to outweigh the evidence that their due process rights were complied with.32

The other claims of Cyprus' breach of the FET standard were not sufficiently supported by the evidence. The claimants contended that Cyprus failed to engage with the Bank's recapitalisation plan, failed to quell rumours about the Bank's liquidity and viability, removed the claimants-led management of the Bank, was responsible for the conduct of the management of the Bank after December 2011 and intentionally deterred private investment in the Bank.33

iv South American Silver v. Bolivia34

The claimants initiated proceedings against Bolivia pursuant to the Agreement between the Government of the United Kingdom of Great Britain and Northern Ireland and the Republic of Bolivia for the Promotion and Protection of Investments BIT of 24 May 1988, alleging that Bolivia expropriated the claimant's investment and failed to accord FET to it. The dispute concerned events leading up to and following Bolivia's 2012 Reversion Decree, which revoked mining concessions that had been granted to the claimant's subsidiary, Compañía Minera Malku Khota (CMMK). CMMK's mining project was located in an area inhabited by various indigenous communities, which opposed the project, resulting in demonstrations and violent clashes.

In relation to the claimant's contention that Bolivia frustrated its legitimate expectations and failed to guarantee a stable legal and business framework in connection with its investment as a result of the Reversion Decree, a majority of the tribunal held that:

the investor is entitled to protection of its legitimate expectations provided (i) that it exercised due diligence, and (ii) that its legitimate expectations were reasonable in light of the circumstances. The circumstances to be taken into consideration by the investor are not merely legal in nature, but they should also include the social, cultural, and economic environment of the host State of the investment, amongst other factors.35

Further, the FET standard did not 'entail relinquishing [states'] regulatory powers in the public interest or the need to adapt their legislation to changes and emerging needs'.36

The majority found that there was no breach of legitimate expectations as the Reversion Decree was an expropriation, which had been a lawful measure under the BIT, in the case of Bolivia's failure to make compensation. Furthermore, the claimant should have known that about the particular political, social, cultural and economic circumstances in which it had invested in Bolivia.37 The majority also held that the CMMK contributed to the social unrest by 'generating divisiveness and escalating the clashes within the indigenous communities'.38

There was also no violation of the FET standard in Bolivia's actions preceding the Reversion Decree. The claimants could not claim that Bolivia's immobilisation of the area surrounding its concession areas prevented the expansion of the project as it did not have rights over the immobilised areas and did not communicate any intention of expanding its projects to Bolivia.39 The claimant's contentions that Bolivia stoked opposition to the project to gain control of the mining concessions or that escalation of conflict was attributable to Bolivia's conduct was not supported on the facts.40 Bolivia's alleged failure to deploy armed forces to protect CMMK's employees and assets from alleged threats and actions by community members who opposed the project was not established on the facts.41 Moreover, there was no evidence that militarisation of the area would have been an appropriate remedy to the social conflict or would have allowed the project to continue.42

v Bolivia v. Chile43

On 24 April 2013, Bolivia filed an application in the International Court of Justice instituting proceedings against Chile pursuant to the Pact of Bogotá, concerning a dispute relating to Chile's alleged obligation to negotiate in good faith an agreement to grant Bolivia full sovereign access to the Pacific Ocean. Among other claims, Bolivia contended that Chile's denial of its obligation to negotiate and refusal to engage in further negotiations frustrated Bolivia's legitimate expectations, a principle that had been widely applied in investment arbitration.

The Court held that the concept of legitimate expectations arose only in the context of investor–state disputes relating to FET guaranteed by treaties. Legitimate expectations, therefore, did not exist as a principle in general international law, which could give rise to a binding obligation on the part of Chile.44

vi Islamic Republic of Iran v. United States of America45

On 14 June 2016, Iran filed an application in the International Court of Justice instituting proceedings against the United States concerning a dispute over alleged violations by the United States of the Treaty of Amity, Economic Relations and Consular Rights, which entered into force on 16 June 1957. The dispute concerned the United States' amendment of its Foreign Sovereign Immunities Act in 1996, which allowed assets owned by Iranian state entities to be made available for the satisfaction of judgment creditors, effectively removing the sovereign immunities previously accorded to such entities. Among other claims, Iran contended that the Court had jurisdiction to entertain the dispute as the United States' failure to accord sovereign immunities to Iranian state entities breached its obligation to guarantee FET to Iranian nationals and companies under the Treaty.

