Impairment” standards, when] (I) similar cases are (II) treated differently (III) and without reasonable justification’. 84

The tribunal further found that the Czech government's excuse that it was not obliged to assist a bank under foreign control, as opposed to those state enterprises it did control, was not a reasonable justification and that the government's assistance programme therefore breached the expectation of even-handedness deservedly expected by the claimant as a foreign investor in the Czech banking sector. In the final part of its award, the tribunal describes its decision in a manner that, if one were unaware of the absence of a national treatment provision in the BIT, and ignored the reference to the fair and equitable treatment obligation, one could readily assume was summarizing a breach of national treatment:

The Respondent has violated the ‘fair and equitable treatment’ obligation by responding to the bad debt problem in the Czech banking sector in a way which accorded IPB differential treatment without a reasonable justification. The Big Four banks were in a comparable position regarding the bad debt problem. Nevertheless, the Czech Republic excluded IPB from the provisioning of financial assistance. Only in the course of CSOB's acquisition of IPB's business during IPB's forced administration was considerable financial assistance from the Czech Government forthcoming. Nomura (and subsequently Saluka) was justified, however, in expecting that the Czech Republic would provide financial assistance in an even-handed and consistent manner so as to include rather than exclude IPB. That expectation was frustrated by the Respondent. The Tribunal finds that the Respondent has not offered a reasonable justification for IPB's differential treatment. 85 (Emphasis added.)

As the test was described by the LG&E tribunal:

In the context of investment treaties, and the obligation there under not to discriminate against foreign investors, a measure is considered discriminatory if the intent of the measure is to discriminate or if the measure has a discriminatory effect. 86 (Emphasis added.)

In its holding of discrimination, the LG&E tribunal indicated no intent on the part of Argentina; rather it relied on the fact that the effect of the measures was patently discriminatory. 87 What is notable about the LG&E, Saluka , and Nykomb awards is that these tribunals employed what was in fact a comparative non-discrimination standard within the context of a minimum standard provision. While the Saluka tribunal attempted to distinguish its findings from those that might be required under customary international law, by noting that it was dealing with an autonomous treaty provision, its attempt was a classic example of ‘a distinction without a difference’. 88 This is especially true given the extent to which the Saluka tribunal explains its

end p.288

findings as being based as much on the principle of good faith (ie legitimate expectation) as on some sort of autonomous standard of fairness or even-handedness. 89

The discrimination test employed by these two tribunals is the same comparative one that would be used in an MFN or national treatment analysis under the provisions of the NAFTA, the ECT, or many other investment protection treaties. Why was it used in application of a fair and equitable treatment standard clause? The Saluka tribunal employed its test because there was simply no more suitable provision in the applicable treaty, the Czech Republic-Netherlands BIT. Unlike many other trade and investment treaties, this treaty makes reference to ‘more favourable’ treatment only in respect of the guarantee of ‘full security and protection’ under Article 3(3) and the application of subsequent treaty provisions under Article 3(5). The Nykomb case is even more striking, given the availability of a national treatment provision in the ECT.

Had the traditional customary international law test for an absolute prohibition on discrimination been employed in the Saluka or LG&E cases, it would have been necessary for the claimants to prove that government officials had embarked on a course of conduct calculated to disadvantage the claimant because of its nationality. 90 Instead, it was only necessary to prove a prima facie case of less favourable treatment having been received—shifting the burden to the respondent to prove why such treatment was justified. The tribunals distinguished their ‘fair and equitable treatment’ provisions from those allegedly based upon the somehow more narrow customary international law version—so that they could interpret ‘discrimination’ on a comparative and effects basis (even though the term ‘discriminatory impairment’ could be argued as connoting an absolute test rather than a comparative analysis of more or less favourable treatment).

