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Standard Of Protection Available To Foreign Investors
Because foreign investment which is given the international character has higher risk than domestic investment, the modern foreign investment law plays a very important role to protect foreign investments and foreign investors in host countries. Particularly, if the aliens, foreign investors are setting up their business in host countries which may have any combination of instable political or economic system, ineffective administration system, and corruption, the international minimum standard of treatment and the international system of dispute settlement are basically needed to deal with these issues and to protect foreign investors.  That is not to say that all the risks of foreign investment should be protected by the international minimum standard in customary international law for example, as a foreign investor, apart from discrimination and expropriation caused by host countries, he/she has to take commercial risk by himself/herself.
The modern foreign investment law has been developed through a long way to achieve its primary goal which is the protection of foreign investors under international minimum standard of treatment. Generally speaking, this progress has experienced two steps of recognising whether the host countries have had rights to expropriate or nationalise foreign properties. In the early years, it was considered that the foreign investors were not subject of the law of host countries, so that their properties could not be expropriated or nationalised.  In addition, it was prohibited by international minimum standard to countries that invoking national law to shun their international obligations.  However, this position was changed by the doctrine of sovereignty. It was accepted generally that countries could not expropriate or nationalise foreign properties unless the compensation was paid.  The latter opinion has been agreed under the modern foreign investment law but the guideline on the standard of compensation is missing. Further, international human rights law and the principles of fairness, equity, justice and non-discrimination of the public international law are foundations of the protection to aliens under foreign investment law.  Also, in practice, there has been a tendency to expend the protection in customary international law through Bilateral Investment Treaties (BITs), Regional Trade Agreements (RTAs) and Free Trade Agreements (FTAs). 
There are four fundamental principles of foreign investment protection under modern foreign investment law, namely, the available protections to aliens, foreign investors in customary international law, the notion of diplomatic protection, international human rights law and state responsibility.  In this article, the availability of customary international law protection to foreign investors will be a main topic responding to the essay’s question.
This writing is structured around four parts. The first part examines the evolution of customary international law. The second part presents the background of international minimum standard which is named as general standard of justice under customary international law. Then, order which is recognised as an opponent of justice but is a core of the international minimum standard of treatment will be explained.
The third part concentrates on defining the conception of foreign investors and foreign investment as they are the objectives of the protection in customary international law. In other words, without identifying who are the “investors" and what kind of economic activities are “investment" under international law or by several treaties such as BITs, RTAs and FTAs, etc, it is impossible to assess such protections.
In the last part, after reasoning the development of customary international law, background of international minimum standard and ensuring the notion of the foreign investors and foreign investment, the international minimum standards of treatment and the treaty-based standards of treatment will be appraised. And the access to international arbitration will also be mentioned briefly.
Finally, based on the factors described in this writing, the answer of what is standard of the protection available to foreign investors in customary international law will be provided with a personal view.
Ⅰ. The evolution of customary international law
The international law is built by customary international law (CIL) and treaty. Unlike treaty, CIL is unwritten and all or almost all nations are governed by it. The definition of CIL is “the collection of international behavioral regularities that nations over time come to view as binding as a matter of law".  In other words, there are two elements included in this standard definition, one is the practice of nations which is not related to legal obligation must be widespread and uniform; another is opinion juris which is a core concept of CIL. In general, policy statement, national legislation, diplomatic correspondence and treaties are counted as nations’ practice. So under some special situation, CIL may describe international obligations in treaties.
Traditionally, principles of CIL which connect with foreign investments are state responsibility for injury to the aliens and their property.  Till the nineteenth century, international law enjoined host countries to obey the international minimum standard in the treatment of foreign investors and their property. This did not mean that the host countries have to treat foreigners the same way as they treat nationals.  However, if host countries breach this standard, they have not only taken state responsibility to foreign investors, but also home countries have legal rights to protect their nationals abroad through diplomatic protection.  In order to prove host countries exercise the minimum standard well, fairness and equitable treatment or good faith has to be displayed. Especially in the case of state responsibility, the host countries have to consider the requirements of the expropriation of foreign property, the prescription of non-discriminatory for foreign investors and foreign assets or economic interests. 
