Investor Due Diligence and Legitimate Expectations

Due Diligence ◽

Host State ◽

Legitimate Expectations ◽

Investment Law ◽

Strict Requirement ◽

Abstract This article examines the significance of investor due diligence in the context of a claim that a host State has breached its obligation to provide fair and equitable treatment (FET). Despite increasing reliance on due diligence exercises, there are considerable differences in how tribunals understand and use such exercises. These differences are related to different visions of the function and future of international investment law. After exploring the different approaches that are taken, this article will argue that the most coherent approach is to treat investor due diligence as merely a technique for assessing investor reasonableness and prudence, rather than a strict requirement.

Fair and Equitable Treatment and Investor’s Due Diligence Under International Investment Law

Netherlands International Law Review ◽

10.1007/s40802-020-00170-7 ◽

2020 ◽

Vol 67 (2) ◽

pp. 233-255

Author(s):

Yulia Levashova

Keyword(s):

Due Diligence ◽

Host State ◽

Political Background ◽

Legitimate Expectations ◽

Investment Law ◽

The Stability ◽

Abstract The investor’s due diligence has become a significant factor in determining whether the legitimate expectations of an investor give rise to protection under the FET standard. This is especially relevant when an investor’s claim for the protection of its legitimate expectations is based on the stability of a regulatory framework. The investor’s due diligence in the context of the FET standard goes beyond the risk-based business due diligence performed by a foreign investor for its own benefit. It has implications for a state’s right to regulate in the public interest and a broader notion of business responsibilities. Investors are expected to conduct proper due diligence before investing in a host state by demonstrating their reasonable efforts to collect information about the rules and regulations that are pertinent to the proposed investment. In some cases, due diligence extends to an investor’s duty to assess the possible risks related to the broader economic situation and socio-political background of a host state. Focusing on the recent renewable energy awards, this article analyses and clarifies the role of due diligence in the context of the FET standard, as well as its potential application for asserting responsible business conduct in the broader framework of international investment law.

Legal Stability and Legitimate Expectations: Does International Investment Law Need a Sense of Proportion? – Joint 2nd Prize Winner of the Essay Competition 2020

European Investment Law and Arbitration Review ◽

10.1163/24689017_010 ◽

2020 ◽

Vol 5 (1) ◽

pp. 240-264

Author(s):

Robert Bradshaw

Keyword(s):

Renewable Energy ◽

Eu Law ◽

Legal Systems ◽

Energy Charter Treaty ◽

Legitimate Expectations ◽

Investment Law ◽

In the aftermath of the Achmea judgment and with the European Commission’s continued efforts to curtail investor- State arbitration, EU law and international investment law may seem antithetical. However, this article considers how EU law may contribute to the development of investment law through the concept of proportionality, a general principle of EU law and various national legal systems. Tribunals have increasingly applied a proportionality analysis in their reasoning, most recently in several cases brought by renewable energy investors against Spain and Italy under the Energy Charter Treaty. These cases concern the controversial issue of when a change in the regulatory framework violates investors’ legitimate expectations and their right to fair and equitable treatment. This article argues that the proportionality standard has the potential to clarify this area of law and to promote “defragmentation” between international investment law and other legal systems.

Due Diligence in International Investment Law

Due Diligence in the International Legal Order ◽

10.1093/oso/9780198869900.003.0016 ◽

2020 ◽

pp. 273-287

Author(s):

Aniruddha Rajput

Keyword(s):

Customary Law ◽

Due Diligence ◽

Investment Law ◽

Investment Treaties ◽

Equitable Treatment ◽

Full Protection

This chapter analyses the prominent role of due diligence in international investment law. It points out that due diligence was relevant in this field as an element of customary law norms requiring compliance with an international minimum standard for the treatment of aliens and prohibiting denial of justice, before modern day investment treaties were concluded. The chapter’s analysis reveals that due diligence underlies host states’ obligation to provide full protection and security and fair and equitable treatment. It underlines that also investors carry a responsibility of due diligence throughout the whole period of their investment and that an investor’s negligence can lead to loss of protection under investment treaties. The chapter argues that due diligence has emerged as a balancing paradigm between protection of foreign investors and regulatory freedom of host states.

The Limits of the Comparative Public Law Methodology in International Investment Law: An Australian Case Study

University of New South Wales Law Journal ◽

10.53637/dxbe7638 ◽

2018 ◽

Vol 41 (2) ◽

Author(s):

Alexander Ferguson

Keyword(s):

Public Law ◽

Investment Treaty ◽

Australian Case ◽

Legitimate Expectations ◽

Investment Law ◽

Government conduct is increasingly reviewable by investment treaty tribunals. These tribunals often consider whether a host state has failed to afford fair and equitable treatment by defeating a foreign investor’s legitimate expectations. To discern what a foreign investor can legitimately expect, some tribunals use a comparative public law methodology that draws on domestic public law. Using Australian law as a case study, I suggest that the comparative public law methodology may not be able to achieve all of its aims.

