96 Am. Soc'y Int'l L. Proc. 19 (2002)
Remarks

handle is hein.journals/asilp96 and id is 31 raw text is: Fair and Equitable Treatment Under NAFTA 's Investment Chapter 19

beginning in the mid-1990s, State Department submittals refer a number of times to the
same clause as being based on standards found in customary international law.'7
A problem with the assertion that fair and equitable clauses have always codified cus-
tom is that one searches in vain for precedents and publicists expounding settled
jurisprudence of fair and equitable treatment. Before the Metalclad award, little or no
such authority seemed to exist. Mann no doubt had this dearth of precedent in mind
in enthusiastically welcoming the positive texts. For his part Schwarzenberger, much
like Mann, appears to have regarded fair and equitable provisions as augmenting-not
restating-the international minimum standard (at least in 1969).0 Certain more re-
cent writers seem to have adopted the same premise.20
In my sample of that approximately 12 percent of texts that mention international
law in connection with fair and equitable treatment, almost half designate international
law only as a floor, implying that fair and equitable treatment may require more, but
never less, than international law. Most U.S. BITs are of this type,2' whereas Article 1105
is not. Recall that it say: treatment in accord with international law, includingfair and
equitable treatment. 22
Based on the foregoing, I predict that-at least in the short term-the Interpretive
Note's principal influence outside of NAFTA will be in relation to the Free Trade
Agreement of the Americas,23 should it come into being, and to certain BITs that also
replicate NAFTA Article 1105 formulation faithfully, as well as to that small percentage
of BITs that expressly define fair and equitable treatment by reference to international
law. Beyond that, awards such as Maffezani24 will continue. In Maffezani, Spain was held
to have violated the treatment clauses in its BIT with Argentina by conducting a par-
ticular loan transaction without sufficient transparency as to be fair and equitable to the
investor. The applicable BIT did not refer to international law and no discussion of
custom was thought necessary by the learned tribunal.
REMARKS BY VED P. NANDA*
As my colleagues have eloquently articulated in their presentations, the fair and
equitable treatment standard incorporated into Article 1105(1) of NAFTA' has been
the subject of differing interpretations. Our chair has asked me to assess the various
interpretations in light of their implications for public regulation, including environ-
mental protection.
I want to begin by looking at the genesis of the phrase fair and equitable treatment,
for its interpretation should comport with the original intent of the drafters, if I may
use that term here. The Organization for Economic Cooperation and Development
17 See U.S. State Department Letter of Submittal of May 1, 2000 to the President accompanying Mozam-
bique-U.S. Treaty Concerning the Encouragement and Reciprocal Protection of Investment, done
December 1, 1998 [hereinafter U.S.-Mozambique BIT].
I8 Metalclad Corp. v. United Mexican States, Award, ICSID Case No. ARB (AF)/97/1 (2000).
GEORG SCHWARZENBERGER, FOREIGN INVESTMENTS IN INTERNATIONAL LAw 36, 114 (1969).
20 See, e.g., PETER T. MUCHLINSKI, MULTINATIONAL ENTERPRISES AND THE LAW 625-26 (1990).
21 See, e.g., BIT Mozambique-U.S, supra note 18, art. 1.3 (a) (covered investments to be accorded fair and
equitable treatment and.., shall in no case [be accorded] treatment less favorable than that required by
international law).
22 NAFTA, supra note 2 (emphasis added).
22 Draft Free Trade Agreement of the Americas, Chapter on Investment (July 3, 2001).
214 Maffezani v. Kingdom of Spain, Award, ICSID Case No. ARB/97/7.
. Vice Provost for Internationalization and Thompson G. Marsh Professor of Law, University of Denver
College of Law.
' North American Free Trade Agreement, Dec. 17, 1992, Can.-Mex.-U.S., art. 1105(1), 32 ILM 605
[hereinafter NAFTA].

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