Certainly it is neither substantively ‘fair’ nor ‘equitable’—in the ordinary sense of these terms—for a foreign-controlled investment bank, as occurred in Saluka , to be forced to suffer the same financial and regulatory conditions faced by its locally controlled competitors without being granted the same kinds of favourable bail-out conditions being granted to them. In terms of ensuring equality of competitive opportunity, a singular objective of national treatment, such treatment is indeed ‘discriminatory’. But if this is what ‘discriminatory impairment’ and ‘fair and equitable treatment’ mean within the context of this treaty, should these provisions not have the same meaning in other treaties with the same language? Should not investors subject to other treaties be permitted the legitimate expectation of being provided even-handed and consistent treatment in comparison with other like investors?

end p.289

A case could be made that if the Saluka tribunal's analysis was borrowed for the interpretation of an identical ‘fair and equitable treatment’ provision in a treaty that also contained a national treatment provision, the result would be more than just unavoidable overlap between the two provisions. Rather, the result of construing the ‘fair and equitable treatment’ provision as connoting a comparative treatment obligation would be to render the treaty's national treatment provision inutile, contrary to the principle of effectiveness in treaty interpretation. 91 This concern is at least partially mitigated if one treats the Saluka and Nykomb awards as being rightly decided on an arbitrariness test rather than a customary international law discrimination test.

The counter-case could be made by pointing to the example of the overlap between the typical BIT expropriation provision and the minimum standard or international law standard provision. There would be little argument that the prohibition of expropriation without compensation is an established obligation under customary international law. Many BITs have available both the treaty prohibition against expropriation without compensation and a minimum standard provision, which would clearly include the customary standard as well. The same risk of overlap exists, yet treaty drafters have not seen this as being problematic. This is where ‘belt and suspenders’ treaty drafting meets the principle of effectiveness head on, but does not create a practical conflict.

(4) National Treatment and MFN Treatment

(a) Prudence and Good Faith in National Treatment

Thus far, we have only a clutch of NAFTA awards addressing the meaning of a ‘proper’ national treatment or MFN provision (outside of the recent BIT cases involving MFN provisions within the context of allegedly more favourable treatment being granted in subsequent treaties). Virtually no other awards are publicly

end p.290

available addressing what ‘treatment no less favourable’ means outside of the GATT/WTO and NAFTA context. 92

With its Second Partial Award on the Merits, the Pope & Talbot tribunal articulated a simple and compelling analysis for Article 1102, which is equally applicable to Article 1103. 93 This analysis, which appears to have been followed consistently by other tribunals, contains three basic elements: (1) identification of the relevant subjects for comparison; (2) consideration of the relative treatment each comparator receives; and (3) consideration of whether any factors exist that justify any deviation in the treatment. The Pope & Talbot test is based upon a simple, but often overlooked, premise: that treaty protection for investors and their investments is equivalent to the establishment of an in rem right possessing a quasi-constitutional character. The holder of such a right, granted by treaty, is entitled to a certain standard of treatment as against all other comparable actors. In this sense, the fact of Pope & Talbot's nationality is only required to establish its entitlement to the right. It is not germane to a finding of liability with respect to its exercise. Provisions such as NAFTA Articles 1102 and 1103 call for a comparison to be made between the investor invoking its right and somebody else. The Pope & Talbot tribunal started its analysis of these provisions by explaining just who that might be.

Basing its reasoning on GATT jurisprudence and international treaty sources, such as the 1993 OECD Declaration on National Treatment for Foreign-Controlled Enterprises, the Pope & Talbot tribunal concluded that a comparison should generally be made between the claimant, and/or its investment, and any other domestic investors or investments operating in the same business or economic sector. 94 There may be cases where the comparison is drawn more widely—for example, where an investor uses the MFN provision to seek the benefit of a more favourable treaty obligation accorded to a non-NAFTA investor by a NAFTA party in a different treaty. 95 Nonetheless, the normal situation will involve commercial competitors receiving different treatment under the same measure, sometimes permitting counsel to call competition law analysis in aid of the comparison he or she would like the tribunal to adopt.

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For the Pope & Talbot tribunal, identifying the comparators was relatively simple: the investment enterprise produced a commodity which was indistinguishable from that which was made by other enterprises throughout North America. Accordingly, the appropriate comparators would be additionally defined by the scope of the measure. As the government of Canada imposed the measure, any softwood lumber producer operating in Canada could serve as a comparator. As Pope & Talbot alleged that producers in Quebec and the unlisted provinces were receiving better treatment, it would be those producers against which the treatment received by the investment would be compared.

