The following is a summary of “Fine Balance: Empire, Neoliberalism, and the Fair and Equitable Treatment Standard in International Investment Law,” published in the Journal of World Investment & Trade. The author is Sannoy Das, Assistant Professor of Law at Vanderbilt Law School.
At the end of the Second World War, decolonizing states became reliant on foreign investments to accelerate their economic development. Yet, investors in the United States and elsewhere, wary of the grip of socialist ideology in these newly independent States, were unwilling to meet this demand without the assurance of some protection for their investments. This moment, when imperialist powers could no longer formally “stand guard” over investments in colonies, provided a fertile ground for the creation of an international legal architecture for protection of foreign investments.
In his article “Fine Balance: Empire, Neoliberalism, and the Fair and Equitable Treatment Standard in International Investment Law,” Sannoy Das examines the production of doctrine around the terms “fair and equitable” in international investment law (IIL), and the ways in which ideas rooted in an imperial ordering of international relations shape legal doctrine.
The modern understanding of the fair and equitable doctrine is that it offers a deep measure of protection for investors, against a variety of risks associated with host-state action. Yet, in the immediate postwar era, the terms and fair and equitable referred to an altogether different normative order. In the era of economic reconstruction in Europe, and of newly decolonized States pursuing policies of rapid economic development, the idea that governments might expropriate property of foreign investors and would not be subject to exacting standards for payment of full compensation had received a fair measure of acceptance. In this postwar moment, the phrase “fair and equitable” represented a dilution of the principle of full compensation that was associated with a bygone world of laissez faire liberalism.
And yet, in the decades after 1990, it was the identically named ‘fair and equitable treatment’ (FET) clause, written into numerous bilateral investment treaties, that became a readily available crutch for foreign investors to challenge regulatory action of States that damaged their prospects for profit, especially in developing countries. In the hands of international arbitral tribunals, the FET clause was read expansively to strengthen the rights that foreign investors enjoyed under IIL.
As the discipline of IIL crystallized in the 1990s, its practitioners wrote part histories, part mythologies, of the FET clause to guide arbitral tribunals in their interpretation. These histories confirmed the place of the FET clause in IIL – as imposing on states a substantive standard of treatment for foreign investment by states. Of course, the scholarship around the FET clause has hardly endorsed a one-sided interpretation that only favors investors. Instead, much of this scholarship shows that the FET clause, properly interpreted, can achieve a balance between the rights of investors and the regulatory interests of States. Yet, the fact remains that the college of international investment lawyers produced the FET clause at sharp variance with how the terms ‘fair’ or ‘equitable’ were used in the era of decolonization and development. Studying this production of the FET clause offers a sharp insight into how global governance rose in a neoliberal mold at the end of the 20th century from the ashes of the contested terrain of the era of decolonization.
In his article, Das examines the scholarship that has attempted to work out how ambiguous terms such as “fair” or “equitable” should be consistently interpreted with regards to the FET clause, as well as the reasoning adopted by arbitral tribunals in investor-State dispute settlement (ISDS). He argues that even the reformist spirit animating academic work in IIL, and the interpretive techniques employed by ISDS tribunals, draw upon and entrench imperial modes of thinking about international order.
Anticolonial world ordering rested on the idea that the central organizing unit of a post-imperial international law would be the developmental state, committed to accelerating economic development of formerly colonized peoples. Today, the specter of this developmental State – despite its somewhat tragic trajectory in answering the aspirations of the South– haunts IIL. Projects of doctrinal clarification, reform, and the interpretive work of ISDS tribunals remain bound up in the presumption that the developmental State was always bound for failure. Owing to this central opposition, reformist visions for IIL continue to be refracted through the prism of empire.
That prism, in Das’s argument, refers less to the direct domination by the West, or even by a transnational capitalist class, and more to a general epistemological condition. The idea that a developmental state, ever prone to excesses and failure, becomes generalized as a suspicion of state action tout court. Thus, even when ISDS tribunals do not penalize states for FET violations, Das, through a close reading of a recent arbitral award, shows, that the tribunal’s modes of reasoning cannot escape the structure of suspicion inherited from an imperialist way of seeing the world.
