Fair and Equitable Treatment

Dumberry, Patrick

doi:10.1007/978-3-319-98361-5_5

Fair and Equitable Treatment

Patrick Dumberry²⁹

Chapter
First Online: 08 December 2018

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2 Citations

Part of the book series: Studies in European Economic Law and Regulation ((SEELR,volume 15))

Abstract

This chapter examines the Fair and Equitable Treatment (FET) standard clause contained in the CETA Investment Chapter. I will first examine the reasons why the provision is novel and very unique in the already diverted world of FET clauses. One notable feature of this clause is the extent to which the text is similar to the way NAFTA tribunals have interpreted the FET clause (Article 1105). For this reason, the second part of this chapter analyses NAFTA case law of the last 20 years.

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Notes

1.
Tudor (2008), Villanueva (2008), Kläger (2011), Diehl (2012), Paparinskis (2013) and Weiler (2013).
2.
Dumberry (2013).
3.
Previous analysis are found in Khalil (1992) and Tudor (2008).
4.
UNCTAD, ‘Investment Policy Hub’, http://investmentpolicyhub.unctad.org/IIA.
5.
See Dumberry (2017).
6.
See, the analysis in Dumberry (2013), p. 35 et seq.
7.
This is the conclusion reached so far by investment tribunals which have accepted the importation of FET protection through broad MFN clauses (with the exception of İçkale İnşaat Limited Şirketi v. Turkmenistan, Award, 8 March 2016, ICSID Case No. ARB/10/24, para. 326 et seq.). See analysis in Dumberry (2016a) examining all publically available BITs with no FET clause and concluding that all of them (except for two) contain MFN clauses that are broad enough to allow for the importation of FET clauses from other treaties. The author has also examined a related different question in Dumberry (2016c) and Dumberry (2016d).
8.
Comprehensive Economic and Trade Agreement (CETA), between Canada, of the one part, and the European Union and its Member States, of the other part, signed 30 October 2016, published in the Official Journal of the European Union, OJ L 11, 14 January 2017, pp. 23–1079.
9.
For an analysis of earlier drafts, see Bernasconi-Osterwalder and Howard (2014), discussing the following documents: Draft CETA Investment Chapter (of 21 November 2013) and Draft CETA Investor-to-State Dispute Settlement (of 4 February 2014).
10.
In fact, Canada proposed that the provision be entitled ‘MST’ (see Draft Text Dated 7 February 2013).
11.
European Commission, EU Canada Comprehensive Trade Agreement—Landing zones, 9, 6 Nov. 2012), http://www.lapresse.ca/html/1633/Document_UE_2.pdf.
12.
Dumberry (2013) p. 40 et seq.
13.
UNCTAD, Fair and Equitable Treatment (UNCTAD Series on Issues in International Investment Agreements II, United Nations 2012), p. 22; OECD, Fair and Equitable Treatment Standard in International Investment Law (Working Papers on International Investment, Paper No 2004/3, 2004), p. 40. See also Haeri (2011), p. 26; Dugan et al. (2008), p. 496.
14.
UNCTAD (2012), p. 8: “[The] identification of the correct source of the FET standard - whether it is grounded in customary international law or is a self-standing obligation – can have important consequences in terms of the standard’s content and, more precisely, of the types of State measures that can be challenged as well as the required threshold for finding a violation, that is, the required degree of seriousness of the breach.”
15.
Ibid., p. 22.
16.
Haeri (2011), p. 26; Dolzer (2006), p. 69; Dugan et al. (2008), p. 496; Schreuer and Dolzer (2008), p. 126; Kläger (2011), p. 85. On the contrary, see the position adopted by the following writers: Schill (2007), p. 33: stating that it is “questionable whether substantial differences result from the different framing of the standard with a view to the actual practice of investment tribunals”; Vandevelde (2010), p. 47: “Differences in the contexts in which the standard appears have made little difference to tribunals interpreting the standard. Rather, the awards have yielded a single coherent theory of the standard, although perhaps not consciously so”.
17.
See Newcombe and Paradell (2009), pp. 263–264, referring to several cases.
18.
See for instance, Siemens AG v. Argentina, Award, 17 January 2007, ICSID No. ARB/02/8, para. 291.
19.