In Feldman v Mexico , the tribunal started with a similar premise, stating that the applicable ‘universe’ of comparable investors and investments was composed of those businesses engaged in the purchase and reselling of cigarettes, rather than a wider group which could have included manufacturers (apparently because the comparison was agreed as between the parties to that dispute). 96 In US—Trucking , a NAFTA Chapter 20 Panel compared any Canadian— or American-owned trucking business desirous of serving the contiguous USA (outside of a small zone adjacent to the Mexican border) with similarly interested Mexican firms (albeit on a hypothetical basis). 97

The ADF tribunal similarly determined that the point of comparison under Article 1102(2) was between steel products held by the investor (a steel fabricator) and steel products held by domestic investors with respect to their potential use in a highway project. It based its comparison on steel goods because they constituted ‘inventory’ which could be considered an ‘investment’ under the broad definition contained in NAFTA Article 1139. 98 The tribunal also compared firms operating in the steel fabrication business as its ‘universe’ of comparable investors under Article 1102(1). In the Myers v Canada case, the tribunal compared would-be competitors in the Canadian market for the destruction of PCB wastes. 99

To date, only one investment treaty tribunal has departed from this approach. In Loewen v USA , the tribunal incorrectly concluded that there was no valid basis for comparison between a Canadian company—which the tribunal found had been denied justice in a Mississippi court—and the US competitor which was unjustly enriched as a result of the terribly flawed court proceedings (which the competitor had

end p.292

commenced against Loewen). 100 It is quite arguable that the tribunal erred because the competition between these two would-be comparators was clearly evidenced in the nature of the civil suit filed by one against the other. This is not to say that opposing litigants should generally be regarded as ‘like’ (simply by virtue of their being in court together), but that the facts of the Loewen case supported such a finding. 101

Regarding the issue of more or less favourable treatment, the Pope & Talbot tribunal began by noting that two of the primary objectives of the NAFTA (contained within Art 102(1) ) are to ‘promote conditions of fair competition and to increase substantially investment opportunities’ in the Free Trade Zone. Historically, WTO jurisprudence established a similar understanding that the goal of non-discrimination obligations is generally to provide effective equality of competitive opportunities. 102 Accordingly, the investor or investment is entitled to the best level of treatment available to any other domestic investor or investment operating in like circumstances. This comparison is not limited to an evaluation of whether the treatment being received is substantially similar; rather, it focuses on the result of the treatment received. 103 A similar conclusion was reached earlier by the SD Myers tribunal, noting that—while evidence of intent is certainly helpful—it is by no means necessary for a finding that Article 1102 has been breached. 104

As also noted above, the Pope & Talbot tribunal’s analysis of the factors involved in considering ‘treatment’ received reflects the particularly individualized character of claims brought under investment protection treaties. Unlike the average WTO case, where one or more members may be arguing a case for the benefit of numerous economic operators, an investment protection treaty case is personal. The aggrieved investor can only make a claim if it has suffered a loss as a result of an alleged breach. The tribunal should not be concerned with how other operators have been treated. It does not matter to the investor if most foreigners have fared comparatively better than locals under the measure, or if there are locals who are receiving the same less favourable treatment. The investor is not concerned with macro-policy results. It is concerned strictly with its own loss, made compensable under the treaty.

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In SD Myers , the measure effectively prohibited the investor and its investment from participating in the Canadian PCB market for what amounted to 14 months. The measure banned the export of PCB wastes from Canada. The best treatment available to Myers' competitors was unfettered access to that market (because only Myers' business model called for the ultimate destruction of those PCB wastes outside of Canada). To the consumer, the service provided by Myers and its competitors was identical: the removal of a serious environmental liability from their lands. Because the comparison is focused upon ensuring a competitive equality of opportunities, the consumers' perspective is accordingly the most relevant. In Champion , the difference in treatment alleged was receipt of government funds as part of the widespread bail-out of the state-owned participants in the cotton trading business.

