Fair and Equitable Treatment” clauses contained in the 1994 US Model BIT and the 2012 US Model

Question 1:

Prime Minister Soto expresses to you her greatest appreciation for the clarity and thoughtfulness of your response. You then proceed to review the text of various Model BITs with the Prime Minister, during which time she brings to your attention the differences in the “Fair and Equitable Treatment” clauses contained in the 1994 US Model BIT and the 2012 US Model BIT, respectively.

Article II, 3 (a) of the 1994 Model BIT, used by the United States in its bilateral investment treaties, contains the following “Fair and Equitable Standard of Treatment” provision:

Each Party shall at all times accord to covered investments fair and equitable

treatment and full protection and security, and shall in no case accord treatment less

favorable than that required by international law.

Article 5 of the 2012 Model BIT, used by the United States in its bilateral investment treaties, contains the following “Fair and Equitable Standard of Treatment” provision:

1. Each Party shall accord to covered investments treatment in accordance with customary international law, including fair and equitable treatment and full protection and security.

2. For greater certainty, paragraph 1 prescribes the customary international law minimum

standard of treatment of aliens as the minimum standard of treatment to be afforded to covered investments. The concepts of “fair and equitable treatment” and “full protection and security” do not require treatment in addition to or beyond that which is required by that standard, and do not create additional substantive rights. The obligation in paragraph 1 to provide:

(a) “fair and equitable treatment” includes the obligation not to deny justice in criminal, civil, or administrative adjudicatory proceedings in accordance with the principle of due process embodied in the principal legal systems of the world;

(b) “full protection and security” requires each Party to provide the level of police protection required under customary international law.

A footnote in the 2012 US Model BIT also states that “Article 5 [Minimum Standard of Treatment] shall be interpreted in accordance with Annex A.” Annex A reads as follows:

The Parties confirm their shared understanding that “customary international law” generally and as specifically referenced in Article 5 [Minimum Standard of Treatment] and Annex B [Expropriation] results from a general and consistent practice of States that they follow from a sense of legal obligation. With regard to Article 5 [Minimum Standard of Treatment], the customary international law minimum standard of treatment of aliens refers to all customary international law principles that protect the economic rights and interests of aliens.

Prime Minister Soto is intrigued by these differences and asks you the following questions:

1. What might explain the change that occurred in the text of the FET clause in the US’s 2012 Model BIT from that which was included in the US’s 1994 Model BIT?

2. Do these FET provisions seem vague to you as a policy analyst? What are the advantages and disadvantages of having a more or less vague Fair and Equitable Treatment Standard provision for the interests of both Rendonia and Parra Petroleum?

Question 2:

Prime Minister Soto again expresses to you her deepest gratitude for the quality of your analysis. Prime Minister Soto then reviews with you her own personal sacrifices made toward the achievement of Rendonia’s Independence as well as the significant losses suffered by the people of Rendonia in their hard-fought campaign against colonial rule. But given your response in Part 2, with even greater urgency, yet with the elegance and wisdom of a woman seasoned by decades of diligent study and personal trials, she presses you on your views regarding the following questions:

1. How would signing multiple BITs potentially impact Rendonia’s adolescent democratic institutions?

2. How might signing multiple BITs potentially impact the Rendonian public’s view of Rendonia’s democracy?

3. How might signing multiple BITs potentially impact the views of other states and potential foreign investors regarding Rendonia’s democracy?

Question 3:

As you conclude your remarks under Part 3, the Minister of Internal Affairs, Howie Kendrick, bursts into Prime Minister Soto’s office and disrupts your meeting. After speaking in confidences with Kendrick, Prime Minister Soto returns to reveal to you the reason for the interruption. A local NGO associated with the Robles indigenous group has just released a report revealing Scherzer Petroleum’s gross negligence in disposing of waste-water used in its petroleum refining operations, which, if true, would be in violation of Rendonian law. Soto relates that said disposal has severely contaminated the Long River, which runs through the heart of Robles community land, and from which the Robles indigenous community obtains 80% of its drinking water. Soto is furious and asks your opinion on the following matters:

1. If Rendonia terminates immediately its concession agreement with Scherzer Petroleum, what are Scherzer’s legal options under Rendonia’s BIT with the Strasburg Empire?

2. Would a cancellation of the concession contract likely constitute a violation of the Rendonia-Strasburg BIT?

3. Approximately how long do these types of cases take to be resolved?

4. Approximately how much would it cost Rendonia to defend itself, given the costs of other similar cases?

5. What do you think the likely outcome of the case would be? Why?


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