Nevertheless, the traditional principles of state responsibility under CIL have been rejected by or have found resistance from Latin America(LA), Socialist States of Eastern Europe (SSEE) and new nations in Asia and Africa (NNAA). For LA, the reason why they have resisted state responsibility is that Western States abused diplomatic protection through threatening of the use of force to ask LA to pay an excessive and unconscionable compensation  and the successive government interventions.  Unlike LA, the reconstruction of the political and economic system is the core feature to SSEE to reject these principles. Also, SSEE believe that state responsibility was particularly designed for protecting economic interests of Western states. For foregoing reasons, SSEE claim that the principle of state responsibility under CIL which contravenes the fundamental principles of international law (such as respecting state sovereignty and no interfering to internal affairs) is not valid in current international law.  Lastly, NNAA as newly independent countries sense that without taking part of creating and developing the principles of CIL by themselves, state responsibility invented by Western countries had colonial characteristics and was unfair and unequal.  During the process of declining the traditional principles of CIL, the Calvo doctrine and Hull formulae were introduced one after another.
In determining to prevent Western countries from abusing diplomatic protection to their citizens aboard, it was claimed by LA that general regulation of foreign investment and the provision of expropriation of foreign property  are subject to domestic jurisdiction, and it is known as Calvo doctrine.  Opposite to international minimum standard, national standard is referred by the Calvo doctrine. This means, according to this doctrine, the only thing which is required by CIL is that host countries treat foreign investors with the same rights as nationals’ enjoy.  In other words, more favorable treatments to foreign investors is prohibited by LA according to national standard under the Calvo clause. 
Furthermore, the content of the Calvo doctrine is not inconsistent with the principle of international standard, it just maintains that national law is the only law to regulate the treatment of foreigners and the dispute must be judged firstly in national courts. Also because of its characteristics, an argument which arose in the case of the North American Dredging Company of Texas v. United Mexcian States of whether a foreign has legal rights to renounce the diplomatic protection by himself/herself, as the protection is recognised as countries’ right.  Finally, it is demonstrated by the case that the Calvo doctrine only appears when foreigners invoke diplomatic protection to escape from his/her obligations of host countries and local adjudication. 
Unlike SSEE, the compensation of expropriation or nationalisation of foreign property was not denied by LA, but the process of the compensation was not prompt, adequate and effective.  Considering the US investors were the biggest number of victims whose property had been expropriated by Mexico, and they had experienced a delayed compensation, Hull formula  was put forward through diplomatic exchanges between the US and the Mexican government to solve the compensation issue.
Hull claimed the most important factor in the formula that with the provision of “prompt, adequate and effective compensation", expropriations are lawful.  Apart from this, the terms of the rights and obligations of the host countries about foreign investors and their home countries permeate into the formula.  However, as two countries’ agreement on compensation of expropriations, the “prompt, adequate and effective compensation" has not been admitted by the law. Again, this criterion of compensation which is recognized as a full compensation has not been clarified. 
Conversely, because there was a disconnection between the theory and practice of the responsibility of host countries to foreign investors, the Calvo doctrine, Hull formulae and the Soviet model have been abandoned by guiding obligations of host countries to foreign investors and investment in practice such as signing BITs, RTAs or FTAs, also the “prompt, adequate and effective compensation" has been replaced by “just compensation" or “appropriate compensation". 
Having examined the evolution of the traditional principles of CIL, it can be said clearly that host states are entitled to expropriate foreign property but with “full compensation" or “just compensation" or “appropriate compensation". Further, if host countries do not undermine the rights which have been guaranteed to foreign investors under customary international law or one of BITs, RTAs or FTAs, it is not necessary to host countries to take state responsibility, and no diplomatic protection needs to be exercised by their home countries either.