UNCTAD (2012), p. 22. Tribunals have overall been divided on the proper interpretation of these words. While some tribunals have held that the term ‘international law’ found in an FET clause was a reference to the minimum standard under custom (see for instance, M.C.I. Power Group L.C. and New Turbine, Inc. v. Ecuador, Award, 31 July 2007, ICSID No. ARB/03/6, para. 369) others have interpreted such an express reference in much the same way as an unqualified FET clause (see for instance, Compañía de Aguas del Aconquija SA and Vivendi Universal SA v Argentina, Award, 20 August 2007, ICSID Case No. ARB/97/3, 7.4.5 ff.; Técnicas Medioambientales Tecmed, S.A. v. Mexico, Award, 29 May 2003, ICSID No. ARB(AF)/00/2, para. 155).
20.
A number of tribunals have interpreted such a clause in much the same way as an autonomous FET clause (see, for instance, Enron Corporation and Ponderosa Assets, L.P. v. Argentina, Award, 22 May 2007, ICSID No. ARB/01/3, para. 258; Sempra Energy International v. Argentina, Award, 28 September 2007, ICSID Case No. ARB/02/16, para. 302; Azurix Corp. v. Argentina, Award, 14 July 2006, ICSID No. ARB/01/12, para. 361; Lemire v. Ukraine, Decision on Jurisdiction and Liability, 21 January 2010, ICSID No. ARB/06/18, paras. 253–254. Other tribunals have, on the contrary, held that such a clause provides for the MST (see Occidental Exploration and Production Company v. Ecuador, Final Award, 1 July 2004, LCIA No. UN3467, paras. 188–190; Lauder v. Czech Republic, Final Award, 3 September 2001, UNCITRAL, para. 292).
21.
Saluka Investments B.V. v. Czech Republic, Partial Award, 17 March 2006, UNCITRAL, 291. See also UNCTAD (2012), para. 90.
22.
One example is CMS Gas Transmission Company v. Argentina, Award, 12 May 2005, ICSID No. ARB/01/8, paras. 282–284. For a critical analysis of these awards, see Kill (2008).
23.
See Jadeau and Fabien (2016), p. 5 et seq.
24.
European Commission (n. 11), p. 9.
25.
Whether or not this is actually the case is debatable since the word ‘only’ does not appear before the enumeration of obligations (see Van Harten 2017). In any event, what is clear is that the parties initially intended the list to be non-exhaustive. Thus, the February 2013 draft refers to the EU proposal using the words ‘notably’ and ‘not exclusively’ before the list of obligations. Canada’s proposal mentioned that it ‘includes’ such obligations. Such language was not kept in the final text.
26.
A first version of the CETA is dated in February 2014. The final version of 2016 maintained the FET clause.
27.
All documents can be found here: http://ec.europa.eu/trade/policy/countries-and-regions/agreements/.
28.
EU-Singapore Free Trade Agreement. The EU website indicates that the agreement was ‘initialled on 17 October 2014’ and that it not yet in force. A May 2015 version of the text can be found at http://trade.ec.europa.eu/doclib/press/index.cfm?id=961.
29.
EU-Vietnam Free Trade Agreement. The EU website indicates that the “negotiations [were] concluded on 1 February 2016” and that the agreement is not yet in force. The text (as of January 2016) can be found at http://trade.ec.europa.eu/doclib/press/index.cfm?id=1437.
30.
European Commission, Draft Text TTIP – Investment [TTIP], Art. 3, http://trade.ec.europa.eu/doclib/docs/2015/september/tradoc_153807.pdf.
31.
Ünüvar (2017a), p. 22, see also Ünüvar (2017b).
32.
UNCTAD (n. 13), p. 29.
33.
Metalclad Corporation v. Mexico, Award, 30 August 2000, ICSID No. ARB(AF)/97/1, paras. 70 and 76.
34.
S.D. Myers Inc. v. Canada, First Partial Award, 13 November 2000, UNCITRAL, para. 266.
35.
Pope and Talbot Inc. v. Canada, Award on the Merits of Phase II, 10 April 2001, UNCITRAL.
36.
Treaty between the Government of the United States of America and the Government of [Country] Concerning the Encouragement and Reciprocal Protection of Investment (emphasis added).
37.
It is noteworthy that both the 2004 and 2012 US Model BITs also explicitly add what customary international law actually means; i.e., “a general and consistent practice of States that they follow from a sense of legal obligation” (See, footnote to Art. 5 referring Annex A).
38.
Lévesque (2006), p. 255; Vandevelde (2009), p. 291; Lévesque and Newcombe (2013), pp. 78–80.
39.
US-Uruguay BIT (2006), Art. 5(1)(2); US-Rwanda BIT (2012), Art. 5(1)(2).
40.
