Protection of the Investor's Legitimate Expectations: Intersection of a treaty obligation and a general principle of law

Author Name HAMAMOTO Shotaro  (Kyoto University)
Creation Date/NO. January 2014 14-J-002
Research Project Pressing Problems of International Investment Law
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In treaty-based investment arbitration, tribunals quite often render their awards referring to the protection of the investor's legitimate expectations. A number of tribunals deal with this issue in the context of the application of the fair and equitable treatment clause and argue that the clause is (not) violated because the investor's legitimate expectations are (not) frustrated. Tribunals consider that such expectations are generated by conducts (or omissions) by the host State when the investor decides to make investment in reliance of such conducts by the host State. Early tribunals found a frustration of the investor's legitimate expectations in cases where the host State modified its domestic laws and regulations in reliance of which the investor had decided to make investment. However, recent tribunals tend to consider that a more specific representation by the host State is required to find a violation of the fair and equitable treatment clause. The question is how to justify such conclusion on the basis of the notoriously vague notion of fair and equitable treatment. An interesting explanation was furnished by Total v. Argentina (2010), in which the tribunal considered that relevant treaty provisions should be interpreted taking into account a general principle of law protecting the investor's legitimate expectations, in light of Article 31(3)(c) of the Vienna Convention on the Law of Treaties. Several comparative law studies reveal that this solution is quite valid. Furthermore, this approach will be an effective response to a number of questions and doubts manifested in respect of the legitimacy of treaty-based investment arbitration. Needless to say, there remain difficult theoretical and technical problems regarding the identification of general principles of law, which necessitate further research.