Abstract
This chapter expounds on the contours of proportionality as an FET element. It is argued that (i) proportionality embodies a general principle of international law with its own foundations in the international legal order itself and (ii) the balancing process that this principle, as an FET element, involves, always takes into account certain circumstances which mainly rest on the business risk taken by the investor on the one hand and the kind of prejudice the investment may suffer on the other hand.
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Notes
- 1.
It is worth noting that proportionality, besides being a criterion that courts take into account in reviewing legislative or administrative measures, is a fortiori a canon of conduct for both the legislator and the administration themselves. On the twofold function of proportionality, see Villamena 2008. More in general, on proportionality, see recently Cognetti 2011.
- 2.
This opinion may be credited to Higgins 1994, p. 236, who prefers regarding proportionality as a concept to ease the appropriate application of norms of international law in particular cases: ‘Whether proportionality is yet a general principle of law is doubtful. [O]ne is left with a sense of subjectivity in the decision-making of the Court as to whether burdens imposed are or are not out of proportion to the object sought. [The principle of proportionality is meant] to oil the wheels of decision-making.’ Further scholars who express the same scepticism include Krugmann 2004, p. 124 and Alvarez 2014, p. 221.
- 3.
See, e.g., Reisman and Stevick 1998, p. 129: ‘[The] Natural Law criteria of necessity and proportionality are indispensable, for they help us to consider and then fashion and appraise legal instruments in terms of social goals, costs and alternative consequences.’
- 4.
- 5.
- 6.
Meron 1989, p. 65.
- 7.
Krüger-Sprengel 1979, p. 194, according to whom proportionality ‘est un principe général dont il faut tenir compte dans l’interprétation des règles pertinentes du droit international.’
- 8.
Delbrück 1997, p. 1144: ‘Apart from the embodiment of the principle of proportionality in various international treaties, whether the principle can be said to underlie the whole of the international legal order as a general principle of law (ICJ Statute, Article 38(c) or as a general principle of international law might be open to discussion. The way in which the principle has developed from domestic law into international law could support the former view but the widespread acceptance of the principle in various areas of international law and its fundamental importance for the international law-applying process suggests that proportionality can already be characterized as a general principle of international law. This view should be accepted as it adequately reflects the relevance of a basic principle such as proportionality, not least for the proper administration of international law which has become more and more sophisticated and will continue to do so’.
- 9.
Cannizzaro 2000. Apparently, Cannizzaro’s argument does not rely on the category of general principles of international law. In his view, proportionality ‘represents a structural principle of international law, a principle which may be deduced from the observation of the formal structure of the legal situations to which it applies. It is common experience that each legal order includes general principles which may be deduced from the analysis of positive rules that articulate their content by application to concrete situations’ (emphasis added). Still, one gets the impression that the alleged category of structural principles of international law, as described by this author, ends up overlapping with the category of general principles of international law tout court. The way they come into existence, i.e. the fact that both categories of principles have their own foundations in the international legal order, makes it difficult to identify any substantive difference. In other words, this is the classical case where apparently different words may have the same meaning.
- 10.
- 11.
Crawford 2011, p. 1: ‘Proportionality is a principle found in a number of different areas of both international and domestic law, including the law of armed conflict, the law of treaties, the law regarding the use of force, maritime delimitation law, and human rights law. As such, it has a number of different permutations according to the specific area in which it operates. However, as a general principle […], proportionality means that a State’s acts must be a rational and reasonable exercise of means towards achieving a permissible goal, without unduly encroaching on protected rights of either the individual or another State.’
- 12.
We essentially refer to proportionality as one of the main preconditions for countermeasures as well as for self-defence to be legitimate.
- 13.
In North Sea Continental Shelf cases, Judgment of 20 February 1969, para 154, the ICJ stated that one of the key factors underpinning its decision was ‘the element of a reasonable degree of proportionality, which a delimitation carried out in accordance with equitable principles ought to bring about between the extent of the continental shelf areas appertaining to the coastal State and the length of its coast.’
- 14.
For example, the ECtHR, since its establishment, has always applied considerations of proportionality in assessing restrictions of fundamental rights. See infra Sect. 5.5.
- 15.
Cannizzaro 2000, p. 450.
- 16.