See, Canada-Czech Republic BIT (2009), Art. 3; Canada-Jordan BIT (2009), Art. 5; Canada-Latvia BIT (2009), Art. 5; Canada-Peru BIT (2006), Art. 5; Canada-Romania BIT (2009), Art. 2; Canada-Slovakia BIT (2010), Art. 3; Canada-Colombia FTA (2011), Art. 805. See also Canada-China BIT (2012) (not using, however, the expression ‘custom’ per se, but referring instead to its two elements).
41.
Australia-Mexico BIT (2005), Protocol, clause 1; Czech Republic-Mexico BIT (2002), Protocol; Iceland-Mexico BIT (2005); India-Mexico BIT (2007), Art. 5; Trinidad and Tobago-Mexico BIT (2006), Art. 5; United Kingdom-Mexico BIT (2006), Art. 3.
42.
UNCTAD (n. 13), p. 25, referring to: Agreement Establishing the ASEAN-Australia-New Zealand Free Trade Area (2009), Japan-Philippines FTA (2006), China-Peru FTA (2009), Malaysia-New Zealand FTA (2009), India-Korea Comprehensive Economic Partnership Agreement (2009). See also Korea-Singapore FTA (2006), Art. 10.5; Japan-Laos BIT (2008), Art. 5; Japan-Brunei (2007), Art. 59 (see ‘Note’); Belgium/Luxembourg-Peru BIT (2005), art. 3; Chile-Australia FTA (2009), Art. 10.5. Jadeau and Fabien (2016), p. 14, refers to these BITs: Turkey-Tanzania, Turkey-Nigeria, Korea-Peru, Korea-Mexico, Japan-India, Colombia-Peru, Colombia-Mexico.
43.
UNCTAD (2012), pp. 13, 29 and 30.
44.
The Model BIT further specifies at Art. 5(3) that “A determination that there has been a breach of another provision of this Treaty, or of a separate international agreement, does not establish that there has been a breach of this Article”.
45.
Gantz (2003). See, for instance, Canada-Colombia FTA (2011), Art. 805; Canada-Romania BIT (2011) Art. II(2).
46.
ASEAN Comprehensive Investment Agreement (2009), Art. 11.
47.
Investment Agreement for COMESA (2007) Art. 14.
48.
US Model BIT (2012), Art. 9.6(2).
49.
Jadeau and Fabien (2016), p. 2 et seq.
50.
Dumberry (2018).
51.
Dumberry (2016b), p. 104 et seq.
52.
Barrera (2017), p. 10.
53.
See Bernasconi-Osterwalder and Howard (2014), discussing the following documents: Draft CETA Investment Chapter (21 November 2013) and Draft CETA Investor-to-State Dispute Settlement (4 February 2014).
54.
For a recent analysis, see Dumberry (2018).
55.
On this point, see Kriebaum (2016), pp. 21–22.
56.
UNCTAD (2012), p. 108.
57.
See for instance, Railroad Development Corporation (RDC) v Guatemala, Award, 29 June 2012, ICSID case No. ARB/07/23, paras. 218–219.
58.
Dumberry (2013), pp. 44–46; see also Dumberry (2015).
59.
The tribunal in Apotex Holdings Inc & Apotex Inc. v. United States, Award, 25 August 2014, ICSID Case No. ARB(AF)/12/1, part IX, paras. 9.41 and 9.47 endorsed these two conclusions by referring to my work.
60.
Dumberry (2013), pp. 127–274. See, for instance, Glamis Gold, Ltd. v. United States, Award, 8 June 2009, UNCITRAL, para. 627; Cargill, Inc. v. Mexico, Award, 18 September 2009, ICSID No. ARB(AF)/05/02, para. 296; Mobil Investments Canada Inc. & Murphy Oil Corporation v. Canada, Decision on Liability and on Principles of Quantum, 22 May 2012, ICSID No. ARB(AF)/07/4, para. 152; Eli Lilly and Company v Canada, Final Award, 16 March 2017, UNCITRAL Case No. UNCT/14/2, para. 222; William Ralph Clayton, William Richard Clayton, Douglas Clayton, Daniel Clayton And Bilcon Of Delaware, Inc v Canada, Award on Jurisdiction and Liability, 17 March 2015, UNCITRAL PCA Case No. 2009-04, paras. 442-3; Mesa Power Group, LLC v Canada, Award, 24 March 2016, UNCITRAL PCA Case No. 2012-17, para. 502. See, however, the reasoning of the tribunal in Windstream Energy Llc v Canada, Award, 27 September 2016, UNCITRAL, paras. 347 et seq., which does not follow this approach (a question further addressed below).
