International Contractualism Revisited: Non-Pecuniary Remedies under the Fair and Equitable Treatment Standard

For years, the international investment regulatory regime has puzzled onlookers with its complexity. Because the system is defined by its vast network of bilateral investment treaties (BITs), the rights and obligations of foreign investors differ greatly from those of all other participants in international trade. At the heart of this confusion is the fair and equitable treatment (FET) standard. While in theory the FET standard purports to promote global economic growth through the broad protection of foreign direct investment (FDI) in developing nations, the standard’s inherent vagueness leaves arbitration tribunals with little guidance to resolve investor-state conflicts. At the same time, concerns over private tribunals’ ability to pass judgment over the policy decisions of sovereign states threatens the legitimacy of the process, thereby limiting the remedies available to wronged investors. By reconciling the FET standard with the powers of arbitration tribunals, this Comment seeks to provide practitioners greater clarity as to the ability of international law in remedying controversies between states and individual investors. As such, a survey of the relevant treaties and accompanying tribunal decisions has yielded the following conclusions: (i) notwithstanding any radical shift in international arbitral jurisprudence, heterogeneities in treaty drafting, namely the decision to integrate the FET standard with customary international law (CIL), have defeated the hope of synthesizing a unified theory of FET; (ii) despite ambiguity in the FET standard, violations of the standard would benefit from the imposition of non-pecuniary remedies; and (iii) a contractual approach in the application of these non-pecuniary remedies will strengthen the reasoning of arbitral decisions. By utilizing the principles of contract law, tribunals will be better positioned to preserve their legitimacy, remedy ongoing violations of international treaties, and provide states and investors with predictable statements of law