The Obligation of Regulatory Stability in the Fair and Equitable Treatment Standard: How Far Have We Come?

Abstract

While ‘regulatory stability’ regularly features in the decisions of investment arbitral tribunals interpreting the fair and equitable treatment (FET) provision, the extent to which the FET standard disciplines ‘adverse regulatory change’ in the absence of an express stabilization commitment from the host State is far from clear. Based on the conceptual distinction between the requirement of ‘strict’ v ‘soft’ regulatory stability, the paper aims to show the way investment treaty tribunals have applied the FET provision in cases of host States’ regulatory change. The paper argues that, despite the fact that investment tribunals have increasingly recognized the need to find a better balance between protecting foreign investors from adverse regulatory changes and the right of host States to regulate in the public interest, several recent arbitral tribunals still fail to clearly set out the role of regulatory stability within the FET standard, thus failing to assuage the fears that investment treaties may indeed function as imposing excessive restraints on host States’ right to regulate.

Keywords: strict stability, soft stability, fair and equitable treatment