61.
See the most recent awards: Bilcon (n. 60), paras. 442–443; Mesa (n. 60), para. 501.
62.
Waste Management, Inc. v. Mexico (“Number 2”), Award, 30 April 2004, ICSID No. ARB(AF)/00/3, para. 98.
63.
See the observation of the tribunal in Apotex (n. 59), para. 9.41.
64.
This is the position defended by, inter alia: Schill (2007), pp. 34, 40–41 and 79–80; Diehl (2012), pp. 330–337; Vandevelde (2010), pp. 52 and 106.
65.
Kläger (2011), p. 129 et seq.
66.
Picherack (2008), p. 271.
67.
Bilcon (n. 60).
68.
Glamis (n. 60), para. 627. The tribunal in Eli Lilly (n. 60), para. 381, endorsed the reasoning of the Glamis award on this point, but decided not to take position on the question.
69.
International Thunderbird Gaming Corporation v. Mexico, Award, 26 January 2006, UNCITRAL, para. 147. See also the separate opinion of Wälde, para. 37, stating that the legitimate expectations principle is a “self-standing subcategory and independent basis for a claim under the “fair and equitable standard” as under Art. 1105 of the NAFTA”.
70.
Dumberry (2013), p. 138 et seq.; see also Dumberry (2014d).
71.
Bilcon (n. 60), paras. 444–445, 448–449, 455 et seq., and 589.
72.
See the analysis in Dupuy and Dupuy (2015).
73.
Waste Management (n. 62), para. 98; Cargill (n. 60), para. 296 (where the tribunal does not list the concept of legitimate expectations amongst the elements of the FET standard under Art. 1105); Mesa (n. 60), para. 502.
74.
Mobil (n. 60), para. 152.
75.
See Bernasconi-Osterwalder (2013), pp. 17–19, discussing a Draft Text of 7 February 2013 (‘f. A breach of legitimate expectations of investors arising from a government’s specific representations or investment-inducing measures’).
76.
EU-Singapore FTA, Art. 9.4(2)(e); see also, Art. 9.5. dealing specifically with commitments given in writing of a contractual nature (binding agreement providing rights and obligations for both parties).
77.
EU-Vietnam FTA, Art. 14(6). It is noteworthy that the treaty also contains another clause (Art. 14(5) dealing specifically with similar protection arising from ‘written agreements’ entered into by the State and an investor satisfying some conditions (it must be a written agreement ‘binding’ on both parties that ‘creates an exchange of rights and obligations’ for both of them in connection to the investment; the investor must have ‘relied on that written agreement in deciding to make or maintain its investment’; the breach of the agreement must have ‘caused actual damages’ to that investment; and the agreement does not contain an arbitration clause).
78.
TPP, Art. 9.6(4): ‘For greater certainty, the mere fact that a Party takes or fails to take an action that may be inconsistent with an investor’s expectations does not constitute a breach of this Article, even if there is loss or damage to the covered investment as a result.’
79.
Thunderbird (n. 69), para. 147.
80.
Cargill (n. 60), para. 290; Mobil (n. 60), para. 152, 170; Grand River Enterprises Six Nations, Ltd., et al. v. United States, Award, 12 January 2011, UNCITRAL, para. 141.
81.
Glamis (n. 60), para. 802.
82.
Ibid., para. 767.
83.
Ibid., paras. 800–801.
84.
Ibid., para 766, see also para. 767.
85.
Thunderbird (n. 69), para. 147 (referring to ‘reasonable and justifiable expectations’); Glamis (n. 60), paras. 621–622; Waste Management (n. 62), para. 98; Mobil (n. 60), para. 152.
86.
Bilcon (n. 60), paras. 445, 455 et seq.
87.
Kriebaum (2016), p. 21.
88.
Glamis (n. 60), para. 766.
89.
Mobil (n. 60), para. 153. See also Mesa (n. 60), para. 619 (‘Art. 1105 does not provide a guarantee against regulatory change’, insofar as ‘a State may amend its laws and regulations as it deems appropriate in light of changing circumstances’). Glamis (n. 60), para. 620, also confirmed that an investor’s expectation is not violated by the mere fact that the host State has breached a contract.
90.
Bilcon (n. 60), para. 589.
91.
Ibid., para. 470.
92.
Ibid., Dissenting opinion of McRae, para. 5, adding that ‘any investor would have the expectation that if the requirements of Canadian law (federal and provincial) regarding environmental assessment were met its investment could go ahead’.