What has been observed in the text may represent a useful counter-argument in response to the doubts raised by Higgins on the nature of proportionality as a general principle of law. According to Higgins ‘[i]n international law the principle in maritime law is entirely different from the principle in other areas. In the other areas, there are common elements to the invocation of the principle, but many doubts surround it still—whether, as in the laws of war, it exists as a separate principle at all; and whether, in human-rights law, it has a meaningful separate existence from the notion of necessity.’ Indeed, in this author’s view, the fact that the principle ends up having a different content depending on the concerned area of international law shows exactly the opposite, i.e. the nature of proportionality as a general principle.
- 17.
Jans 2000, p. 240.
- 18.
As has been rightly observed ‘[s]trictly speaking, proportionality involves a four-step analysis since the first prong comprises two different questions. First, is the goal pursued by the legislator or the executive a legitimate one? Second, is the State measure a suitable means to attain this goal?’ (Bücheler 2015, p. 37, at footnote 43). An analysis of this kind, for example, is relied on by Barak 2012, p. 131. However, insofar as the suitability test necessarily presupposes the ascertainment of a proper purpose, the terms of the question do not change. This is the reason why, according to the conventional understanding of the proportionality principle, it consists of three tests (Bücheler 2015, p. 37).
- 19.
Jans 2000, p. 240.
- 20.
Andenas and Zleptnig 2007, p. 387.
- 21.
Jans 2000, p. 240.
- 22.
Andenas and Zlepting, supra note 20.
- 23.
Pino 2010, p. 207 (own translation).
- 24.
Occidental Petroleum Corp., Occidental Exploration and Production Company v. Ecuador, ICSID Case No. ARB/06/11, Award of 5 October 2012, para 403.
- 25.
Barak 2012, pp. 178–183. Georg Nolte 2010, p. 246, doubts ‘whether this development […] was due to some inherent quality of the concept of proportionality as a product of the German legal system’; plausibly, this is nothing but the result of human rights instruments (such as the Universal Declaration of Human Rights, the European Convention of Human Rights and Fundamental Freedoms, and the International Covenant on Civil and Political Rights), the universality of which ‘requires some uniformity concerning the method of the determination of rights.’
- 26.
7 BVerfGE 377.
- 27.
In particular, para 1 of this Article states as follows: ‘All Germans shall have the right freely to choose their occupation or profession, their place of work and their place of training. The practice of an occupation or profession may be regulated by or pursuant to a law.’
- 28.
- 29.
Point 10 of the motivation (own translation).
- 30.
Idem.
- 31.
R. v. Oakes, [1986] 1 S.C.R., at 103.
- 32.
Idem, at 139. Bücheler 2015, p. 44, rightly observes that ‘[t]he similarities between the Canadian and the German proportionality test are obvious: both contain a three-step approach that differentiates between suitability, necessity, and proportionality in the strict sense.’
- 33.
State v. Makwanyane and Another, 1995 (3) SA 391, 436 (CC).
- 34.
See, inter alia, Mathis 2008.
- 35.
Bücheler 2015, p. 61.
- 36.
CJEU, Judgment of 13 November 1990, point 13. In this respect, the opinion of Advocate General Van Gerven delivered on 11 June 1991 (Society for the Protection of Unborn Children Ireland) is revealing. Having regard to the possible consistency between the prohibition of the distribution of information and the principle of proportionality, he states as follows: ‘I consider that the following points should be considered on the basis of the principle of proportionality. First, does the prohibition on the provision of information which is at issue pursue a legitimate aim of public interest which fulfils a imperative social need? Secondly, is that aim being realized using means which are necessary (and acceptable) in a democratic society in order to achieve that aim? Thirdly, are the means employed in proportion to the aim pursued and is the fundamental right concerned, in this case freedom of expression, impinged upon as a result?’ (para 35).
- 37.
- 38.
Reference is especially made to the right to respect for private and family life (Article 8 ECHR); the freedom of thought, conscience and religion (Article 9); the freedom of expression (Article 10); and the freedom of assembly and association (Article 11). Paragraph two of all these provisions contains a limitation clause that follows the pattern described in the text.
- 39.
- 40.
