A Host state regulatory right in Fair and Equitable Treatment (FET) in Bilateral Investment Treaties (BITs)

Abstract

A host state has become a victim of “fair and equitable treatment” investment standard offered to the foreign investment protection. Foreign investment dissatisfied with host state legitimate public measures affecting their investment demand FET protection alleging investment protection violation. Foreign investors strong pitching for FET standard protection subordinating every sovereign host state regulatory action is creating friction between the parties. While host state insists non-discriminatory police power inherited in FET regulation for public measures, in contrast, foreign investors demand absolute protection of foreign investment. Emerging and developing host country were early targets of foreign investment. A capital export from developed source state to emerging and developing host state is not anymore unidirectional but bidirectional. The investment from emerging and developing economies to developed countries are in rapid increase. Earlier emerging and developing host country were in voracious attack from established source state foreign investors. These suffering host states were fighting for their sovereign rights to regulate for public protection and interests, however, no to avail. Developed source state supporting implicitly for their investor’s investment protection became a victim of themselves. Rules applied to other became a loop to themselves whom they are now fighting to defend host state administrative rights for the public purpose. The absolute FET has become more fickle and in a way of balancing stage recognising outstanding and value of regulatory rights in FET. My dissertation explores on the same line that FET protection standard for foreign investors and their investment is reciprocal to host state just and equitable regulatory public measures. Host state non-discriminatory measures are non-compensable and legitimate of sovereign rights when public protection and security demands. This adduces long believed and practiced host state necessary steps of domestic law and order. It is evidence by Modern Model BIT, in arbitration practices and even developed source states opposing absolute FET standard protection. These methods proved that predatory nature of alleging FET violations are not only harming host country but also negativity in foreign investors and their investment. The future is not about only host state rights regulatory measures but also foreign investors and their investment self-regulatory measures like corporate social responsibility.