93.
Ibid., para. 33.
94.
Ibid., para. 39.
95.
Dumberry (2013), p. 181 et seq.; see also Dumberry (2014b); and see, S.D. Myers (n. 34), para. 263; Waste Management (n. 62), para. 98; Gami Investments, Inc. v. Mexico, Award, 15 November 2004, UNCITRAL, pp. 98 and 103; Thunderbird (n. 68), para. 194; Merrill & Ring Forestry L.P. v. Canada, Award, 31 March 2010, UNCITRAL, para. 208; Cargill (n. 60), paras. 292–293; Mobil (n. 60), para. 152; Glamis (n. 60), para. 626; Eli Lilly (n. 60), para. 122, 416 et seq.; Mesa (n. 60), para. 502.
96.
Mesa (n. 60), para. 579.
97.
Ibid., para. 553.
98.
S.D. Myers (n. 34), para. 263.
99.
Waste Management (n. 62), para. 115 (emphasis added).
100.
Thunderbird (n. 69), para. 194.
101.
Glamis, (n. 60), para. 617.
102.
Ibid., paras. 626–627. See also Eli Lilly (n. 60), paras. 222–223; Cargill (n. 60), para. 296, referring to measures “arbitrary beyond a merely inconsistent or questionable application of administrative or legal policy or procedure so as to constitute an unexpected and shocking repudiation of a policy’s very purpose and goals […])”.
103.
Some tribunals simply refer to “arbitrariness”: Merrill & Ring (n. 95), para. 208; Mobil (n. 60), para. 152; Bilcon (n. 60), para. 591.
104.
See the analysis of Kriebaum (2016), p. 17 et seq., indicating that the qualifier ‘manifest’ refers to the obvious and clear nature of the arbitrary conduct rather than to its gravity or seriousness.
105.
Stone (2012), p. 103.
106.
Gami (n. 95), paras. 91, 103 and 104.
107.
Ibid., paras. 759, 763–765, 803, and 817.
108.
Cargill (n. 60), paras. 298, 300 and 301; Glamis (n. 60), paras. 542, 689, 763–765 and 793–794.
109.
Bilcon (n. 60), para. 591.
110.
Ibid., McRae (n. 92), para. 36.
111.
Ibid., para. 37.
112.
Ibid., para. 36.
113.
Ibid., para. 38.
114.
Merrill & Ring (n. 95), para. 208.
115.
Methanex v. United States, Award, 3 August 2005, UNCITRAL, Part IV, Chapter C, Page 7, paras. 14–27; Grand River (n. 80), para. 208–209; Glamis (n. 60). para. 542 and fn. 1087.
116.
Waste Management, (n. 62), para. 98, endorsed by Mobil (n. 60) 152); Mesa (n. 60) 502; Eli Lilly (n. 60), paras. 416, 431 et seq.
117.
The terms are used in Waste Management (n. 62), para. 98.
118.
Cargill (n. 60), paras. 300 and 550; Glamis (n. 60), para. 828.
119.
While the Glamis Tribunal (n. 60), paras. 542, fn. 1087 and 559, fn1128), examined discrimination-related allegations in the context of arbitrariness, it nevertheless referred some 11 times to the terms ‘evident discrimination’ alongside other elements of the FET standard (paras. 22, 24, 616, 627, 762, 765, 776, 779, 788, 824 and 828).
120.
Kriebaum (2014), p. 474 et seq.
121.
Robert Azinian, Kenneth Davitian, & Ellen Baca v. Mexico, Award, 1 November 1999, ICSID No. ARB(AF)/97/2, 102–103; Metalclad (n. 33), paras. 91 and 93; Pope & Talbot (n. 35), p. 181; Pope & Talbot v Canada, Award in Respect of Damages, 31 May 2002, para. 68; Mondev International Ltd. v. United States, Award, 2 October 2002, ICSID No. ARB(AF)/99/2, paras. 96, 126–127; Loewen Group, Inc. and Raymond L. Loewen v. United States, Award, 26 June 2003, ICSID No. ARB(AF)/98/3, paras. 54–55, 87, 119, 122, 124–137; Glamis (n.60), para. 22; Waste Management (n. 60), paras. 95, 97 and 98; Thunderbird (n. 69) 194; Methanex (n. 115), Part IV, Chapter C, Page 8, para. 15; S.D. Myers (n. 34), para. 134; Mobil (n. 60), para. 152; Apotex (n. 59) para. 9.16.