In US—Trucking , a state-to-state arbitration involving the NAFTAs investment provisions, the difference in treatment focused upon the eligibility of competitors to qualify for environmental testing which was required in order to participate in the US market. Canadians and Americans were permitted to apply for certification to haul goods around the USA. Mexicans were precluded from applying (allegedly because Mexican trucking firms, on the average, possessed poor environmental records fostered by allegedly weaker Mexican environmental regulations and enforcement). The measure was determined to be faulty specifically because it did not afford individual Mexicans the same opportunity to qualify as was offered to American and Canadian competitors. 105 In Pope & Talbot , the difference in treatment was determined to be the entitlement of the investment's competitors in Canada to ship lumber to the USA while paying lower, or no, export fees than those being paid by Pope & Talbot under the measure at issue. 106

In ADF , the difference in treatment brought about by the measure was the ability of ADF's competitors to participate in a construction project from which it was being precluded. However, the ADF tribunal determined that ADF failed to provide ‘specific evidence concerning the comparative economics of the situation’ in order to prove that its competitive position was actually disadvantaged, vis-?-vis US-based steel fabricators as a result of its exclusion from the construction project. 107 This finding appears reminiscent of the WTO Appellate Body's ruling in Canada—Autos. 108

The Feldman case provides a better example of how treatment should be considered between appropriately defined comparators. Feldman had successfully proved that his investment was subjected to an audit process that was not imposed on similarly situated domestic competitors. 109 Furthermore, his investment was not granted

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all of the same tax rebates that his local competitors received during the relevant years. 110 Accordingly, Feldman established a prima facie case of discrimination by showing that a foreigner was not receiving as favourable treatment as that which was being received by local competitors. 111 It was not necessary for Feldman to prove that he was receiving less favourable treatment because he was a foreigner. It was not necessary for him to provide a comparative economic analysis of how he fared, as an investor, vis-?-vis his competitors (although some economic analysis will generally be required to prove damages in most national treatment cases, under free trade treaties, investment protection treaties, and hybrids such as NAFTA Chapter 11 112 ). Feldman only needed to prove that he was a foreigner receiving inferior treatment to that being enjoyed by a comparable investment. 113 It was fairly clear that if his competitors did not suffer from the same audits and enjoyed more rebates, Feldman was comparatively disadvantaged.

Once a prima facie breach of a non-discrimination provision has been established, the burden shifts to the respondent government to explain why the difference in treatment is justified. 114 If the government can prove that the treatment was different because the comparators were truly not in like circumstances, it will have justified the measure. 115 This is the third prong of the Pope test. It is based upon two tenets: prudence and the fundamental international law principle of good faith.

The tenet of ‘prudence’ applies to the interpretation of national treatment and MFN treatment provisions because both are missing something which is commonly shared by their WTO cousins: exemption provisions which import a rule of reason to the application of the comparative treatment obligations: GATT Articles I and III have Article XX, and GATS Articles II and XVII have Article XIV, and the wealth of jurisprudence flowing from their interpretation. The kinds of non-discrimination provisions found in investment treaties, or even the NAFTA hybrids, do not normally contain such clear exemption language, as described below.

One could presume from this state of affairs that investment treaties are not intended to exempt any measure from their ambit. Adopting such an approach, however, would require one to abandon the WTO and its acquis as interpretative aids, because wherever there is an obligation not to discriminate, logic dictates that there will be a rule of reason to ensure that justifiably differential regulatory treatment shall not be discouraged. Accordingly, tribunals have prudently adopted an approach to the meaning of ‘like circumstances’ which permits them to save

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governments from being forced to compensate investors for justifiable regulation. By ‘justifiable’ one means that a reason exists for the measure which is not itself discriminatory and reasonably chosen and applied in the circumstances. Given that prudence has required tribunals to find a ‘like circumstances exception’ in the text of Article 1102 (and, presumably, Art 1103), something else must aid them in giving substance to their discovery. This is where the principle of good faith is called into action, and where the fair and equitable treatment standard, in particular the principle of abuse of authority, converges again with national treatment.

(b) More Convergence: Good Faith and Non-discrimination

The WTO Appellate Body has explicitly noted how the introductory paragraph of GATT Article XX is a manifestation of the principle of good faith. 116 In truth, the entire provision qualifies in this regard. Article XX provides a specific list of reasons why an otherwise discriminatory measure might nonetheless be justified, if applied in an appropriate manner. However, it also provides, much like GATS Article XIV and various other provisions found in the NAFTA Chapters and WTO Agreements on Sanitary and Phyto-Sanitary Measures and Technical Barriers to Trade, that a measure saved by its listed justifications is not applied in an arbitrarily or unjustifiably discriminatory manner. What future tribunals must do is determine exactly how to apply the ‘like circumstances exception’ in a principled and consistent manner. Given that WTO decision-makers often attract considerable criticism for their interpretation of plainly written exemptions, the task required of investment treaty tribunals (in the absence of any written guidelines) will be no less formidable.