In other words, as has been observed by Cannizzaro 2000, p. 70, while the margin of appreciation doctrine serves to identify the space for manoeuvre that a State enjoys in determining the purposes of its actions, proportionality serves to assess the legitimacy of the means relied on to carry out these actions. The same opinion may be ascribed to Padelletti 2003, p. 233. More generally, on the function of the proportionality analysis in European law, see Harbo 2015.
- 41.
Desmedt 2001, pp. 478–479. The author, on the other hand, argues that ‘the chapeau of Article XX could lead to the emergence of such a principle through judicial activism.’
- 42.
- 43.
Report of 11 December 2000.
- 44.
Para 164. Proportionality is resorted to also in other fields of international law, especially that concerning the use of force. Yet, in this case, proportionality ‘is not strictly used as an ‘ends-means’ balancing test between competing interests over a single asset but rather as a means of limiting harm against others in situations of armed conflict. [T]he right to self-defence against an armed attack is itself subject to limitations and requirements. One of these is that any act in self-defence to an armed attack must itself be “proportional” to that armed attack’ (Crawford 2011, p. 3).
- 45.
Tècnicas Medioambiente Tecmed S.A. v. Mexico, ICSID Case No. ARB (AF)/00/2, Award of 29 May 2003. For a summary of the facts underlying the decision, see Chap. 4, Sect. 4.6.1. Henckels 2015, p. 107, observes that ‘[a]lthough the case is regarded by some as methodologically sound approach to proportionality analysis in the context of indirect expropriation, this book argues that the decision exemplifies a flawed methodology and an overly strict approach to the standard of review.’
- 46.
Mauro 2003, pp. 266 et seq.
- 47.
See paras 122 et seq. of the decision. In particular, according to the tribunal, the statements of the Strasbourg Court in this matter ‘apply to the actions of the State in its capacity as administrator, not only to its capacity as law-making body.’
- 48.
See para 122.
- 49.
Such a remark may be found in Kläger 2011, p. 242: ‘[A]ltough such analysis resembles some of the elements of a structured proportionality test, the tribunal did not review whether the host State actually applied the least restrictive measure in the sense of the necessity requirement. Moreover, the tribunal did not extend its particular concept of proportionality to the analysis of the fair and equitable treatment.’
- 50.
See Muchlinski 1995, p. 625 (‘The concept of fair and equitable treatment is not precisely defined. It offers a general point of departure in formulating an argument that the foreign investor has not been well treated on account of discrimination or other measures being taken against its interests. It is, therefore, a concept that depends on the interpretation of specific facts for its content. At most it can be said that the concept connotes the principle of non-discrimination and proportionality in the treatment of foreign investors.’); Kläger 2011, p. 245 (‘In summary, arbitral case law reveals little consistency with regard to the structure and intensity of review in the context of fair and equitable treatment. Although a number of arbitral awards employ the notion of proportionality, it seems that it is not yet fully established in arbitral jurisprudence. This is especially true if one considers a structured proportionality analysis following the steps of suitability, necessity and proportionality stricto sensu, being at best rudimentarily applied by arbitral tribunals. Nevertheless, arbitral tribunals seem to recognize, at least implicitly, that all steps of proportionality analysis are relevant for the finding of a breach of fair and equitable treatment. It is indeed of importance whether: a State measure is suitable to pursue a legitimate public purpose; there are less restrictive measures available; and, in a broader balancing, the interests of the investor or those of the host State ultimately prevail. Usually, however, such considerations are not discussed under the concept of proportionality, but are shrouded by other notions, referring to the reasonableness of the State measure, the legitimacy or reasonableness of the investor’s expectations or the existence of a reasonable basis for a differential treatment’); Bücheler 2015, pp. 182 et seq.; Henckels 2015, pp. 70 et seq.
- 51.
Xiuli 2007, p. 639: ‘[W]e do not regard that the fair and equitable treatment principle includes the principle of proportionality.’
- 52.
MTD Equity v. Chile, ICSID Case No. ARB/01/7, Award of 25 May 2004, para 109; emphasis added.
- 53.
Bücheler 2015, p. 198.
- 54.
Idem, pp. 199–202.
- 55.