Ⅱ. The international minimum standard---the standard of justice
Although it is difficult to identify the content of the international minimum standard, the rule which relates to compensation for expropriation of foreign property or investment and the dispute settlement of such issue through international tribunals have been embodied by the standard. The international minimum standard includes fair and equitable treatment, full protection and security and compensation against expropriation.  These treatments will be discuss thoroughly in part Ⅳ.
It is undoubted that if foreign countries regulate the ownership of the property in their territories, foreign investors have no right to acquire this foreign property.  On the contrary, there is much of controversy about the protection of acquired property over international minimum standard with regard to expropriation of foreign investment and property. Actually, the most contentious part of the minimum standard of treatment is not the admission the foreign property into countries as it endues foreign investors of certain property rights,  but expropriation of foreign property. 
The original intention of the minimum standard of treatment was not only to safeguard aliens’ life, liberty and property but also included the personal securities of aliens.  Remarkably, USA (LF Neer) v United Mexican States  was first case which had applied the minimum standard of treatment to deal with personal security of aliens.  Moreover, the minimum standard was acknowledged as a “standard of civilised justice or civilisation"  , hence it has been referred to the minimum standard of treatment as the standard of justice.  However, this justice was only to aliens not to nationals.  This means the international minimum standard was not based on natural law by excluding nationals from the scope of the standard.
On the other hand, as the justice standard, the international minimum treatment worked injustice to aliens in application. It has been confirmed by the academic view that the “national character of the claim" was a key issue to foreign investors to apply international minimum standard of treatment for injury.  Because of the national character of the claim, home states have right to “settle, release or abandon the claim".  In addition, the compensation in the payment of the claim is received by states, not injured nationals. That is to say, the standard is unsuccessful in repairing this injustice to foreign investors by indemnifying to their home states. Thus, it can be said that the international minimum standard of treatment is not just to individuals, but to the order which is connected with nations by operating its protection to the nations’ interests.  Although, there are several foreign investment treaties and the mechanisms of dispute settlement in home countries have reduced the effect of diplomatic protection, this does not affect the nature of the standard in practice that protects states’ interests.
In short, taking the treatment of foreign investors and their property into account, the minimum standard of treatment is required to operate within the structure of international rules. Meanwhile, a special rule of international law is necessary to be applied as it ascertains the minimum in each case. What is more, unlike traditional context of the standard, the modern utilization of the standard, under fair and equitable treatment in CIL, is to invoke states’ responsibility for any economic loss which is caused by states’ conduct.
Ⅲ. The definition of the foreign investors and foreign investment
The terms of ‘investor’  and ‘investment’  are often defined by most treaties, and there is significant change in defining these two terms that the scope of protections to the ‘investor’ and ‘investment’ have become broader. For investors, not only have their rights changed from post-establishment to pre-establishment  , but also more and more treaties have left open-ended definitions. In addition, a large amount of treaties define the term ‘investment’ with non-exhaustive list.  However, the meaning of ‘investment’ is not just limited in the definition of treaties. International tribunals often employ international law or demotic law to define it. 
To describe the extension of the definition of ‘investment’ in more detailes, the portfolio investment, intellectual property right, contractual right and administrative rights have to be mentioned here.
Unlike foreign direct investment which is protected though the diplomatic protection and state responsibility under customary international law, the portfolio was not protected by customary international law.  A good illustration can be taken from the case law-Barcelona Traction case,  where the international court of justice sentenced that considering the rights of shareholder were vehicles of the foreign investor, the diplomatic intervention of the home state could not protect it. However, the foregoing issue was solved by treaties which included shares in the definition of foreign investment.  This means that not all kinds of portfolio investment enjoy protection of foreign investments automatically,  but if the treaties define shares as a part of foreign investments, portfolio investments will be protected in the same manner as foreign direct investments under customary international law.