The Court rejected Iran's contention that the FET provision under the treaty included an obligation to respect the sovereign immunities of the state and its entities under customary international law.46 Having regard to the context of the FET provision, the Court observed that its purpose was to guarantee certain rights and minimum protections for the benefit of natural persons and legal entities engaged in commercial activities. The FET provision, therefore, could not be interpreted as incorporating, by reference, the customary rules on sovereign immunities.47


1 Andre Yeap SC is a senior partner, Paul Tan is a partner, Matthew Koh is a senior associate and David Isidore Tan is an associate at Rajah & Tann Singapore LLP.

2 See Notes of Interpretation of Certain Chapter 11 Provisions (adopted by the NAFTA Free Trade Commission on 31 July 2001).

3 See Article 9.4 of the Singapore–European Union Free Trade Agreement. See especially fn 11 of Chapter 9.

4 CC/Devas (Mauritius) Ltd., Devas Employees Mauritius Private Limited and Telecom Devas Mauritius Limited v. The Republic of India, PCA Case No. 2013-09 (Award of 25 July 2016) (Devas v. India), published in 2018.

5 Devas v. India, para. 465.

6 L.F.H. Neer and Pauline E. Neer v. Mexico, Mexico-U.S. General Claims Commission, Docket No. 136, Opinion, 15 October 1926 (1927) 21 The American Journal Of International Law 555, p. 556 (Ex. R-88).

7 Devas v. India, para. 456.

8 ibid., para. 463.

9 Olin Holdings Ltd v. State of Libya, ICC Case No. 20355/MCP (Award of 25 May 2018) (Olin v. Libya).

10 ibid., para. 308.

11 ibid., para. 311.

12 ibid., para. 314.

13 ibid., para. 316.

14 ibid., paras. 324-325.

15 ibid., para. 322.

16 ibid., para. 345.

17 ibid., para. 344.

18 ibid., para. 347.

19 ibid., para. 349.

20 ibid., paras. 350-351.

21 ibid., para. 352.

22 Marfin Investment Group Holdings S.A., Alexandros Bakatselos and others v. Republic of Cyprus, ICSID Case No. ARB/13/27 (Award of 26 July 2018) (Marfin v. Cyprus).

23 ibid., para. 1213.

24 ibid., para. 1215.

25 ibid., para. 1218.

26 ibid., para. 1241.

27 ibid., para. 1245.

28 ibid., para. 1246.

29 ibid., para. 1247.

30 ibid., para. 1272.

31 ibid., paras. 1282-1299.

32 ibid., paras. 1306-1308.

33 ibid., paras. 1219-1232.

34 South American Silver Limited (Bermuda) v. The Plurinational State of Bolivia, PCA Case No. 2013-15 (Award on 22 November 2018) (South American Silver v. Bolivia).

35 ibid., para. 648.

36 ibid., para. 649.

37 ibid., para. 655.

38 ibid., para. 656.

39 ibid., paras. 622-623.

40 ibid., para. 664.

41 ibid., para. 671.

42 ibid., para. 672.

43 Obligation to Negotiate Access to the Pacific Ocean (Bolivia v. Chile), Merits, Judgment, International Court of Justice, 1 October 2018 (Bolivia v. Chile).

44 ibid., para. 162.

45 Certain Iranian Assets (Islamic Republic of Iran v. United States of America), Preliminary Objections, Judgment, International Court of Justice, 13 February 2019 (Islamic Republic of Iran v. United States of America).

46 Islamic Republic of Iran v. United States of America, para. 74.

47 ibid., para. 58.