For example, in its award the Pope tribunal suggested that it would look for a ‘reasonable nexus’ between the measure and a ‘rational, non-discriminatory’ policy goal, in order to determine whether a prima facie breach may turn out to be justified. 117 It did not expand upon its choice of words, and its consideration of the issue did not provide any strong indication of whether ‘reasonable nexus’ to a ‘rational’ policy goal can be distilled into merely inquiring as to whether the measure was ‘reasonable’ (and accordingly non-discriminatory) in the circumstances. Is the correct test whether a government's alleged policy goals are ‘reasonable’ in relation to the risk identified and the avenues chosen to address it, or must the measure (as

end p.296

applied) only be rationally connected to a legitimate policy goal to survive international scrutiny?

The WTO exemptions suggest a possible way forward, effectively determining that different types of policy goals call for different tests. When the justification is based upon environmental policy (Art XX(g) ), perhaps it is sufficient for the measure to be ‘related’ to the stated goal and not applied in a manner that is arbitrarily discriminatory or which acts as a disguised barrier to equal opportunity. For health measures (Art XX(b) ), perhaps the measure should be ‘necessary’ to achieve the stated goal, and not applied in a manner that is arbitrarily discriminatory or which acts as a disguised barrier to equal opportunity. Should future tribunals follow the lead of these WTO provisions, jurisprudence would be available to support them.

The existing NAFTA jurisprudence is of only little assistance in this regard. In Myers and US—Trucking , the environmental justifications were flat-out rejected (in the former because all of the evidence pointed to discriminatory intent at the highest levels of government; 118 and in the latter because the measure was manifestly out of proportion to the alleged risk). The Champion , ADF and Loewen tribunals did not get this far, but in Pope , the test seemed to be reduced to a simple hunt for a reasonable explanation for otherwise discriminatory results, no matter how non-transparent such justifications seem to be in application.

The Feldman tribunal did not get this far either, but for a very different reason. It was faced with a respondent government that simply refused to provide the evidence necessary to rebut the prima facie proof of a discriminatory measure. As the Feldman majority noted, an international tribunal is entitled to draw an adverse inference concerning the facts at issue where a respondent refuses to provide sufficient evidence to the contrary. 119 The tribunal looked to the international law standard stated by the Appellate Body of the WTO:

… various international tribunals, including the International Court of Justice, have generally and consistently accepted and applied the rule that the party who asserts a fact, whether the claimant or respondent, is responsible for providing proof thereof. Also, it is a generally accepted canon of evidence in civil law, common law and, in fact, most jurisdictions, that the burden of proof rests upon the party, whether complaining or defending, who asserts the affirmative of a claim or defence. If that party adduces evidence sufficient to raise a presumption that what is claimed is true, the burden then shifts to the other party, who will fail unless it adduces sufficient evidence to rebut the presumption. 120

The Feldman tribunal found that the claimant had established a prima facie case that it had been treated in a different and less favourable manner than several Mexican-owned cigarette resellers, and the respondent had failed to introduce any credible

end p.297

evidence into the record to rebut a presumption that its reason for this lack of disclosure was that the evidence available to it would not have been beneficial for its case. 121 Accordingly, in the face of silence from the Mexican government regarding why it was treating Feldman and his domestic competitors differently, a majority of the tribunal concluded that Mexico had breached its obligation to provide equal national treatment to Feldman pursuant to Article 1102. 122

The tribunal in Thunderbird v Mexico has also provided an award on the national treatment standard, but its analysis was not particularly helpful in developing the interpretation of the standard. The three-pronged test was seemingly adopted, with a finding that it was not required for the claimant to prove that it received less favourable treatment for reasons of nationality. 123 However, it inexplicably concluded that a prima facie case of more favourable treatment had not been made out by the claimant—even though the claimant had demonstrated how its facilities remained closed while various others remained open (for various reasons). The tribunal appears to have collapsed the second and third prongs of the test, confusing its acceptance of Mexico's justification for the difference in treatment with the issue of whether a difference had been established in the first place. 124

