Book Symposium Investment Law: The International Minimum Standard of Treatment of Aliens and Administration of Domestic Regulation under WTO and Investment Protection Law

by Anastasios Gourgourinis

[Dr Anastasios Gourgourinis is Lecturer in Public International Law at the National and Kapodistrian University of Athens Faculty of Law, and Research Fellow at the Academy of Athens]

Let me start by extending a warm thanks to Freya Baetens for her overall care, diligence and patience as the editor of Investment Law within International Law: Integrationist Perspectives, the publication of which is very timely and indeed. I am also grateful to Opinio Juris for hosting this Book Symposium, as well as to Anne van Aaken, who I am privileged to have as commentator of my chapter entitled “Reviewing the administration of domestic regulation in WTO and investment law: the international minimum standard as ‘one standard to rule them all’?”. In this post, I briefly summarize the chapter’s key points.

The interaction between the legal standards established under the World Trade Organization (WTO) agreements and international investment agreements (IIAs) has steadily and increasingly become important in international judicial practice. Perhaps the most recent and controversial illustration of this interaction can be found in the plain packaging disputes against Australia, currently ongoing in parallel before the WTO dispute settlement panels (see here, here, here and here), as well as arbitral tribunals established under bilateral investment treaties (see here). For, what all these disputes share in common is the set of the underlying facts complained of, i.e. Australia’s Tobacco Plain Packaging Act 2011, and related laws and regulations, allegedly in violation of Australia’s obligations both under the WTO covered agreements and the Agreement between the Government of Australia and the Government of Hong Kong for the Promotion and Protection of Investments of 1993.

Hence, in the greater context of the debate regarding the relationship between WTO and investment protection law, Nicholas DiMascio and Joost Pauwelyn have undertaken a thorough study on non-discrimination standards in the WTO covered agreement and IIAs. They persuasively concluded that ‘investors cannot assume that they will prevail on a national treatment claim before an investment tribunal even if their country has earlier prevailed on the same claim at the WTO, and vice versa’ (p. 88).

But does the same apply also with respect to equitable standards of treatment also found both in WTO agreements and IIAs? Literature on this point has been scarce, with the notable exception of the comparative examination provided by Martin Molinuevo, albeit limited on minimum standards of treatment under the General Agreement on Trade in Services (GATS) and IIAs (pp. 176-189). It is in this context that my chapter elects to examine the interaction between, on the one hand, standards contained in the various WTO agreements (not limited to GATS), and, on the other, standards of “(fair and) equitable” and “fair and equitable” treatment in IIAs. The chapter concludes that, based on the same set of facts, foreign investors (if simultaneously qualifying as foreign traders, services providers and so on) can assume that they are likely to prevail on a fair and equitable treatment (FET) claim, if their country of origin has earlier prevailed, for example, on a Article X:3 GATT claim before WTO organs, and vice versa.

To begin with, the chapter’s analysis embarks from the working hypothesis that foreign traders under WTO law (e.g. producers of goods or service providers or holders of IP rights etc.) may in principle qualify as foreign investors under IIAs, and vice versa. The chapter then turns to trace the origins of international minimum standard of treatment of aliens (MST), which is commonplace to trace back to the Neer claim before the US–Mexican Claim Commission. The customary character of MST, i.e. part of general international law prescribing for generic minimum guarantees as a ‘floor’ of protection, indicates its potential normative relevance as lex generalis with regard to the treatment afforded to aliens, independently of their capacity as investors or traders, or both. Be that as it may, the jurisdiction of both WTO panels and investment arbitral tribunals established under IIAs is limited to hearing treaty claims, i.e. claims regarding the breach of the provisions of the covered agreement and IIAs respectively. It is exactly in view of this that the chapter then turns to trace equitable standards of treatment in WTO and investment protection law.

In the WTO ambit, the discussion focuses on those provisions of the covered agreements which, either by virtue of their very wording or indirectly, deal with the proper administration of domestic regulation vis-à-vis foreign traders. Drawing also from WTO jurisprudence, minimum standards for transparency and procedural fairness are indeed traced in Article X GATT, Article VI GATS, Articles 41.2, 42 and 63 TRIPS, and Article 1.3 of the Import Licensing Agreement, in addition to basic ‘non-arbitrariness’ standards under the Article XX GATT and Article XIV GATS exceptions, as well as the requirements of Articles 2.3 and 5.5 SPS.

In the investment context, the obvious point of departure is the FET standard included in the vast number of IIAs. The quest for a proper definition of the FET standard in the course of arbitral settlement of international investment disputes has focused on the appropriate yardstick by reference to which host state measures are to be scrutinised, and notably, its relationship with the MST, i.e. whether protection offered by FET clauses goes beyond the one provided by MST. So, while the FET standard in IIAs has been interpreted as either referring to MST or as a self-standing treaty clause, several arbitral tribunals have eventually concluded that the FET standard is not to be read as materially different from the customary MST. Moreover, the interpretation of FET in the latter cases, i.e. where FET was found to be substantively identical to MST, evidences that the MST has evolved, so that ‘except for cases of safety and due process, today’s minimum standard is broader than that defined in the Neer case and its progeny’ (Merrill & Ring Forestry LP v. Canada, para. 213). Ergo, according to the grain of practice of investment tribunals, FET (and by implication, MST) has been interpreted as encompassing, inter alia, minimum requirements regarding investors’ legitimate expectations, legal security and predictability, even-handed treatment, due process, lack of denial of justice, transparency and so on.

Overall, the, relevant to the above, analysis in the chapter indicates that WTO provisions prescribing minimum due process requirements in the administration of domestic trade regulation very much converge with the FET protection afforded under IIAs (where FET is interpreted as corresponding to MST). It can, thus, be maintained that both the international trade and the investment regimes have been permeated and influenced by the common customary ‘core’ of MST, as “one standard to rule them all”. It is in this vein that I conclude that the same set of facts regarding the administration of domestic regulation may indeed give rise to successful challenges brought before either the WTO dispute settlement body or investment arbitration tribunals, albeit under distinct (but parallel) causes of action.

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