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This year, the Third Annual Charles N. Brower Lecture on International Dispute Resolution was delivered by the eminent public international scholar, Professor W. Michael Reisman, the Myres S. McDougal Professor of International Law at the Yale Law School. His eloquent and insightful presentation entitled “Canute Confronts the Tide: States and the Evolution of the Minimum Standard in Customary International Law,” compared the futile attempts of States to control the evolution of fair and equitable treatment (“FET”) and minimum standards of treatment (“MST”) with the inability of King Canute to control the ocean tides.
Professor Reisman began by explaining the difference between verification rules and evaluation rules. Verification rules are binary and limit those charged with verifying compliance to evaluation of a specific metric (i.e., whether a door complies with a regulation that it be at least a certain height off the ground). Verification rules are designed to reduce or eliminate the exercise of discretion, and they do not allow for any consideration of fairness, justice, minimum order, or common sense. In contrast, evaluation rules take account of a range of variables and are often expressed at some level of generality (i.e., Article 39 of the UN Charter).
In international investment law, both FET and MST are evaluation rules. As such, they continue to evolve over time and are influenced by a number of factors, including the accretion of arbitral decisions and changes in social, economic, and political norms. Professor Reisman noted that a number of States have chafed at the evaluation rule nature of FET and have attempted to make it more of a verification rule out of a concern that investment tribunals have exceeded their limits in applying the FET standard.
So far, such efforts have not been successful. It theoretically would be possible for States to limit the scope and evolution of FET through measures such as removing references to FET from bilateral investment treaties or attempting to reduce FET to a codex of verification rules. These options, however, are unappealing for States because they would forego protections and flexibility for its own investors. Professor Reisman also spoke at length about the efforts by the signatory parties to the NAFTA Agreement to impose upon tribunals a restrictive definition of FET. In particular, he singled out the “Notes of Interpretation of Certain Chapter 11 Provisions” issued by the Free Trade Commission in 2001, which sought to equate the FET to be accorded under Article 1105 of the NAFTA Agreement to the customary international law minimum standard of treatment of aliens. Professor Reisman argued that such efforts introduced certain legal and logical challenges and were in any event ineffective at rolling back the evolution of FET and MST.
Hansel T. Pham is a Partner in the Washington, D.C. office of White & Case where his practice focuses on international dispute resolution, in particular complex arbitration and litigation.