Accordingly, it lies for future investment treaty tribunals to elaborate the full import of the third prong of this test, attempting to find a balance between achieving the promise of appropriate protection of an investor or its investment from the respondent state, without jeopardizing the right to regulate. The issue is more delicate because it does not involve a taking; by definition, it involves a lesser interference which has caused loss or damage. It is naturally easier to justify awarding damages for the near-total deprivation of investment rights, in the application of a truly non-discriminatory measure of general effect, than it must be to award damages for some lesser deprivation. 125 For this reason, one might expect to see tribunals either implicitly or explicitly importing ‘rules of reason’ or ‘proportionality tests’

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from other streams of international jurisprudence—or simply continuing to make further use of the legitimate expectation concept—in order to find the appropriate balance that fully recognizes the regulatory and business context within which the investor and/or its investment have operated.

(5) One Standard or Two? A New Balancing Act

As this cursory review of the jurisprudence demonstrates, the work of some recent ad hoc investment and trade treaty tribunals appears to have coalesced around a single theme—legitimate expectations—in order to analyse government treatment received by claimant investors. It is not difficult to understand why this phenomenon is taking place: the professional pool from which tribunal members are drawn is still relatively small and tightly knit; the provisions are very similar across treaty platforms and the terms used in them are sufficiently broad or amorphous so as to be capable of overlapping, if not nearly identical, constructions (eg ‘arbitrary’ versus ‘fair and equitable’ versus ‘discriminatory’ versus ‘no less favourable’).

This coalescence is not limited to the minimum standard and comparative standards of discrimination either. Increasingly, one is seeing tribunals and treaty-drafters attempting to accommodate recognition of regulatory sovereignty (the so-called ‘police power’) in their application of the customary international law test of full, fair, and effective compensation for indirect expropriation—by employing concepts such as ‘investment-backed expectations’ and ‘acquired rights’ to discuss when an investment whose value has been effectively destroyed is deserving of a damages award. How the use of these concepts differs from the use described above, for cases of less-than-substantial interference, may be difficult to discern.

Under the banner of legitimate expectation, some semblance of order is finally emerging from the chaos that could be expected from the ad hoc arbitration of sometimes vague and overlapping provisions found in almost 2,500 investment and trade treaties. With an increasing number of sad stories being presented to them by investors, perhaps our small cadre of arbitrators are unintentionally groping towards a single, albeit ill-defined, standard of regulatory treatment that is largely based upon the international law principle of good faith, as manifested in the present guise of ‘legitimate expectations’.

To paraphrase the Waste Management II tribunal, what we are collectively searching for here is an international standard of review for the regulatory treatment of foreign nationals (participating as investors in a host state, a free trade area,

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or a common market, as the case may be). 126 What we need to do in order to bring some semblance of order and consistency to the work of the tribunals called upon to review such treatment is to ascertain the basket of legal concepts, or regulatory indicators, which will assist them in determining the nature of the foreign investor's expectations against which treatment should be adjudged.

The enterprise of articulating this unified standard of investment protection naturally involves the task of balancing investment-backed expectations with the sovereign right of states to protect the interests of their citizens. This is a theme taken up by a number of recent tribunals. 127 In recognition of fundamental human rights protected under international law, the value of the exercise of state sovereignty, in any given case, could be either tempered or enhanced by an awareness of whether the citizens of the respondent State enjoy sufficient civil and political rights so as to assume that they actually had some say as to the policies alleged to have been adopted by the official who claims that such adoption is in the public interest.

The following list of factors required in this act of balancing could include, but would not be limited to:

• the level of deprivation, as contrasted against the value and means of investment;

• the nature and quality of the connection drawn between a valid regulatory goal and the means employed to obtain it;

• the relative sophistication and level of awareness of the claimant concerning the regulatory environment and the likelihood of potential changes to it;

• the reasonableness or prudence of the investor in making and maintaining the investment; 128

• the relative transparency of the regulatory environment generally and the impugned decision-making process in particular;

• the absence or presence of due process or procedural fairness in the regulatory environment generally and the impugned decision-making process in particular;

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• the nature of the decision-making process in question (judicial, legislative, or administrative); and

• the absence or presence of an improper purpose in making the impugned decision (including, but not limited to, discrimination on the basis of nationality or some other form of intentional, bad faith, or sectarian prejudice).