122.
See Dumberry (2013), p. 225 et seq.. See, for instance, Thunderbird (n. 69), para. 186; Apotex (n. 59), para. 9.41.
123.
The language adopted for denial of justice is directly borrowed from the US Model BIT 2012, Art. 5 (2a).
124.
Dumberry (2013), p. 225; see also Dumberry (2014a), pp. 246–264.
125.
Loewen (n. 121), para. 168.
126.
Mondev (n. 121), para. 127; see also Loewen (n. 121), para. 133.
127.
Eli Lilly (n. 60), para. 224, speaking of the ‘considerable deference’ which needs to be ‘accorded to the conduct and decisions’ of national courts and adding that it is appropriate for a tribunal to assess their work ‘only [in] very exceptional circumstances, in which there is clear evidence of egregious and shocking conduct’.
128.
Thunderbird (n. 69), para. 194. In Glamis (n. 60), paras. 22, 24, 614, 616, 625 and 627, the Tribunal refers on many occasions to ‘gross’ denial of justice and a ‘complete’ lack of due process. See also Cargill (n. 60), para. 296; Eli Lilly (n. 60), paras. 222–223.
129.
Azinian (n. 121), paras. 102–103.
130.
Ibid.
131.
See, i.a. Glamis (n. 60), para. 22; Waste Management (n. 62), para. 98; Thunderbird (n. 69), para. 85; Chemtura Corporation v. Canada, Award, 2 August 2010, UNCITRAL, para. 145; Apotex (n. 59), paras. 9.41 et seq., and 9.49.
132.
Thunderbird (n. 69), para. 198.
133.
Apotex (n. 59), paras. 9.36, 9.50.
134.
Ibid., paras. 9.53, 9.58, 9.61, and 9.65.
135.
Ibid., para. 9.50.
136.
Thunderbird (n. 69), para. 200; Metalclad (n. 33), para. 91.
137.
Metalclad (n. 33), para. 93.
138.
Thunderbird (n. 69), para. 198.
139.
Pope & Talbot (n. 35), paras. 180–181; Pope & Talbot (n. 121), para. 68.
140.
Thunderbird (n. 69), para. 200.
141.
Bilcon (n. 60), para. 437.
142.
Ibid., para. 452.
143.
Ibid., para. 573.
144.
Ibid., paras. 503 and 505. These conclusions are rejected by McRae in his dissenting opinion (n. 92), paras. 9 et seq.
145.
The majority of the Tribunal also indicated that the JPR did provide an assessment of the mitigation measures that could have been taken by Bilcon to avoid the significant environmental effects of the project.
146.
Ibid., para. 451.
147.
Ibid., para. 590.
148.
Ibid., para. 590.
149.
Ibid., para. 592.
150.
Ibid., para. 444.
151.
Ibid., McRae (n. 92), para. 30.
152.
Ibid., para. 31. See also: “But the NAFTA standard is not the domestic law standard and a NAFTA claim must meet the NAFTA standard. Showing that domestic law could have been violated does not mean that there has been a violation of Article 1105’ (para. 42).
153.
Ibid., para. 40.
154.
Thus, for him, the decision of the majority ‘will change the character of environmental review under a joint review panel’ (Ibid., para. 45). Thus, there exist already two forms of controls on an environmental review panel in the Canadian system (the government can reject the recommendation of a panel and the Federal Court can review the actions of the Panel). The decision of the majority ‘add a further control over environmental review’ (a NAFTA claim) which allows a claimant to ‘bypass the domestic remedy provided for such a departure from Canadian law’ (para. 48). Thus, the decision ‘has in effect introduced the potential for getting damages for what is a breach of Canadian law, where Canadian law does not provide damages for such a breach’ (para. 43). As a result, ‘the proper application of Canadian law by an environmental review panel will be in the hands of a NAFTA Chapter 11 tribunal’ (para. 48) which he considers to be ‘a significant intrusion into domestic jurisdiction’ which ‘will create a chill on the operation of environmental review panel.’ (para. 48). He also stated that ‘the subjugation of human environment concerns to the scientific and technical feasibility of a project is not only an intrusion into the way an environmental review process is to be conducted, but also an intrusion into the environmental public policy of the state’ (para. 49). For him, the decision of the majority ‘may be disturbing to many’ and ‘will be seen as a remarkable step backwards in environmental protection’ since ‘a chill will be imposed on environmental review panels which will be concerned not to give too much weight to socio-economic considerations or other considerations of the human environment in case the result is a claim for damages under NAFTA Chapter 11’ (para. 51).