Glamis Gold Ltd v. United States, UNCITRAL, Award of 8 June 2009. In the same terms, one may mention Saluka Investments B.V. v. Czech Republic, UNCITRAL, Partial Award of 17 March 2006. In this case, indeed, albeit in a somewhat non-linear fashion, it is expressly recognized that the State measure modifying the regulatory framework existing at the time of the investment, must be suitable, necessary and proportionate to the aim pursued (paras 306–307): ‘The determination of a breach of Article 3.1 by the Czech Republic therefore requires a weighing of the Claimant’s legitimate and reasonable expectations on the one hand and the Respondent’s legitimate regulatory interests on the other […] A foreign investor protected by the Treaty may in any case properly expect that the Czech Republic implements its policies bona fide by conduct that is, as far as it affects the investors’ investment, reasonably justifiable by public policies and that such conduct does not manifestly violate the requirements of consistency, transparency, even-handedness and non-discrimination. In particular, any differential treatment of a foreign investor must not be based on unreasonable distinctions and demands, and must be justified by showing that it bears a reasonable relationship to rational policies not motivated by a preference for other investments over the foreign-owned investment.’
- 56.
In this regard, the tribunal makes the point clear that the contested measure ‘was rationally related to its stated purpose and reasonably drafted to address its objectives. It is the Claimant’s burden to prove a manifest lack of reasons for the legislation, and the tribunal holds that it has not met this burden’ (para 803); in its view, indeed, ‘the government has a sufficient good faith belief that there was a reasonable connection between the harm and the proposed remedy’ (para 805).
- 57.
On this point, the tribunal observes that ‘the adoption of the proposed regulation requiring backfilling and site recontouring of open fit surface mine excavations for metallic minerals [was] necessary for the immediate preservation of the public general welfare’: para 181.
- 58.
In this respect, the tribunal expressly recognizes that ‘governments must compromise between the interests of competing parties and, if they were bound to please every constituent and address every harm with each piece of legislation, they would be bound and useless’: para 804. See also Charanne B.V. and Construction Investments S.A.R.L. v. Spain, Arbitration Institute of the Stockholm Chamber of Commerce, Award of 21 January 2016, para 517.
- 59.
Total S.A. v. Argentina, ICSID Case No ARB/04/1, Decision on Liability of 27 December 2010, para 124 (emphasis added).
- 60.
BP Group Plc v. Argentina, UNCITRAL, Award of 24 December 2007, para 344:
- 61.
Middle East Cement Shipping and Handing Co.S.A. v. Egypt, ICSID Case No. ARB/99/6, Award of 12 April 2002.
- 62.
See Chap. 3, Sect. 3.5.2.
- 63.
See para 143.
- 64.
Azurix v. Argentina, ICSID Case No. ARB/01/12, Award of 14 July 2006.
- 65.
The decision to be relied on is that passed in James et al. v. United Kingdom, Judgment of 21 February 1986.
- 66.
Para 311.
- 67.
EDF v. Romania, ICSID Case No. ARB/05/13, Award of 8 October 2009.
- 68.
Supra note 64, para 311.
- 69.
Idem, para 294: ‘In view of the foregoing considerations, Claimant’s allegation that the enactment of GEO 104 was ‘discriminative’ and ‘clearly designed as a pretext to take away Claimant’s right to do business’ is unsustainable. As a measure of a general nature taken in accordance with Romanian law, GEO 104 equally applied to the other airport duty-free operators in Romania. Such operators were all affected by the loss of their duty-free licenses, including those present at airports where Claimant did not operate, as shown by the evidence produced by Respondent. Following expiry on March 27, 2002, of its rights to commercial spaces at the Otopeni Airport, Claimant’s right to do business was limited by GEO 104 to the conduct of duty-free operations on 49 m2 of space at Constanta Airport until June 8, 2005.’
- 70.
- 71.
Paragraph 404.
- 72.
Paragraph 450.
- 73.
Idem (emphasis added).
- 74.
Henckels 2015, p. 86.
- 75.
- 76.
Occidental Petroleum Corp., Occidental Exploration and Production Company v. Ecuador, ICSID Case No. ARB/06/11, Decision on Annulment of the Award of 2 November 2015, paras 585–586.
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Palombino, F.M. (2018). FET and Proportionality. In: Fair and Equitable Treatment and the Fabric of General Principles. T.M.C. Asser Press, The Hague. https://doi.org/10.1007/978-94-6265-210-1_5
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