Again, the reason why extending the intellectual property right into protection is unlawful copying of the inventions of the developed countries. Since the term intellectual property has been included into treaties, the intangible rights as the physical assets of foreign investors which are protected by foreign investment law.  The contractual rights as result rights of the relationship among the investor, the state and his/her agencies that can assist investor to seek remedies. Lastly, including administrative rights into definition of ‘investment’ is not only to facilitate but also to control foreign investment.  For example, the investor has to make sure that all the requirement of his project has been satisfied either entry or post-entry steps.
Thus, it is clear that by extending the definition of the terms ‘investor’ and ‘investment’ in treaties, the protection to foreign investors have become more widely.
Ⅳ. International minimum standards of treatment, the treaty-based standards of treatment and the access to international arbitration
A. International minimum standards of treatment
Fair and Equitable treatment in customary international law
Fairness and equity are basic elements of this treatment which offers a primary level of protection to foreign investors. However, because of the difficulties in identifying the concrete meanings of the term ‘fair and equitable treatment’ and its different interpretations, there is much controversy of this standard under extends the fair and equitable treatment beyond CIL; conversely, the narrow approach which restricts the treatment under CIL. The latter approach has been supported by the NAFTA Free Trade Commission’s interpretation of Article 1105. Canada, Mexico and the United States declared that the standard was no more than the international minimum standard of CIL.  And the Singapore-United States Free Trade Agreement stands the same position as NAFTA that interpreting the standard within the scope of customary international minimum standard.
In practice, for purposes of reducing the confusion of applying the term “fair and equitable treatment", four major approaches have been used by relevant treaties: 1) omitting the reference of fair and equitable treatment; 2) the treatment of fairness and equity should be offered by the States but it is not a legal requirement; 3) as a matter of law, the States have to accord this treatment of investment; 4) a legal requirement to the States that combine this treatment with other standards of treatment, for instance, most-favoured-nation and national treatment.  Besides, comparing with the foregoing interpretation which have referred the standard to international minimum standard of treatment, the plain meaning of fair and equitable is favoured by some literates as foreign investors is entitled to meet the treatment of fairness and equity as local citizens receive. 
Another view of the fair and equitable treatment is that even if some basics of the treatment overlap with international minimum standards (such as the requirements of non-discrimination and due process), the two standards are not interchangeable and synonymous.  In fact, the scope of the international minimum standard is expanded by this treatment. The reason for saying this is that the treatment allows tribunals to create new standards in order to achieve the justice to foreign investors who suffer unfair treatment in host countries.  As a result of this, there are various and vague definitions of the fair and equitable treatment that have been identified by different tribunals. The case of Waste Management Inc v Mexico  is a good instance of foregoing saying as the tribunal constitutes an evolutionary character of the customary minimum standard of treatment. In the case, the tribunal did not define the term ‘fair and equitable treatment’ by invoking investment treaties but from other cases’ identification of this treatment,  so that the lower requirement of violating the treatment was created. 
The new terms on the fair and equitable treatment in CIL have been expressed by the United States in treaties with CAFTA countries, Uruguay, Australia, Singapore and Chile.  The Article 5 (2) of the model treaty provides that prescribing “the customary international law minimum standard of treatment of aliens" is the obligation of fair and equitable treatment which is “not to deny justice in criminal, civil, or administrative adjudicatory proceedings in accordance with principle of due process embodied in the principle legal systems of the world;",  and indicates that this treatment does not “require treatment in addition to or beyond that which is required by that standard,“, and does not “create additional substantive rights". 
In all, the fair and equitable treatment is likely to be concerned with the obligation of denial of justice. Further, it can be seen from the model treaty that the responsibility of states in treatment of foreign investment and property cannot be given rise by the obligation of fair and equitable treatment intrinsically. 
Full protection and security
The provisions of the many investment treaties (such as BITs and FTAs) on treatment standard include the entitlement of foreign investors to ‘full protection and security’. This standard as one of firmer underpinnings in CIL has developed by the United States. It has been recognised that if a host country fails to provide protection to foreign investors when their investment is threatened or attracted by civil conflict or physical violence, the host country responsibility is created.