In order to prove its claim for damages under this apparently unified (or at least coalescing) standard of review, it appears that the burden falls upon the claimant to prove that the jurisdictional basis of making the claim has been satisfied (such as proof of investment; nationality; existence of a qualifying dispute, etc, as the treaty requires) and that the investment was made and operated with a reasonable/legitimate expectation that the undertaking was in keeping with local laws, customs, or practices (or specific state assurances). Once the bona fides of qualification under the treaty were established by the claimant, it would be entitled to expect to enjoy a basket of rights, including: due process, transparency, and non-discrimination. The particular wording of a treaty provision would still explain how and why these particular rights would be enjoyed, in context.

With the investor having established the existence of a legitimate expectation to be treated in a fair and equitable manner (connoting both the substantive and procedural elements of such fairness), the burden would shift to the respondent state to demonstrate either why the expectation was not reasonably held, or how the standards of protection rightfully expected had not been breached. Characterization of the type of measure impugned by the claimant would naturally have an impact on this balancing exercise—with more deference being shown, for example, to the final outcome of a reputable judicial system in terms of procedural fairness than that which might be shown to a legislative decision alleged to have discriminatory effect. Similarly, the capricious decision of an administrative official whose discretion was not subject to the serious prospect of domestic judicial review would be less deserving of deference than the considered decision of a legislative body forced to balance competing interests in regulating an industry known to generate deleterious externalities in respect of the public interest.

Concluding Remarks

To be clear, it is not the authors' intent to advocate the overthrow of the existing treaty models, which contain seemingly discrete provisions that grant investors compensation for breaches of most-favoured-nation treatment, national treatment,

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the expropriation norm, and some form of minimum standard of treatment. Rather, the purpose of this chapter has been to recognize that there can be considerable confusion in the growing number of cases in which concepts such as ‘non-discrimination’, ‘fair and equitable treatment’, and ‘legitimate expectation’ have been used to the same end, but in so many different ways. All that is proposed here is to attach a label to something that currently has no name. There appears to have evolved what can now be called a single standard of regulatory treatment, based upon the legitimate expectation of investors to enjoy access to rights of transparency, due process, and non-discrimination in a host country or in a free trade area, as the case may be.

Is there more to this convergence of tribunals finding liability on the basis of what is effectively a single standard of regulatory treatment? Perhaps we are indeed witnessing a more extraordinary development: that is, the inclusion of a comparative standard of non-discrimination in the customary international law minimum standard of treatment. It is already accepted that bad faith is not a requirement of the modern minimum standard of fair and equitable treatment—and thus intent becomes less important than effect in the minimum standard analysis. Further, and in a manner that would have pleased Dr Mann, recent tribunals have experienced little difficulty in considering ‘fair and equitable treatment’ as an obligation of substantive fairness that includes a prohibition against non-discrimination. If increasingly fewer tribunals draw distinctions between custom and treaty, in respect of the fair and equitable standard, the proposition may indeed attract more adherents.

In the meantime, with the accession of the principle of legitimate expectation as a ‘dominant element’ of the fair and equitable treatment standard—a consensus appears to be forming about the importance of representations made to investors, implicit and explicit. Similarly, consensus appears to be forming in respect of the proportionality principle, which tribunals see as common to each of the standards of expropriation, fair and equitable, and national treatment. The effect of such consensus is that it encourages tribunals to balance both the alleged reliance of the investor against the policy rationale for impugned state conduct—regardless of the treaty standard at issue.

Yet formalism in treaty interpretation may still prevail. Treaties are still most often drafted with the full panoply of obligations intact—redundant though they may increasingly be. Nonetheless, if we do seek to shed more light on—and thereby bring greater discipline to—the ever-growing number of awards being rendered in this field, we must recognize the doctrinal shift under way. In the jurisprudence of investment protection treaties, a single standard of regulatory treatment has been developing. It is based upon a good faith analysis of investment expectations and the reasonable protection of regulatory policy space. ‘Standard of treatment’ or ‘standards of treatment’—time will tell.

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