Investors Use Runaway “Fair and Equitable Treatment” Standard in 75% of “Successful” Cases Against Governments

“Fair and Equitable Treatment” and Investors’ Reasonable Expectations: Rulings in U.S. FTAs & BITs Demonstrate FET Definition Must be Narrowed

By Public Citizen's Global Trade Watch

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The most successful (and controversial) basis for investors’ challenges of government measures under U.S. trade and investment agreements is alleged violations of “fair and equitable treatment” (FET). Fully 74 percent of “successful” investor claims under U.S. Free Trade Agreements (FTAs) and Bilateral Investment Treaties (BITs) –17 awards—have found FET violations.

This note summarizes a review of the known investor-state rulings under U.S. FTAs and BITs. Our goal was to consider if actual tribunal decisions concerning the Minimum Standard of Treatment (MST) and FET standards supported the claims by the Office of the U.S. Trade Representative (USTR) that the language in past U.S. FTAs and BITs does not subject countries to claims under these obligations if, for instance, countries simply alter their policies. This is a critical question. No country wants to have its normal functions circumscribed by the threat of having to compensate foreign investors simply because a government alters a policy to respond to changing circumstances, such as financial crises or new scientific findings relating to the environment or health, or to respond to public demands that lead to the democratic creation of new laws of general application.