155.
Glamis (n. 60), para. 627; Cargill (n. 60), para. 296 (‘an utter lack of due process so as to offend judicial propriety’); Eli Lilly (n. 60), paras. 222–223; Mesa (n. 60), para. 502 (referring to ‘gross’ unfairness, ‘complete’ lack of transparency and candor in an administrative process; lack of due process ‘leading to an outcome which offends judicial propriety’; and ‘manifest failure’ of natural justice in judicial proceedings); Loewen (n. 120), para. 132 (“[m]anifest injustice in the sense of a lack of due process leading to an outcome which offends a sense of judicial propriety’).
156.
Kriebaum (2016), p. 17, noting that the language used is rather ambiguous insofar as it is not clear whether it requires that a fundamental rule be breached or that a breach be serious, or a combination of both.
157.
See Bernasconi-Osterwalder (2013). The draft referred to: ‘g. A disregard of the principle of effective transparency in any applicable administrative or judicial procedures’.
158.
Glamis (n. 60), para. 561; Cargill (n. 60), para. 294. See, however, Merrill & Ring (n. 95), para. 231 (noting that a ‘requirement for transparency may not at present be proven to be part of the customary law standard, as the judicial review of Metalclad rightly concluded, it is nonetheless approaching that stage’).
159.
Metalclad (n. 33), paras. 70, 76. 88, 99.
160.
Mexico v. Metalclad, Supreme Court of British Columbia, Judgment and Reasons for Decision, 2 May 2001, paras. 68 and 72.
161.
Waste Management (n. 62), para. 98. See also, UNCTAD (n. 13), p. 90 concluding that ‘transparency, consistency, legality and stability of regulatory framework’ are not part of custom.
162.
It should be noted that both the EU-Vietnam FTA (Art. 14(2)(b)) and the EU-Singapore FTA (Art. 9.4(2)(b)) do not refer to ‘fundamental breach of transparency’.
163.
Mesa (n. 60), para. 502. The Tribunal also mentioned (para. 595) that ‘the existence of an obligation of transparency under international law and under Article 1105 of the NAFTA in particular is a controversial issue’, but decided that it was not ‘necessary to enter into the merits of this debate in the context of this dispute’.
164.
UNCTAD (2012), p. 108.
165.
Glamis (n. 60), para. 627; Mesa (n. 60), paras. 504, 512; Cargill (n. 60), paras. 285 and 296; Waste Management (n. 62), para. 115; ADF Group Inc. v. United States, Award, 9 January 2003, ICSID No. ARB(AF)/00/1, para. 190; Thunderbird (n. 69), para. 194; Eli Lilly (n. 60), paras. 222–223; Apotex (n. 59). para. 9.47-9.
166.
Only two NAFTA awards have taken a different stance: Pope & Talbot (n. 35), para.118; Merrill & Ring (n. 95), paras. 210 and 213.
167.
Cargill (n. 60), para. 616; Glamis (n. 60), para. 616. See also Eli Lilly (n. 60), paras. 222–223.
168.
See, Draft Text Dated 7 February 2013, borrowing from S.D. Myers (n. 34), para. 263; Thunderbird (n. 69), para. 194.
169.
UNCTAD (2012), p. 56.
170.
Picherack (2008), pp. 268–270.
171.
As mentioned above, the Metalclad award (n. 32) finding a breach of Art. 1105 was the object of judicial review.
172.
UNCTAD (2012), p. 64, noting a significant statistical difference between the lower success rates of FET claims under NAFTA when compared to the much higher one under BITs. By October 2010, tribunals addressed the merits of FET claims in eighty-four treaty-based disputes. Of this overall number, the FET claim was successful in forty-five cases and rejected in thirty-nine cases. In NAFTA cases, only 22% of those claims were successful (four out of eighteen), while in BIT cases, 62% were accepted by tribunals (41 out of 66).
173.
The Tribunal decided to examine the question of the quantum of damages in a subsequent award (not yet rendered at the time of writing).
174.
Bilcon (n. 60), paras. 440–444.
175.
Ibid., para. 444, adding that ‘The formulation also recognises the requirement for tribunals to be sensitive to the facts of each case, the potential relevance of reasonably relied-on representations by a host state, and a recognition that injustice in either procedures or outcomes can constitute a breach’.
176.