States' Reassertion of Control over International Investment Law: (Re)Defining ‘Fair and Equitable Treatment’ and ‘Indirect Expropriation’

Reassertion of Control over the Investment Treaty Regime ◽

10.1017/9781316779286.013 ◽

2016 ◽

pp. 285-308 ◽

Cited By ~ 4

Author(s):

Eric De Brabandere

Keyword(s):

Investment Law ◽

Fair and Equitable Treatment Between the International and National Rule of Law

The Journal of World Investment & Trade ◽

10.1163/22119000-12340141 ◽

2019 ◽

Vol 20 (4) ◽

pp. 513-552 ◽

Cited By ~ 1

Author(s):

Velimir Živković

Keyword(s):

Decision Making ◽

Rule Of Law ◽

The Rule Of Law ◽

Investment Protection ◽

National Rule ◽

Investment Law ◽

Abstract Promoting the rule of law is a potentially strong legitimating narrative for international investment law. Illustrating the interlinkage, the ubiquitous ‘fair and equitable treatment’ (FET) standard embodies distinctly rule of law requirements. But these requirements remain open-textured and allow understanding their meaning in either more ‘international’ or ‘national’ way. An ‘international’ understanding – detached from the host State’s vision on how the rule of law should look like – should remain dominant. But I argue that decision-making under the FET standard should also involve a systematic engagement with how these requirements would be understood in the host State’s law and how they were complied with from that perspective. Whilst not determinative for establishing a breach, this assessment better respects the expectations of the parties, strengthens the persuasiveness of findings and helps enhance the national rule of law as a key contributor to the ultimate goal of investment protection – economic development.

International Investment Arbitration: Substantive Principles, Principles of International Investment Law and The Fair and Equitable Treatment Standard in International Foreign Investment Law

British Yearbook of International Law ◽

10.1093/bybil/79.1.378 ◽

2009 ◽

Vol 79 (1) ◽

pp. 378-388

Author(s):

C. Baltag

Keyword(s):

Foreign Investment ◽

Treatment Standard ◽

Investment Arbitration ◽

Investment Law ◽

Preventing the Regulatory Chill of International Investment Law and Arbitration

International Law Research ◽

10.5539/ilr.v9n1p85 ◽

2020 ◽

Vol 9 (1) ◽

pp. 85

Author(s):

Atif M. Alenezi

Keyword(s):

Foreign Investors ◽

Regulatory Changes ◽

Resolution System ◽

Investment Law ◽

Foreign Corporations ◽

Equitable Treatment ◽

Legitimacy Crisis

International investment law has increasingly come under attack because it does not put host states on par with foreign investors. Foreign investors can evoke broad investment rights and pursue investment arbitration. The threat of substantial arbitral awards can result in host states not enacting policies, regulations, laws or reaching decisions, despite them being needed in order to protect a variety of important public interests. The concern is, therefore, that international investment law, including the investor-state dispute resolution system, causes a regulatory chill. The paper examines how the asymmetric relationship between foreign investors and host states can be remedied, so that trust in international investment law is strengthened and its legitimacy crisis is overcome. One core issue with international investment law is that the customary international minimum standard and its therein subsumed full protection and security, and fair and equitable treatment and compensation principles are inherently vague, thereby contributing to the overprotection of foreign investors. Arbitral cases further highlight how regulatory changes can result in host states incurring liability and thus enable foreign corporations to shift potential costs and risks. International, and national solutions to prevent the regulatory chill of international investment agreements are spelled out.

The Application of the Principle of Proportionality to Assess Compensation: Some Reflections Arising from the Case of Joseph Charles Lemire v. Ukraine

The Law and Practice of International Courts and Tribunals ◽

10.1163/15718034-12341275 ◽

2014 ◽

Vol 13 (2) ◽

pp. 199-222

Author(s):

Sondra Faccio

Keyword(s):

Case Law ◽

International Human Rights Law ◽

Human Rights Law ◽

Investment Treaty ◽

Investment Law ◽

Principle Of Proportionality ◽

In the last few years, the principle of proportionality has appeared with a certain frequency in international investment case law: arbitrators have employed it to determine whether the State’s regulatory measure under scrutiny represents a form of indirect expropriation, to assess violations of the fair and equitable treatment (‘fet’) standard, to counterbalance competing obligations drawn from international investment law and international human rights law, and to assess compensation. This article will focus on the so-called “quantum phase” – the part of the award devoted to the assessment of the monetary compensation due to the foreign investor for the breach of the investment treaty provision – and will discuss whether the principle of proportionality can effectively play a role in the assessment of compensation. The work will start from the analysis of the case of Joseph Charles Lemire v. Ukraine, where arbitrators expressly resorted to proportionality to verify whether the indemnity awarded to the claimant for the breach of the fet standard was adequate in light of the specific characteristics of the investment lato sensu and the investor, to then approach the issue of proportionality more in detail.