From studying the case law, it can be seen plainly that different treaties which involve different parties provide different levels of protection under this treatment. As a result of this, the precise definition of the term ‘full protection and security’ is not agreed in general. To show what hypostasis of this standard has been found by tribunals, let us take a close look at Noble Ventures v Romania  and Wena Hotel v Egypt.  In the former case, Romania as the host country was asked to enforce its national law and provide police protection to the foreign investment which was located in Romania. The restrictive interpretation of this standard was held by the tribunal that the scope of this customary international law, but the host country’s liability should be confirmed to “due diligence" standard.  The similar approach was taken by the tribunal of the latter case, where the restrictive definition of the standard was used by confirming “the ‘full protection and security’ clause is not meant to cover just any kind of impairment of an investor’s investment". 
Thus, this standard which is considered as the level of police protection in CIL is not a compelling liability upon the host countries but it requires these countries to “adopt all reasonable measures to protect"  the foreign investors and their property.
Protection against expropriation and standard of compensation in customary international law
As a time-honored tenet of foreign investment law, protection of foreign investment against expropriation provides several measures of taking foreign investor’s property. That is to say, if host countries cannot meet such measures, foreign investors and their property can be protected and they can be against such expropriation. The expropriation of foreign property will be recognised when it 1) is for a public purpose; 2) should be non-discriminatory; 3) is consistent with applicable laws and due process; and 4) is accompanied by full compensation.  Nonetheless, defining the meanings of foregoing conditions is quite repugnant both in jurisprudence and literature.
Although expropriation takes many forms, there are two categories of expropriations: direct expropriation and indirect expropriation. The first one, as a less controversial definition means foreign property is taken by host government directly. Conversely, indirect expropriation which is the most contentious expropriation as depriving the essential benefits of the property’s owner  contains three types of expropriations. They are so-called, “creeping expropriation", “regulatory expropriation" and “Consequential or De Facto expropriation". The similarity among them is that they all involve taking governmental measure to the investment’s economic value, but the last one is a result of failures of host state’s obligations. 
As competing norms, the standards of compensation for expropriation are not clarified yet. Although the “prompt, adequate and effective" as a typical provision on compensation for expropriation has been cited by several treaties, it has not been accepted generally.
Considering that compensation should balance between the foreign investors’ interests and public interests, “just" or “appropriate" compensation has been split out by some treaties.  In modern international law, this type of compensation is recognisd as a flexible standard which ranges from the full compensation, the loss of the future profits to no compensation in the case of foreign investors had taken excessive benefits from their investments but the host countries had no profit at all from it.  Under the scope of “appropriate" compensation, if the taking was lawful or it was a one-off taking of a small business, the full compensation must be paid.  Yet, if the taking was a part of entomic reform, there is no need for host countries to pay full compensation.  Lastly, if the foreign investment harmed the host countries, partial or no compensation was applicable. That is to say, the standards of compensation are changing in the different situations. Because of that, the best way to define which standard is available to contracting parties is to set an article of the standard of compensation in treaties that can protect the interests between the foreign investors and host countries.
B. The treaty-based standards of treatment
Most-Favoured-Nation treatment (MFN)
One thing has to be clarified at the beginning of this section is that even though the MFN is very important to both foreign investment law and international trade law, it is not counted as a principle of CIL.  Because of this, the content of MFN depends on the treaty’s provision. The reason why taking the MFN principle into account of protection of foreign investment in CIL is that this principle has not only avoided discrimination against foreign investors, but also presented the equality of competitive chances between foreign investors from different nations. 
A traditional definition of the MFN principle is “the minimum of discrimination and the maximum of favours conceded to any third State".  Under foreign investment, the MFN treatment which is based on the principle of reciprocity is defined that “a host country treats investors from one foreign country no less favourably than investors from another country".  In practice, because this definition has been interpreted differently by each treaty, it caused the difficulty of applying the MFN treatment to dispute settlement among the treaty’s parities. However, there is an agreed account of MFN treatment which is examined through each case is that unless a treaty applies a different method for resolution of disputes clearly, the MFN provision should be applied to dispute settlement. 