Glamis (n. 60), para. 616: ‘to violate the customary international law minimum standard of treatment codified in Article 1105 of the NAFTA, an act must be sufficiently egregious and shocking […] so as to fall below accepted international standards and constitute a breach of Article 1105(1)’ (emphasis added). See also Cargill (n. 60), para. 296; Mondev (n. 121), para. 127.
177.
See, the reasoning of McRae in his dissenting opinion (n. 92) para. 2, indicating that the tribunal applied ‘the standard in a way that it is met simply by an allegation of a breach of Canadian law’.
178.
Windstream (n. 60), para. 358.
179.
Ibid., para. 298 (indicating the position of the claimant as follows: ‘moratorium was arbitrary, grossly unfair and contrary to the Respondent’s commitments and representations and the Claimant’s legitimate expectations’).
180.
Ibid., paras. 376 and 379.
181.
Merrill & Ring (n. 95), para. 213 (emphasis added). See also: “[w]hat matters is that the standard protects against all such acts or behavior that might infringe a sense of fairness, equity and reasonableness” (para. 210).
182.
Windstream (n. 60), paras. 376–377. The tribunal also refers to the government’s concern over the economic impact of such project on electricity costs as well as to public opposition against the project.
183.
Ibid., para. 378.
184.
Ibid., para. 379.
185.
Ibid., para. 379.
186.
Ibid., para. 380.
187.
The Mobil Tribunal (n. 60), para. 153, rejected the existence of such an obligation to maintain a stable environment. However, Merrill & Ring (n. 93), para. 232, indicated that “the stability of the legal environment is also an issue to be considered in respect of fair and equitable treatment’ and that ‘State practice and jurisprudence have consistently supported such a requirement […]”.
188.
Barrera (2017), p. 9.
189.
Jadeau and Fabien (2016), p. 10.
190.
Dumberry (2013), pp. 89–124; Dumberry (2014c).
191.
Merrill & Ring (n. 95), para. 210.
192.
Dumberry (2013), pp. 117–122.
193.
Glamis (n. 60), para. 616.
194.
Ibid., para. 616.
195.
See Lévesque (2010), pp. 311–313.
196.
Dumberry (2013).
197.
Dumberry (2013), p. 123.
198.
Barrera (2017), pp. 6–7.
199.
Jadeau and Fabien (2016), pp. 11–12; Ünüvar (2017a), pp. 22–23.
200.
There remains, of course, the possibility under Article 8.10.3 for the parties to review and update the content of the standard.
201.
‘Joint Interpretative Instrument on the Comprehensive Economic and Trade Agreement (CETA) between Canada and the European Union and its Member States’, 22 October 2016, para. 3.
202.
Ibid.
203.
See the comments in Henckels (2016).
204.
CETA, Arts. 8.27 and 8.28; see Schacherer (2016), p. 631; Van Harten (2016) and VanDuzer (2016).
205.
See Schacherer (2016), p. 642.
206.
In any event, the permanent tribunal will have to keep in mind Art. 8.9(1) whereby ‘the Parties reaffirm their right to regulate within their territories to achieve legitimate policy objectives, such as the protection of public health, safety, the environment or public morals, social or consumer protection or the promotion and protection of cultural diversity’. See, also: ‘Joint Interpretative Declaration’ (n. 201) 2. Reference should also be made to Annex 8-D, which consists of a ‘Joint declaration concerning Art. 8.12.6’ (dealing with the issue of expropriation regarding intellectual property rights). The first words of the Annex may have a broader application than the specific issue of intellectual property rights per se: ‘Mindful that the Tribunal for the resolution of investment disputes between investors and states is meant to enforce the obligations referred to in Art. 8.18.1, and is not an appeal mechanism for the decisions of domestic courts, the Parties recall that the domestic courts of each Party are responsible for the determination of the existence and validity of intellectual property rights.’ (emphasis added).
207.
‘Joint Interpretative Instrument’ (n. 201), para. 3.
208.
Barrera (2017), p. 1.
209.
See Schill (2007), pp. 34, 40–41, and 79–80; Diehl (2012), pp. 330–337; Vandevelde (2010), pp. 52 and 106.
210.
See Aguilar Alvarez and William (2003), p. 365.
211.
Schill (2009), p. 271.
212.
Alvarez (2011).

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Patrick Dumberry

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Dumberry, P. (2019). Fair and Equitable Treatment. In: Mbengue, M.M., Schacherer, S. (eds) Foreign Investment Under the Comprehensive Economic and Trade Agreement (CETA). Studies in European Economic Law and Regulation, vol 15. Springer, Cham. https://doi.org/10.1007/978-3-319-98361-5_5

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