In addition, some treaties have extended the MFN treatment to pre-entry situations.  Of course, if the MFN treatment does not include pre-investment conditions, the treatment of MFN is only available to the foreign investors who have already made investments in host countries. In contrast, if a pre-establish phase is contained in the MFN treatment under the treaty, it is respected that contracting parties have not only created non-discriminatory clauses to new foreign investors but also provided “like circumstance" between these new investment and the existing investment. 
Thus, considering the contents of the MFN treatment are not same from one treaty to anther, the contracting parties can make up their own mind to define the MFN clearly, for example, whether include the pre- and post-entry clause in MFN standard or extend the MFN to dispute settlement.
Like MFN, national treatment as a treaty-based standard is not part of CIL, so the content of national treatment cannot be derived from international law but treaties.  Though national treatment does not belong to CIL, it protects foreign investors on the non-discriminatory basis of expropriation under CIL. Besides, the distinction of national treatment between WTO/GATT and foreign investment is that unlike the term “like products" in WTO/GATT, the term “like circumstances" is contained in national treatment standard as it is a key of non-discrimination to foreign investments. 
From an academic view, national treatment may violate the international minimum standard if domestic enterprises are mistreated by host countries.  In fact, this opinion is untenable because the host countries defend their national interests. Actually, national standard is recognised as host-state standard, which means no matter a country is developing or developed, the standard of national treatments are being exercised differently by the country’s position whether it is a home country or host country.  For instance, if a country in the home state capacity, the national treatment will be interpreted as broad as possible to built state responsibility of other countries. On the contrary, if the country in its position as host state, the narrowest interpretation of national treatment will be applied to avoid its responsibility for breaching the treaty obligation. For these reasons, it can be said that national treatment is not in opposition to international minimum standard, they coexists somehow.
Another argument about national treatment is that performance requirements  which are imposed by host countries to benefit themselves from foreign investment will not accord with national treatment as these requirements are only imposed on foreign investors not local entrepreneurs.  However, technically, the imposition of performance requirements can be exempted form scope of national treatment by the treaty provision.
Further, because national treatment is a treaty-based standard, the contracting parties have rights to stipulate pre- and post- entry clauses in national treatment standard.  Also for the same reason, some treaties’ parities choose not to formulate national treatment into the treaty at all for the unwillingness of imposing preferential treatment which is enjoyed by domestic investment to foreign investment. Moreover, the parties can decide the receiver of the national treatment. 
After discussing the main issues of national treatment, it is obvious to say that because of voluntary character, national treatment standard is becoming popular and that more and more treaties include and broaden its application.
C. The access to international arbitration
Besides the protections of the treatment standards, the access to international arbitration is another important protection to foreign investors. Currently, treaties’ contracting parties are able to negotiate with each other and decide the way of dispute settlement. As a result of this, foreign investors are granted the right to access to international arbitration to solve investment disputes with the host country. That is to say, foreign investors have stopped suffering from delay and political pressure which were produced by national adjudication of disputes of foreign investment.
Having discussed the evolution of CIL, the international minimum standards of treatment and the treaty-based standards of treatment above, it is clear that CIL has already enlarged its protection scope by citing the most important principles of the trade law such as MFN and national treatment into foreign investment law. Under CIL, the international minimum standards of treatment offers a general standard of justice to states and prevents discrimination to aliens. Besides, treaty-based standards of treatment entitle foreign investors to take the protections which are produced by these principles. Lastly, the international law presents another protection to foreign investors which is the access to international arbitration tribunals.
On the whole, foreign investors are protected by the international minimum standards of treatment in CIL. And by developing CIL, the standard of the protection to foreign investors is becoming comprehensive and sound.
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